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What many people don’t realise about the failure of Kodak as a company is that it was not so much that it missed the move to digital cameras, but rather that it was so close yet missed the move to online photo sharing.
When Kodak bought web-based photo-sharing site Ofoto in 2001, online sharing was emerging as a new trend.
But instead of embracing its potential, Kodak tried to use the site to boost its traditional photo-printing business. The result was a disaster.
It sold Ofoto to Shutterfly in 2012 for less than $25m, while Facebook paid $1bn the same month to acquire Instagram, a photo-sharing site that a young ex-engineer from Google had created 18 months earlier.
The lesson is that any business or industry that fails to react to an emerging trend and changing customer base will collapse, no matter how strong and successful it is at the time.
The local scenario
Out of 17 global emerging-market economies, South Africa comes last in terms of savings, at just 15% of GDP.
For the country’s National Development Plan to be implemented effectively, savings of around 30% of GDP are needed – this equates to a current shortfall of around R15bn a month.
Yet, against this backdrop, SA has one of the most sophisticated financial services industries globally with a formal pension funds sector managing over R3tr in assets.
There are more South African fund managers ranked among the world’s top 500 largest managers than the Netherlands, Belgium, Portugal, Norway, Sweden, Denmark, Finland, Russia, Austria, Hong Kong and all the South American countries combined.
But the underlying client base is changing and SA’s asset management industry urgently needs to look beyond its traditional and ageing client base to identify how to deliver advice and create products more relevant to a younger generation.
There are different approaches to targeting this new emerging millennial market. A company can go it alone by carving out a new target market as part of an overall business strategy.
Or as a collective, stakeholders in the sector can drive greater knowledge and understanding through coordinated efforts and shared knowledge, focusing on four key areas: education, simplification, accessibility and incentives.
Financial literacy at a primary, intermediate, tertiary and professional level is hugely important. One study found that only 24% of millennials can demonstrate basic financial knowledge, yet only 27% seek professional advice.
In SA, 51% of young people aged between 20 and 24 do not have a matric certificate. Financial education and basic financial literacy are vital to foster an understanding of the importance of future financial planning.
Simplifying products can go a long way to draw in millennials. SA’s retirement industry is one of the most developed globally but years of development have led to a sophisticated, yet not necessarily simple, market.
Building financial education into online advice tools for younger people presents a significant opportunity.
Creating an industry-wide “standard product” can help to simplify savings. Standard does not mean sub-standard, but rather a guide to what most people should consider as a minimum.
Mobile phone usage is well established and widespread, and was relatively quickly adopted in SA. Mobile technology could be used more extensively for financial advice and education, reaching a larger audience.
More than any other generation, millennials have taken up health and wellness issues in a serious way.
Millennials eat smarter, exercise more and more regularly, use online sources to find healthier food, and track everything they do.
Using incentives can be a powerful and more effective way of engaging younger people.
The need for the industry to get more in touch with the next generation of client is not simply about ensuring its future survival.
It’s about ensuring financial stability for a generation that is one of the largest in history.
SA’s industry also needs to consider appealing across demographics and gender. Only 29% of certified financial planners in SA are women and just 15% are black, according to Global Comparator Research.
While trying to grapple with generational changes, SA also has to figure out how to appeal to a vastly diverse market where products have traditionally been developed by a fairly narrow segment.
Stokvels, for example, are one of the longest-running types of saving schemes in SA. Is the financial advisory and asset management industry doing enough to develop outside its traditional product offering?
South Africans generally work well as a collective and have shown great success in rapidly adopting new approaches to change focus when the need arises.
There is a large social case for ensuring advice and products can be delivered in a way that appeals to the next generation. They are, after all, our future.
Kevin Lings is chief economist at Stanlib.
This article originally appeared in the October 2017 edition of Collective Insight, which appears in the 19 October edition offinweek. Buy and download the magazine here.
