Technology & Innovation

Analysing your value chain

September 18, 2017


September 18, 2017

Rashmi Dalai


Rashmi started her career on Wall Street with time spent in both convertible bonds sales and trading at Goldman Sachs and structured derivative products at Lehman Brothers. She left to form her own healthcare consulting practice, and spent over a decade advising a wide range of clients from large university hospitals to start-ups on business and financial strategies. Her role included taking interim COO and CFO positions for clients managing periods of high growth or other business transitions.

In 2007, she began splitting her time between the US and Asia (China, Indonesia, and Singapore) and expanded her consulting business to include advisory on business communications strategies and global thought leadership. Prior to joining The Economist Group, she was Head of Strategic Planning at Weber Shandwick, a global communications and PR firm, in Singapore.

Rashmi holds a Bachelors in International Affairs from Johns Hopkins University and a Masters in International Affairs from Columbia University with a concentration in International Finance and Banking. 

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Throughout the industrial age, proprietary capabilities and customer access have long been blocks with which companies have built vertically integrated value chains. While these are still important parts of any organisation, technology has revolutionised the spread of information and given competitors and new entrants easier market access. This has simultaneously challenged many traditional value chains.

Banking provides a robust example of this transition. Until recently, this 500-year old industry focused on providing a safe place for money, transaction services, access to capital and ways to grow wealth. All of these services were housed in one place— banking branches—and the walls around these branches protected their market position.

While the core proposition of banking has not changed, the digital age has challenged every one of these services. Technology has redefined what people view as “safe” places for money, no longer limiting that definition to a physical location. The rise of fintechs has created new platforms for monetary transactions and raising capital, and the internet is flooded with information and ways to invest.

Further, today’s consumers place less emphasis on having a relationship with a banker and more on being able to drive easy and reliable financial transactions online and through mobile devices. As a result, “banks have had to develop solutions from the outside in, rather than inside out,” says Michael Gorriz, group CIO at Standard Chartered, which has more than 1,000 branches in about 70 markets across Asia, Africa and the Middle East.

For all companies, this re-evaluation of their value chains requires them to study their market position from many different angles. In some cases, they need to refine their utility to better meet the needs of customers. Others need to identify their competitive weaknesses. Yet others must recognise they are losing market share to new entrants. Sometimes, a company must do all three.

In the case of Standard Chartered, says Dr Gorriz, “we needed to rebuild our bank to meet the expectations of customers. Today, everyone wants everything done in five seconds, so if we want to be around in the next 500 years we have to meet that expectation.”

Keeping value chains competitive

For many companies actively refining or changing their existing technologies, the process of staying competitive goes beyond strengthening technical capabilities and moves into how their teams collaborate and operate. To this end, Tony Graham, head of product and technology at the banking and financial services group at Macquarie, has adopted DevOps, which calls for software and technology developers to work closely with the bank’s operations teams to help improve the speed of innovation in his teams.

Mr Graham says DevOps changes his team’s way of working, and helps Macquarie drive creative collaboration to better serve customers. It also helps manage risks. “There are a lot of regulation and responsibilities to the customer we have to take into account, so a DevOps strategy ensures we’re managing the technology and regulatory risk over the top of it.”

In the case of Tenaga Nasional Berhad (TNB), Malaysia’s largest electric utility company, its value chain analysis is leading it to make anticipatory investments. “Our whole idea of a digital journey is driven by our core businesses related to the electricity supply industry, from generation, transmission and distribution, and retail,” says Fazil Ibrahim, CIO of TNB. On the generation side, the company sees renewable energy—for example solar and wind power—as having the potential to fundamentally change its business.

“For TNB, there’s a threat and also opportunity for us. Gradually, we’ll have lots of new power from renewable energy injected into the grid. People will be able to generate energy from renewable energy sources, but they need to be complemented with power from the grid for sustainability and reliability of supply,” says Mr Ibrahim. “Therefore, there are opportunities for us to participate in renewable energy 

generation and to build a resilient transmission and distribution grid throughout the country to make sure all sources of energy are well-connected and efficiently distributed.”

Anticipating the threats to its value chain informs TNB’s digital strategy for its business. “We need to progressively build a ‘Grid of the Future’, that includes advanced metering infrastructure, grid automation, self-healing capability, super grid and micro-grids,” adds Mr Ibrahim.

Standard Chartered’s value chain analysis has led it to repackage some of its core services to meet the cross-border needs of its customers. “In wholesale banking, customers came to us and said we’re operating in so many countries and every country has a different payment schema. Can you help us to bundle this and give us one simple API that helps us collect money throughout the world?” This is where the bank can add value, says Dr Gorriz. “It is ultimately about serving the needs of our customers consistently, thereby deepening our relationship with them.”

Maintaining innovation momentum

While many companies can find the resources for discrete points of change, sustaining a more constant innovation momentum can prove a larger challenge. The market unfortunately demands this pace though, and companies must gain innovation speed.

According to Steven Barnett, president and CEO of AIG Korea, this is particularly true in Seoul, which is the most wired city in the world with high consumer expectations. With certain insurance products, Mr Barnett says regulators insist some claims must be paid in three days. Some of their competitors pay up to 80 per cent of a claim within six hours.

Consumer demand means AIG has to continuously study their competitors’ product structures, methods of distribution and the service expectations of customers. “It’s a constant for us because we want to be on par or better,” says Mr Barnett.

This monitoring has allowed him to watch consumers change the way they engage with the insurance industry, and decide when to take advantage of new technologies. For example, in recent months the popular local social platform Kakao—the Korean equivalent of WeChat or WhatsApp—has launched a bank and is able to facilitate the sale of insurance through its ecosystem. AIG has successfully used the new platform to work with third parties and within their ecosystems.

Each new step out onto the digital horizon can drive innovation change in other parts of the business, including products. “If young people buy insurance through Kakao, we’re giving them the product which changes our value chain quite dramatically,” says Mr Barnett. “The sophistication of the product changes when you’re only doing digital sales.”

Having a healthy innovation momentum can help companies identify areas of comparative friction. Mr Barnett sees this in the regulatory sphere. “Regulation is the greatest risk to our value chain now and it’s a big issue globally. It’s difficult for companies’ own internal compliance officers to move at a digital speed.”

A healthy innovation momentum can also help move forward some of these areas of resistance, as it builds on itself and creates an internal mindset that looks for opportunities to transform. “We believe that innovation can be accelerated by learning from other people, trying to work together with our partners and bringing our solutions to our stakeholders,” says Mr Ibrahim “Innovation is about being more proactive rather than reactive to the demand.”

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