What is the Second Mover Advantage… An example in the Automobile sector is Tesla Motors, founded in 2003 in the Silicon Valley by a group of engineers to launch electric cars. In 11 years, company’s market capital stands at about $32 billion. To cross the same, companies like Ford and General Motors took more than 60 years.
This is true for any industry… Look at Apple… Look at Samsung… they were not the first… They were second. But they came… they saw… and they ruled the world.
In the context of Indian Banking Industry, we have seen this happening in 1995. ICICI Bank, HDFC Bank, are examples of being second. When these banks’ entered the market, they had wealth of experience (of learning from the PSBs and Old Private Sector Banks), technology acceptance (Many banks were undergoing computerization and concept of Core Banking / Universal Banking was gaining popularity) and new class of customers (liberalization of 1991 has started showing its effect). Both these players capitalized on these factors to their advantage and disrupted financial services market in India.
Today, once again Indian Banking Industry is at similar crossroads. Etailing and Ecommerce has created new class of customers, Penetration of Mobile and Mobile Internet has changed the game of distribution channels and policy support like Introduction of UIDAI, are few important developments to shake up the existing business models. Introduction of Payment Banks and Small Bank in this conducive environment is a huge opportunity for new entrants. We will see huge disruption in the Financial Service market if these new entrants play it right.
So what are the factors to play it right?
Outside-In Approach: Conventionally Banks adopt an “Inside-out” approach, where by available services are provided to the customer. In “Outside-In” approach, offering are governed by what customer wants, how he wants it and where he wants it… And today it not necessary for you to have everything. One can partner with appropriate service provider and make the services available to customer. In other words, it becomes important to own the customer.
Digitization: the whole world is getting digitized. Biggest advantage of digitization is it allows you to be present in the customer’s world without him realizing it. From Financial service point of view, it means being present in the customer’s world not only at point of transaction but before and after the transaction.
Let’s look at examples like Zomato. It started as an app that will help customer to choose the restaurant after looking at their menu. From there it started ranking restaurants based on customer reviews, if you have selected restaurant, it allows you to book Uber and now if don’t want to step out of your home, Zomato will deliver food to your doorstep. Similarly, Ola who was a just cab aggregator has extended itself to Ola Café, Ola Store and Ola Money. New Financial Service players should learn from the contemporaries and use technology to provide innovative
Channel Strategy: Today everyone thinks about ATMs, Internet and Mobile as channels. But the world has moved beyond these channels. With digitization Merchants, Partners, Ecommerce etc. can be enabled as additional channels. Like in earlier example, Zomato becomes another channel for Uber. Similarly, PayTM / Mobiquick wallets is embedded within Uber App. This creates spiral effect and gives easy entry into customers’ world. Such integration in customer’s ecosystem is enabled by Open APIs published by the service providers. This brings whole new perspective to channel. New entrants should decide their channel / distribution strategy based on the underlying digitized platform.
Time to Market: One has to be the first to leverage his Second Mover advantage. In other words, one has to be quick to respond to changing market conditions and needs of their customer. Existing players have disadvantage of their size. With monolithic organization and deep rooted culture created around processes, makes it difficult for large players to respond quickly. However new players should utilize their lean-mean structure to their advantage. They should create technology and operations in a way that they do not lose their agility with growing scale.