SFE Insight: Do we stick with what we know, or imagine something better?

Malcolm Robertson is a founding partner at Charlotte Street Partners

 Albert Einstein is credited with once saying that “imagination is more important than knowledge.”

Today, those words feel somewhat comforting. Nobody knows when the pandemic will subside, but one of my modest coping mechanisms from the beginning has been to spend some of my time imagining life beyond Covid-19.

For me, that might mean climbing mountains or just seeing family and friends again. For others, it will be foreign adventures, changing careers or just living life at a different pace, with new-found perspective.

However, for all of us, an important question exists around the future of our socially and economically important industries and how these are shaped by changing consumer behaviour.

There is surely a duty to build resilience into business models reshaped during a time of crisis, not just to withstand the storms of today and tomorrow, but to help strengthen the robust foundations of the society that will emerge from these dark days, with healthy, sustainable businesses better equipped to meet the diverse needs of all customers, especially those deemed vulnerable.

For the financial service sector, the challenges are acute, and the change was happening before a virus forced us all into isolation. A report by EY for UK Finance found that in 2017, more than 70% of adults in the UK use digital banking.

Technology has been one of the great disruptive forces of the late 20th century and the early years of this one. While Covid may have frustrated much of our lives, it seems unlikely that it will slow down the pace of technological change; on the contrary, that change seems to be permanent. In a study published in August 2020, the World Economic Forum drew on US retail index figures to estimate that the pandemic has accelerated the shift from physical to digital by five years.

Douglas Fraser, BBC Scotland’s business and economy editor, wrote about Jenners this week. His piece was at times sentimental, a reflection of simpler times in which at least one “cathedral of retailing wonder” sat at the heart of Scotland’s towns and cities.

But Fraser’s view is also grounded in the reality that the high street is changing dramatically – the troubles of Philip Green’s Arcadia Group and Debenhams are a reflection of those changing ways of the consumer and it is instructive that the companies most likely to rescue those brands are online retailers, presumably not interested in the physical infrastructure.

Financial services leaders – and politicians and regulators – cannot dismiss or ignore that change; somehow pretend it’s not happening. In every competitive industry, success is determined largely by how responsive an organisation is to the changing habits and demands of its customers.

However, it is important to ensure that industries meet the needs of all customers, especially those regarded as vulnerable – including those with limited or no access to digital platforms and the older generations who might depend on face-to-face contact.

This is a thin line to walk and it is perhaps only this generation of financial services leaders that will feel the weight of responsibility that comes with the challenge to best serve the needs of those generations who will only ever use a smartphone or a laptop to transact, and those who have spent their entire lives using services in person.

It is surely too simplistic an approach to use Covid to delay or frustrate difficult business decisions when the truth is that the virus is only speeding up a consumer-driven transformation that was happening anyway and for which there will never be immunity. It is not just business leaders who should walk in step with customers.

The more difficult job for all of society – including politicians and regulators – is to ensure that nobody is left behind by these profound and lasting changes to the way we live. As Einstein might have asked: do we stick with what we know, or imagine something better?

Published 28 January 2021