Financial Services Institutions Have Yet to Make the Most of Market Intelligence on a Strategic Level

October 10, 2011. With the European debt crisis and failure of US economic stimulus packages, financial institutions are likely to take pre-emptive measures against a possible global economic downturn. How will this affect Financial Services companies’ plans for market intelligence over 2011-2012?

In the 2011 Global Market Intelligence Survey conducted in March 2011, M-Brain (formerly GIA) surveyed the current state of the market intelligence in large and mid-sized companies around the world. There were close to 1,000 respondents across different industries, 90 of which were respondents from the Financial Services sector. Thomas Lo, M-Brain (formerly GIA)’s Financial Services practice head, talks about some of the key findings on this sector.

Is Asia the bright spot for Financial Services companies?

“Asia has its own share of problems. Japan is nowhere close to recovering from its weak economy and the impact of the earthquake and nuclear crises.

China is looking at a possible slowdown as well. With high inflation and over-extension of its credit, the Chinese government has tightened its monetary policy. This already has a great impact on the amount of loans that banks can lend out. With limited funds and over-supply of real estate properties, the first bubble to burst might be the real estate market. Small and mid-sized companies in the private sectors are also having trouble getting uncollateralized loans. What the Chinese government hopes to achieve is to contain the bursting of bubbles to only a small segment of the economy and shield the banking sector from taking a big hit. If the Chinese economy takes a hit, so would the rest of Asia, and the global economy. And the hope is that the damage of the bubble burst can be minimized.

Other markets in Asia are not big enough to pick up the slack from China. India might benefit from this the most but they are probably still a few years from being able to drive the global economy like China does. Other emerging Asian countries such as Vietnam, Thailand and Indonesia would also come out of this better but Asia as a whole will have to endure some initial pain at first while the global economy readjusts.”

Is the market intelligence function developed within most Financial Services organizations?

Financial Services companies surveyed recognize the importance of having a market intelligence program, with 76% of them having a systematic operation in place. For those with no market intelligence program, 30% plan to launch one within the next 12 months. 95% of those surveyed say they have benefited from market intelligence, and 75% think that their investments have paid off, which is on par with companies from other industries.”

How is market intelligence structured within organization charts?

“The market intelligence operation tends to be set up under the Sales & Marketing function, rather than under Strategic Planning / Business Development. The benefits of setting the market intelligence operation under Sales & Marketing is that it would allow organizations to react quicker to the needs of customers or the actions of competitors. However, this kind of setup would not help organizations make long term, strategic based decisions as much. Sales and marketing tends to take a shorter-term view while strategic planning takes a longer-term view for business development.

Financial Services_Under which function is market intelligence set up_web

Source: 2011 Global Market Intelligence Survey by M-Brain (formerly GIA)

*Click on image to enlarge

 

72% of companies surveyed have no more than three organizational layers between the market intelligence function and the CEO. While this is on par with other industries, CEOs from Financial Institutions tend to be more removed from market intelligence units. This is probably due to the fact that CEOs tend to take a more macro view of the economy and already have access to a lot of market indicators, such as interbank rates. Usually, the farther away the CEO is from direct access to the information, the slower the company can react or act on the information on a strategic level. This result shows that the Financial Services industry tends to keep market intelligence at a lower organizational level, which is consistent with the finding that market intelligence tends to be under Sales & Marketing.

On average, there are 14 people involved in market intelligence work, which is also on par with the 13-member teams in other industries.

What is quite different from other industries is the average size of the internal market intelligence network. The number of internal clients served is higher than other industries (992 vs. 727) but with fewer staff contributing to market intelligence (61 vs. 95). This means that the sector has an average ratio of 16.3 users to 1 contributor ““ which is twice as many users as other sectors. This would tend to create market intelligence reports that are generalized in nature for a large group of people. It would be difficult for such reports to be customized and catered to the specific needs of a few users. When it comes to market intelligence, the more specific and detailed, the better it would be for the users.”

Financial Services_How market intelligence is organized_web

Source: 2011 Global Market Intelligence Survey by M-Brain (formerly GIA)
*Click on image to enlarge

Overall, what are your key observations?

“The Financial Services sector is arguably the most highly regulated industry. Compared to most other industries, it is relatively transparent and everyone knows how and what other rivals are doing.

At different levels, all Financial Services companies compete as well as cooperate with one another.

Financial Services could consider gathering more market intelligence from customers and specific sectors to supplement the existing risk-assessment models with more comprehensive and up-to-date market data. Perhaps the Financial Institutions can start to integrate more market intelligence into the top management for their decision-making to avoid taking on some unexpected risks. It is an encouraging sign, though, to see from the survey that 51% of Financial Services companies said that they intend to increase their investments in market intelligence. Hopefully, the investments would be put into the right type of market intelligence.”

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