The Bankwatch

Tracking the consumer evolution of financial services

The endgame for banks – sloggers or innovators

We quickly forget about previous crashes, but over the period 1997 – 2003, $2.8 trillion in market value was wiped out from the telcoms as they experienced their own bubble through the dot.com times.  The Economist points out there are lessons for banks and for banking regulators too I would say.

Their conclusion is consistent with my view that there will be some innovative winners such as O2 that are able to re-energise with innovative measures, marketing and services.  However many will as the article say, slog along “against competitors and reinvigorated regulators”.  I have gone further and supported the idea that the inevitable nationalization of the sloggers, will result is a set of financial utilities, more akin to electricity and water providers to your home.

Lessons from the telecoms bubble (1) | Economist

Ideally, this revolution can be extended to reinventing brands and business models. But a depressing precedent has been set by incumbent telecoms firms, which, like most banks, are stodgy bureaucracies at heart. Despite endless product launches and reorganisations, perhaps only two firms, KPN (see article) and O2 (subsequently bought by Telefónica) were transformed by innovative managers. For most others, the decade since the bubble has been a slog against competitors and reinvigorated regulators. That is the lot of most firms in most industries. They face a constant battle to protect pockets of high profits and have few chances to grow. For telecoms, the glamour and infamy were followed by mediocrity. Banks are still staggering about in the limelight, but the same fate surely awaits them.

The other observation of note in the article is that all the senior management at the telcoms were replaced.

Written by Colin Henderson

February 27, 2009 at 11:30

Posted in Uncategorized

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