Companies routinely shed parts of their business as part of ongoing efforts to boost overall performance. But most of the time, they do so to get rid of under-performing or unsustainable assets. In today’s challenging environment, we see some investment banks take a different approach by pruning their core business and integrating it much more closely with other businesses to deliver a superior proposition to a broader set of clients.
In fact, the time is right for investment banks to identify what they’re good at, align the business to those strengths, and develop business and operating models that build on and advance those strengths. Doing so will help investment banks to more strongly differentiate themselves, attract more clients and, ultimately, reignite growth.
Admittedly, this sounds easy on the surface. But it’s not. It requires hard work along three key dimensions.
First, you’ll need to fully understand which elements of your offering clients truly value and will pay for. The answer will differ by product and what a company’s franchises require and can deliver. But the obvious point is that you won’t be able to grow and prosper if you’re not giving clients what they want—and that could be different from what you’re currently offering.
Once you’ve pinpointed what clients want, you’ll need to sort through what that means for your client focus and franchise. You might discover that in your current form, you won’t be able to provide sufficient value. In this case, you may need to broaden your footprint. Or you could determine that you could unlock more value by shifting your focus across specific segments.
Lastly, and arguably the most difficult, you’ll need to reconfigure your operating model and how you cooperate across the broader ecosystem. We see four primary models an investment bank could pursue:
- Doubling down on the core
- Focusing on corporates
- Focusing on investors
- Becoming a platform player
These options aren’t mutually exclusive. Some may decide to combine multiple elements, although this approach likely would be reserved for the largest players. But the point is to make sure pruning is not an ad hoc or standalone effort. Rather, it needs to be driven by a strategy that provides the business with a clear direction, identifies where significant value can be found, and outlines how to capture that value.
So, what do you think? Do you have a good handle on what your core business is and how to best build on it? Contact me at firstname.lastname@example.org to get started.
In the meantime, check out the full report: Challenge 1: Pruning for Growth and Distinctiveness