“Code” is everywhere in business today. Fuelled by data, Code lives in the algorithms that are the strategic weapons in the information age. We’re in an era of “code or be coded” and industries are getting rebooted.
From Amazon, Google, Microsoft and IBM to Uber, Square, Stripe, Airbnb, Docker, and a host of new “unicorns” (new companies valued at over $1B), Code is at the heart of their disruptive technologies, their new business models and their fantastic user experiences.
Code: Algorithms hit the C-Suite Agenda
Code is driving new business strategies including the topic of this post: the hot “FinTechs” (financial technology companies) rising in the traditionally stable Financial Services (Ten CEOs who are disrupting finance with technology).
The importance of understanding Code is why Bloomberg Businessweek recently published an entire 38,000 word essay in a double issue (June 11, 2015) for the purpose of “demystifying Code” to executives – (all executives, not just Chief Information Officers and Chief Data & Analytics Officers). The cover’s call to action: “If You Can’t Read That, You’d Better Read This“. It’s an excellent issue that gets right to the point:
“Recognizing that the world now belongs to people who code, and those who don’t understand it will be left behind, the issue is devoted to demystifying code and the culture of the people who make it.”
“Code directs the fate of everything from media to e-commerce to banking, and is arguably the most important phenomenon for the twenty-first century businessperson to understand. Yet it remains an intimidating mystery to most execs…Which means that people have been faking their way through meetings about software, and the code that builds it, for generations… ignorance is no longer acceptable.”
Fundamentally, Code is shorthand for the software and algorithms that digitize business processes by storing and swiftly moving data. While Big Data is getting the spotlight, Code manipulates and analyzes the data to drive new value from it. Code is what makes up artificial intelligence, machine intelligence and cognitive computing.
With a tidal wave of data (Goldman Sachs: 28 Billion things by 2020 ) flooding business from the “Internet of Things” (IoT), every business will be increasingly information-rich. What we do with all that data to improve customer experiences and drive efficiencies is today’s pressing question.
From healthcare to publishing to financial services, we’re in the process of digitizing and Coding virtually every industry.
Algonomic Strategy – A New Model for Business Strategy for Code and Data
It’s long been said that data is a strategic asset – but what then is the strategy? I suggest today’s overarching executive challenge is to develop a Code strategy to take advantage of Big Data and Analytics, to drive value for customers, employees, and shareholders. Just as financial knowledge became a requirement throughout the C-suite, arguably every CFO, CMO, CHRO & CRO should be Code-savvy and partner with the CIO and CDO on an aligned data-driven and Code-driven business strategy.
I think of this information-age approach to business strategy with a new term I call being “Algonomic“. An Algonomic strategy describes how the business will compete in the market to deliver economic value using algorithms (aka “Code”) either owned in house or licensed, big data, and analytics.
Google, Facebook, Amazon are largely companies natively built to deliver services and compete with their Code. Code is their strategic weapon and they’re highly Algonomic, making use of large amounts of data to drive the best advertising engines, friend suggestions, and book recommendation engines. They nurture their Code and, they’re so good at it they’ve begun offering their machine intelligence to other organizations as a cloud service.(See Amazon’s Cloud (Profitably!) Powers Major Brands, Amazon Web Services)
Executives defining strategy in the information age need to understand how information flows through the thousands of Application Programming Interfaces (API) of the “programmable web“. Code and data strategies underpin new collaborative partnerships (e.g. IBM in data sharing agreements with Twitter & Facebook) and competitive battles (e.g. Apple vs. Google vs. Microsoft vs Amazon in the Cloud Services space). Data and information sharing strategies (HBR: “The Strategic Value of API’s”) will drive new data-driven services and Code needs to be thought of by the C-level as a strategic asset too.
It’s 2015 and Here Comes FinTech…
So, given how critical Code is to business success, let’s use Code as a theme to see its impact in the banking and financial services industry, where arguably Big Data began.
A previous blog, FinTech Startups: Unbundling Wells Fargo, Citi and Bank of America, highlighted the potential disruption already taking place in banking. Many new non-bank startups are bringing Code with them to attack the incumbents on their own turf. Bain & Company also focused on the topic with Rebooting IT: Why financial institutions need a new technology model.
In addition to high profile “Ten CEOs who are disrupting finance with technology”, the overall pace of FinTech development is accelerating. VentureScanner.com is monitoring over a 1,100 FinTech companies over at least 15 categories. They also have a good view on Which Financial Technology Category Is Most Mature. At 5 years of age, Square is a relative newcomer and crowdfunding is even younger. It’s challenging to keep up with the pace of new entrants.
Recently, Santander Innoventures, Santander Group’s innovation fund partnered up with management consultants Oliver Wyman and digital financial services investment firm Anthemis Group for this must read report: The FinTech 2.0 Paper: rebooting financial services
They conclude: “Fintech 2.0 will cause a major disruption of the banking market“. The recommended response, with Santander being one of the Big Banks with its own FinTech investment arm, calls for a stronger collaboration between FinTechs and the banks to realise the incredible opportunity ahead: