2024 marked an interesting but challenging year in PE. According to Pitchbook, U.S. firms closed 46 first-time funds, raising $9.2 billion—a significant drop from $21.5 billion across 121 funds in 2023. PE also encountered sustained headwinds on entry with the cost of leverage up to 10% in 2024 vs. 5% in 2022. 

As PE combats a few tough years, green shoots are starting to emerge. PE exits in 2024 were at $902 billion compared to $754 billion in 2023, according to Wachtell, Lipton, Rosen & Katz. This is still well below pandemic-era highs but leaves renewed optimism for 2025. 

This stalled deal activity has made clear that while private equity (PE) firms have mastered the art of financial engineering, operational efficiencies, and strategic acquisitions, today’s PE environment requires an expanded toolkit of revenue and growth engineering to unlock value. One that specifically focuses on unlocking the true potential of a well-defined and executed CMO or Growth Officer agenda post-deal.   

What stands out in Prophet’s experience working with a network of trusted PE partners and their portfolio companies is the power of value unlock potential beyond the deal. Specifically, bringing in a growth-oriented playbook alongside an operational and financial engineering one that focuses on four targeted actions with seismic potential to accelerate time to value. 

Crafting a Compelling and Coherent Story of Value: Rethink Your Company’s Identity to act as a Greater Value Multiplier 

Alongside operational and financial levers, the impact of a strong story of value and brand positioning can have on strengthening enterprise valuation cannot be understated. We’ve seen investor valuation models shift towards more forward-leaning expectations and storytelling. A strong story of value is an essential foundation in supporting the brand and can help reduce customer churn, enable premium pricing and attract top talent.  

The story of value has two parts: the corporate story, which is investor-focused and catalyzes leadership and business value, and the brand story, which is customer-facing and drives awareness and customer consideration and retention. 

These all work together as important signals to a much broader set of stakeholders, ultimately enhancing exit appeal to strategic buyers or IPO markets. A well-structured brand system should go beyond a creative exercise to crystallize business ambition and serve as the essential wrapper that catalyzes a new growth thesis. The creative strength of the work is also not trivial; new strategies can fall flat or get lost in old design systems and messages. 

It is essential to nail the blend of both stories to create a symbiotic relationship that enhances overall enterprise value. 

Driving a Customer-Led and Commercially Minded Go-To-Market Reconfiguration: Fix the Leaky Funnels and Unlock New Sources of Revenue 

Companies may risk struggling with stagnant growth, inefficient go-to-market strategies and underperforming sales motions post-acquisition. Partially changing leadership through the transition of ownership can risk decelerating progress in the short term. Post-investment, the primary goal is to avoid harming existing businesses and commercial momentum while reorganizing and integrating new technologies and products. 

However, changing leadership creates new opportunities to get closer to customers and the marketplace, uncover new insights and revisit outdated go-to-market processes by re-engineering the experience from first principles. This allows the organization to realign its brand, marketing and sales tactics in a way that can improve conversion, expand share of wallet and shorten sales cycles. 

The real unlock is creating a new or improved system that successfully drives leads and follows them through an improved sales channel, enhancing both demand generation and the sales process. These types of transactions can also serve as welcoming opportunities to deliberately engage with customers more broadly. Specifically, conversations that expand the frame of reference of the new entity and open opportunities to deepen relationships or cross sell more effectively. Finding new processes for this that can scale in broader roll-ups can accelerate the time to exit for portfolio companies.  

Using Culture as a Catalyst to Power Change: Get People to See, Believe and Live the Change 

When PE firms acquire a company, there’s often a disconnect between leadership priorities, business strategy, organizational culture and the financial growth plan. Change is expected and constant during these transitions but is often not well communicated or orchestrated. New leaders are brought in to drive the change but need to lean heavily on legacy teams, especially in the beginning.  

The HR function is often undervalued, but culture is critical at deal time. Building a unified culture accelerates integration and leverages an energized organization to achieve objectives. Post-deal, the focus shifts to attracting and retaining the right talent for the company’s vision. Highlighting both the initial integration and ongoing talent strategy is essential. A well thought out story of value and brand from empowered CMO and/or Growth Officers should be deliberately activated internally to shift employee culture to drive impact externally.   

Where’s Your Playbook? 

Prophet understands the essential role of revenue engineering for PE value creation—and more importantly, how to define and accelerate the right company efforts to gain a competitive edge in an increasingly complex valuation market. We routinely see PE firms with great playbooks and partners for rapid due diligence going into a deal that outlines strategic routes and assessments of where to play post-deal along with the risks associated with the moves.  

However, post-acquisition can be the ideal time to bring in a growth-led “think and build” partner capable of accelerating the CMO or Growth Officer agenda to move quickly to execute how-to-win strategies that unpack new customer insights, depict a more coherent story of value, develop a refreshed identity, reimagine new customer experiences and power a renewed sense of culture. 

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Part 1 of Our Exclusive 3-Part Series on Driving Growth and Relevance in Commercial Banking

This first installment uncovers the critical strategies to align brand-building and demand generation efforts, unlocking sustainable growth in an era of constant change.  

Key Learnings: 

• Why the gap between brand-building and demand generation limits growth—and how commercial banks can bridge it.  
• Actionable insights to enhance client engagement and position your bank for sustainable growth.  
• Key strategies to differentiate your organization in an increasingly crowded market.  

What’s Next?

Future articles in this series will dive deeper into reimagining client experiences, rethinking product architectures, and fostering cultural alignment to position commercial banks for long-term success. 

Download Now

Get started today by downloading this report and take the first step toward driving meaningful growth and relevance in commercial banking. Contact our team to learn how we can help you successfully integrated brand and demand marketing strategies that lead to uncommon growth. 

In competitive business landscape, an inefficient product portfolio can significantly impact a company’s bottom line. Our experience shows that companies lacking a customer-centric product portfolio strategy and failing to manage their portfolios proactively can lose up to five percent in product margin. Moreover, these companies often incur 10-20% higher portfolio management costs than their peers who prioritize product portfolio management.  

The Foundation of an Efficient Product Portfolio: Understanding Your Customers 

A successful product portfolio strategy starts with a deep understanding of your customers. It’s crucial to know: 

• What customer segments are there? What are their goals and needs? 
• How do they choose products? What dimensions influence their decisions? 
• What is important to them? Are we prioritizing features based on an “inside-out mindset” rather than actual customer preferences? 
• What are the decision-making hierarchies? Which aspects come first, second, and third in their buying process? 

The answers to these questions should shape how you structure, build, and rationalize your product portfolio. They also guide how you allocate marketing budgets and internal resources, design packaging, organize store layouts, and structure your website. 

In this article, we share our thinking on how to create a customer-centric Portfolio strategy, using our Efficient Portfolio Model (Exhibit A.)   

Exhibit A

The Pitfalls of an “Inside-Out Mindset” 

Many companies falter by adopting an “inside-out mindset,” in which internal perceptions and engineering priorities drive product development. For instance, engineers might focus on technical features that seem crucial from a development standpoint but are not key factors in customer decisions. This approach often leads to overly complex portfolios that are hard for customers to navigate, potentially hampering sales and driving up management costs. And when the inevitable portfolio rationalization comes about, they rely on rough rules of thumb such as the 80/20 rule to remove the long-tail, rather than using customer-centric criteria.  

Aligning Product Development with Customer Needs 

Successful companies start with a thorough understanding of customer needs and behaviors, which inform the critical product dimensions. Customer research is essential to identify these “drivers of choice.” Effective methodologies we recommend include: Contextual Inquiry, in which participants are observed while they perform tasks and describe what they are doing; and Discrete Choice Modeling, in which the importance of different product dimensions, such as brand, price, size, and specific features, are quantified. 

By identifying choice dimensions and mapping them on a matrix, companies can analyze the market to identify key volume and value pockets, as well as growing or declining niches. Comparing the existing portfolio against these matrices allows companies to determine which products to keep and prioritize, which to potentially discontinue, and where new opportunities lie. This strategy provides long-term guidance and direction for R&D teams on where to focus future product development. 

Case Study: Streamlining for Success 

For one of our FMCG clients, a detailed analysis revealed that 80% of the sales volume and value in their category were concentrated in three product hotspots across most markets. Based on this insight, we developed a product portfolio strategy that emphasized a “core” portfolio focusing on these hotspots. Additionally, we suggested an “excite” range of propositions to complement the core products, driving customer engagement and creating a buzz (Exhibit B.)

Exhibit B

Portfolio deployment guidelines were then developed to help markets roll out the product portfolio in the most impactful and efficient ways, depending on their specific context (e.g. new vs established markets, competitive intensity, etc.) (Exhibit C.)

Exhibit C

Leveraging Multi-Brand Strategies for Efficiency 

For companies managing multiple brands, this analytical approach can also identify opportunities for efficiency. By defining clearer roles for each brand in terms of the product territories they cover, companies can streamline their portfolios, potentially migrating propositions to align better with brand strengths and market opportunities. 

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How do you gain market share and attract the best talent in a market that looks like a sea of sameness? Where clients, partners, and talent see you and your competitors as interchangeable? Asset managers have long operated with this mindset when it comes to brand positioning.   Compounding this challenge in recent years is the need to navigate challenges that include fee compression, market volatility, shifting regulatory environments and talent friction.  

Consequently, asset managers have rapidly expanded their areas of focus: taking on a new tension around focused expertise vs. expanding the set of offers to serve investors (e.g., new industries, specialties, alternative investments, ESG investing, real estate, digital assets, etc.). Many have used expanded offers to deepen their relationships with clients and successfully compete but at the price of sometimes murky associations around specialization. Such go-to-market strategies have made it confusing for new investors to confidently invest and, at times, for asset managers to confidently sell a broader set of investments and capabilities.  

Facing New Opposition  

Rising interest rates, inflation, inverted yield curves, disruptive technologies (AI, digital assets), and rising global tension have shrunken available Assets Under Management (AUM), which has only increased investor trepidation as they conserve cash at a time when access to capital is more costly.  

Automation and AI are also shifting the paradigm for acquiring AUM, and there could be a semi-industry rotation. The sales and client engagement processes are also evolving as a consequence of technology. It’s less about being “close” to investors for AUM and more about being “ubiquitous” and/or “famous” for something.  

The theme of 2021 was a world of too much money chasing too few assets. The theme of 2023 is too little AUM for too many asset managers and their expansive sets of offers. 

Consolidation is the next imminent frontier we are seeing. Franklin Templeton’s $1bn+ purchase of rival Putnam Investments and Lansdowne Partners’ plan to acquire UK equity investment manager Crux Asset Management are only the beginning.  

The Asset Management Brand-Demand Challenge  

While consolidation will make newly combined entities more competitive and allow them to capture efficiencies, it will not solve the two underlying challenges present in the asset management space:  

1. A need to establish or regain slipping relevance: Every asset management brand covered in Prophet’s Brand Relevance Index (BRI) saw a decline in relevance from 2021 to 2022, and all but one declined in relevance versus other brands from 2022 to 2023. Relevance, which directly relates to the bottom line, is noteworthy to all stakeholders. It creates importance to investors but also attracts and retains premier talent in a tighter AUM environment and bigger asset management ecosystem—building both brand and demand for the business.
2. A need to create coherence: As entities combine and grow, it is critical to ensure that not just the company but also its offers and capabilities are well-articulated, organized and understood—making it easier for investors to buy and asset managers to sell.  

5 Actions for Building a Winning Asset Management Strategy  

1. Acknowledge and understand your unique audience motivations.

Asset managers need to manage a range of stakeholders and monitor the emerging patterns in behaviors. For example:   

• Investors: Institutional and individuals are typically seeking risk-adjusted returns that outpace the other options available in the capital structure.   
• Portfolio Companies: Seeking sustainable growth through capital and expertise, but also looking for purpose and values alignment.  
• Capital Allocators: Seeking value creation, preservation of capital, and risk management for both the firm and its clients.  They also need the best talent to convey expertise, broaden access to capital, and drive outsized performance. 
• Talent: Looking to build unique career knowledge, gain experience, and get rewarded by working with the smartest people at asset management firms with the strongest cultures.  

2. Establish a clear brand purpose.

Asset management brands tend to place too great of an emphasis on what they do (alternatives, quant, fixed income) vs. answering bigger questions on how they do it (resources, ecosystem, talent) or, even further, why they align their purpose, promise, and principles to a particular vision. Brands that can’t get past what are likely to simply float along in a sea of sameness. Many asset management positionings have migrated to being ‘safe’ through a few primary lenses: looking towards tomorrow, spotlighting integrity and/or trust, and a focus on driving long-term value.  

We believe many of the declines in brand relevance for asset managers can be attributed, in part, to a decline in various key client sentiment heart factors as outlined by Prophet’s BRI. Heart factors encapsulate the emotional connections that the audiences will forge with brands, e.g., ‘connects with me emotionally’, ‘makes me feel inspired’ and ‘engages with me in new and creative ways’. The erosion of these heart factors vs. more rational head factors which have remained stable, e.g., ‘know I can depend on’, ‘delivers on a consistent experience’, and ‘makes my life easier’ reinforces the idea that asset managers have reached a perceived parity across products, services, and the overall brand.  Such underscores the likely importance of conveying a clear ‘how’ paired with a well-defined ‘why’ in the brand purpose with clients.    

A clear how may include things like:  

1. Your investment philosophy and approach 
2. Your organization’s talent, values, and principles  
3. Signature stories of lasting impact on employees, investors, companies, communities, and ecosystems 

A well-thought-out purpose is:  

1. Authentic – ties back to what you do 
2. Inspiring – connects with employees and customers emotionally 
3. Shared – creates connection and builds community 
4. Actionable – lived every day 

In Vice Chairman at Prophet David Aaker’s recent book The Future of Purpose-Driven Branding, he outlines the use of inspiring, and mission-driven signature social programs that deploy resources to address the most pressing societal challenges.  One shining example of this is State Street Global Advisors who commissioned the bronze sculpture Fearless Girl overlooking the New York Stock Exchange in anticipation of National Women’s Day.  This serves as a symbol of a part of the organization’s purpose to position on the gender equality gap and reinforces its position on taking an aggressive stance on its expectation that all portfolio companies hold at least one woman on its board.  The organization mentions it is prepared to cast proxy votes against board leaders when companies do not meet their diversity expectations.  

3. Power brand from within using a visible human-centered approach.

It’s hard enough to articulate a clear purpose in the crowded asset management space but even harder to ensure that brand purpose connects meaningfully to people and clients. The brands’ purpose needs to align with prospective talent and customers. Shaping a visible culture plays a critical role in attracting and retaining the best people which in turn garners the attention of clients. Bridgewater Associates famously pioneered a workplace culture relying on truthful and transparent communication dubbed “radical truth and radical transparency” as part of Ray Dalio’s principle-based approach. A human-centered approach involves bridging your brand purpose into a visible culture supported by a strong employee value proposition that:  

• Articulates what makes your company a strong place to work  
• Improves winning in the broad talent marketplace 
• Develops an enhanced foundation to support future and evolving talent needs  

Doing these three things requires building from the organization’s purpose but also driving careful consideration around the Employee Value Proposition and employee experience.  In some recent Prophet qualitative research in the asset management space, we found building a winning EVP requires deliberate care to the employee experience levers talent is looking for beyond compensation, such as:  

• Autonomy – giving employees the freedom to make decisions that matter to them 
• Mentorship – surrounding talent with leaders that inspire them 
• Clarity – on how the organization will value their performance and the capital available to them  
• Resources – being equipped with the right support to guide decisions and accomplish goals 
• Innovation – seeing their work and the work of the company evolving toward the future 

4. Revisit architecture, nomenclature, and value propositions.

Increasingly adding incremental investment products and services will raise organizational capabilities with impending M&A in the asset management space compounding that effect. But these new products, services, and areas of focus often get added to the existing array of capabilities that slowly stifle brand and portfolio coherence. Asset managers need to revisit the growing complexity of their investment focuses and develop an architecture and naming strategy that still complies with regulatory requirements but removes friction for both buying and selling offers designed to increase their AUM. Coupling this with strong value propositions that don’t just indicate what investments to provide but also how to pursue those investments in a way that serves to improve investor consideration and demand in addition to improving the ability for advisors to promote their services. The necessity for these services becomes evident when we consider a key finding from BRI, which reveals asset management brands fall short of advantageous relevance drivers that connect to aspects of having a strong brand architecture, use of nomenclature, and/or value propositions resonate with people in meaningful ways:  

• Emotional resonance (connects with me) 
• Value alignment (has a set of beliefs and values that align with my own) 
• Essentiality (I can’t imagine living without).   

5. Experiment to win with experience both internally and externally.

In an industry where both brand and culture follow predictable patterns and a substantial amount of investment follows critical business-as-usual actions around quality reporting, transparency, educational resources, technology, etc., it can be easy for marketing, business development/advisor activities, experience investments, and cultural investments to follow these patterns. Applying a portfolio construction theory to marketing, hiring, and culture investments to experiment with actions that set a brand’s purpose and culture apart can yield huge returns. Asset management company, Vanguard, is famous for owning the retirement space not just for investors but also employees whom they affectionately name their “crew”. The Vanguard Retirement Savings plan for this group offers 4% in matched contributions and an unheard-of 10% company contribution without limit.  

Acknowledgment: The authors would like to thank Prophet Partner Adam Tremblay for his input in creating this article. 

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While there is no crystal ball, slow economic growth and an inverted yield curve continue as headwinds for the banking industry. Both have already exposed vulnerabilities of large regional banks like Silicon Valley and Signature Bank, as well as G-SIBs such as UBS and Credit Suisse. While the speculated wave of consolidation may be overblown, there will no doubt be M&A activity during the foreseeable, uncertain future.   

HBR continues to cite that between 70-90% of acquisitions fail. In addition, MIT Sloan studied 200+ M&As with values exceeding $250M during a 10+ year period starting in 1995 and learned that in nearly two-thirds of those deals, brand strategy was deemed to have a low to moderate influence in pre-merger discussions. This approach leads to the new identity or identities post-merger in a suboptimal place with limited clarity and often stems from a gap in brand expertise during the M&A process and following.  

Specifically, we see five common mistakes related to brand that hinders speculated growth performance and increase costs during and post-acquisition:  

1. The deal strategy undervalues customer upside and risks: To complete a fully informed financial forecast, due diligence must quantify current and future demand, change tolerance and emerging customer requirements. 
2. There is limited understanding of purchased brand assets: For a truly shared optimized portfolio post M&A, companies must understand how all brand assets work to drive choice, revenue, and pricing power. 
3. Integration teams have a narrow framing as primarily a “re-branding” effort: M&A presents a rare, point-in-time opportunity to articulate a new corporate narrative, upgrade customer perceptions and drive lasting cultural change within the organization.  
4. Integration planning without a go-to-market plan to win: Integration priorities should pair synergy plans with growth moves: product, service and experience innovation to drive growth through the new asset base. 
5. The new enterprise under-leverages culture and employee engagement: Successfully informing, engaging and enabling employees BEFORE launching externally is critical to retaining human capital and driving cultural engagement. 

As inevitable market forces drive sustained or increased M&A in the banking industry, new and exciting opportunities emerge. Here are three practical things to consider that relate to your brand (and business) during M&A:  

1. Consider customer context early and often: Ensure all functional discussions include conversations around customer impact and set a precedent that addressing the customer impact and experience is a priority. This is especially true at retail banks, often built around specialized customer focuses or geographic footprints with entrenched identities.  
2. Evaluate the value and values of brand assets to guide the right transition plan: Typically, fewer stronger brands win out in banking. While long-term efficiencies exist for consolidating brands, careful work must be done to explore different end-states and migration scenarios. Perform the right evaluation ahead not just to understand the brand’s value, but also the inherent values the brand holds, and the customer perception to guide the right transition plan in context.  
3. Discover or rediscover purpose and power it through culture from within: Banking consolidation done wrong can feel like a mismatched transformer coming together with messy operating model discussions and integration cadences that unfold over time. This can be especially distancing for distributed employees working in branches or regional offices closest to the customer. Investing early in the process to better understand and sharpen a combined new culture with a more meaningful purpose can serve as a North Star for smoother and more engaged integration.  

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Innovation – more and more –  is what every financial services company seeks as the primary means of driving growth. That’s true because innovation is increasingly what separates market leaders from also-rans.  

But for all the investments in innovation, most organizations struggle to generate the returns they’re looking for or produce the growth that innovation is supposed to unleash. For more on the barriers to innovation and – more importantly – how to get over them, read our recent research report, Winning the Innovation Game in Banking.) 

In the intensely competitive financial services sector, it is not enough to innovate every now and then. Rather the goal is to establish a rigorous practice of innovation and to make it a standard part of ongoing operations. The vision is to establish a high-performing innovation engine that continually identifies innovation opportunities, explores those ideas via prototyping and gated investments and efficiently moves meaningful innovations to market. Such a disciplined process is necessary to avoid the common pitfalls that make repeatable innovation an elusive target for many companies.  

Introducing… the Innovation Maturity Model 

To help banks, insurers, and investment managers industrialize their approach to innovation, Prophet created the innovation maturity model. This model helps organizations:  

• Assess their own innovation capabilities and opportunities  
• Identify the barriers – technological, process, human, cultural – inhibiting innovation 
• Establish tangible innovation goals and actionable plans to overcome those barriers  
• Define a roadmap to establishing repeatable innovation capabilities  

The innovation maturity model inspects five dimensions of the business that are critical to enabling innovation:  

1. Strategy and Vision  
2. Organization and Mechanics 
3. Insights and Measurement 
4. Culture, Behaviors and Rituals 
5. Education and Enablement 

Within each of these areas, the model defines varying levels of maturity – beginner, novice, intermediate, advanced, expert – so organizations can understand where they are today and what to aim for tomorrow. For instance, an organization with expert-level capabilities in organization and mechanics would involve the entire enterprise in using innovation portfolios to drive strategic directions and decisions, with all employees aligned to the innovation strategy and with specific responsibilities to drive that strategy forward.  

In terms of education and enablement, beginner firms will be those that provide access to and funding for external training for dedicated innovation practitioners. Intermediate firms will have innovation teams in place to help drive behavioral change across the organization and support wider education efforts. At the expert level, innovation training and education will be a mandatory part of onboarding and learning and development programs, with continuously updated curricula and regular use of outside resources for insight and inspiration.  

The innovation maturity model reflects our market experience in terms of what works in driving breakthrough innovations. Further, it’s designed to establish cultures that prize risk-taking and experimentation and instill operational discipline relative to innovation. Such organizations are capable of both acting like a startup and investing like venture capital firms. As we highlight in our report, “Winning the Innovation Game in Banking”, it’s a matter of building a portfolio of innovation ideas based on deep customer insight and then rapidly testing and refining those ideas through pilots and MVP launches into the market.  

The Many Forms of Innovation 

Because innovation can take many forms, our innovation maturity model provides the core insights that can point the organization in the right long-term direction. To put the model into context, consider how the organizations below are evaluating the different ways to set up their innovation engines and flywheels.  

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It’s that time of year again, when we stick our necks out to envision what’s coming for financial services in 2023. You don’t have to be clairvoyant to know that there will be more disruption and plenty of innovation. The tightening economic landscape means that banks, insurers and wealth and asset managers will need to prioritize investments that deliver results in the near term, even as they look to establish strong foundations for long-term transformation and ongoing innovation.  

1. Resilience Through Relevance Becomes the Priority  

Yes, customers are likely to be more careful with their spending in 2023. But, no, customer experience will not become less important. Financial services firms should “buy the dip” by continuing to fund innovation programs.  

Market experience and research from Harvard Business Review tell us that firms that retain their focus on and continue to invest in innovation (especially in those areas of relatively low opportunity cost) during times of economic uncertainty significantly outperform their peers in sales and profit growth. And many well-known brands and market leaders have fully reinvented themselves during downturns, by focusing relentlessly on resilience and retaining their relevance.  

For large financial services firms, they must overcome the common tendency to solve their own internal business problems rather than solving authentic customer problems, as broad and evolving as those can be. Showing empathy and aligning with customer values can help brands stay relevant and differentiate during tough times. That means defining the corporate purpose in terms that are meaningful to customers, a topic we cover in more detail here. Such clarity is especially important in embedded finance and other areas of disruption, where established brands must define their role.  

2. Mega-Growth Comes from Sub-Categories  

When it comes to reaching new segments, many financial services companies are finding success with tailored offers that can create separation from the primary brand and the competition. As Prophet Vice Chairman David Aaker has written in his book, “Instead of promoting the superiority of a brand, create a subcategory with new or markedly superior customer experiences or brand relationships to create barriers to competitors.”  

Sub-categories are promising because they allow incumbent brands to go into new places. And there are many potential opportunities:  

• Banks offering credit and other services tailored to small business categories
• Insurers launching digital policies for millennials and Gen Z 
• Wealth managers focusing on simpler income protection products and decumulation strategies  

There has been considerable market action along these lines in recent years: Some sub-category explorations and extensions have been successful in gaining traction, while others have delivered sub-optimal results, while also producing ample learnings that can be applied to future endeavors.  

We’ll give David Aaker the last word here: “Subcategory-driven growth has exploded in the digital era because of technological advances and the fast, inexpensive market access made possible by e-commerce and digital communication.” That trend will surely continue in 2023 and beyond.  

3. Brands Will Define Their Roles in the Embedded Finance Value Chain  

Critical mass may still be a few years off, but the days of nearly all finance being delivered as-a-service are getting close. Embedded finance is on the same trajectory that made “digital marketing” just “marketing” and “mobile phones” just “phones”. 

According to recent research, the U.S. embedded finance industry is expected to grow at a CAGR of 23.5% from 2022 through 2029, reaching $212 billion by 2029. Plaid expects a 10x jump in embedded finance revenue from 2020 to 2025. We expect the growth of embedded finance to be nearly recession-proof.  

At the center of this growth is the shift from standalone products to solutions delivered at the point of need. After all, customers don’t want a credit card or an insurance policy, but rather an integrated payments experience that streamlines purchasing and provides protections for important purchases. We believe that a primary way to differentiate in the embedded finance space is to start with the customer and design products and experiences around their needs and relevant to their financial journey. 

The next 12 months will see plenty of milestones. Investment advice is everywhere and easily hopping over industry boundaries. Consider how DriveWealth is offering advice for health savings accounts (HSAs).  

The tipping point for mass adoption of embedded finance is clearly getting closer and we very well may reach it in 2023. Financial services organizations that start with deep insights into the needs of customers’ financial journeys and that engage successfully in ecosystems will be best positioned to win the innovation game in the embedded era.  

4. Holistic Wellness Matters as Much to Your Employees as Your Customers   

For many financial services institutions, customers are your employees. A weakening macroeconomic environment will only intensify the need for greater wellness – including physical, mental and financial wellness. There’s a risk that employers may cut programs because of cost pressures in a recessionary environment; that would be a mistake in our view. While wellness may seem a consumer hot topic du jour, financial firms should recognize that wellness equates to confidence and security, which is what consumers are looking for when they buy financial services products.      

We expect to see more financial services firms expand their content, education and advisory offerings (via both in-person and Robo channels) for the simple reason that more people need such services. That’s true at every level of the market; from high-net-worth families that want multi-generational wealth distribution strategies to younger consumers just starting their careers and seeking higher degrees of financial literacy and basic tools for budgeting, savings and investing. To realize the benefits, banks, insurers and others will need to master their activation strategies.  

Financial services firms keying on wellness would do well to understand the complex linkages between mental health and financial wellness. For instance, financial stress is the number-one driver of poor mental health among employees, according to research from MetLife. Because dynamic relationships between different types of wellness play out for both customers and employees, the group insurance and employee benefits space is seeing more innovation, much of it focused on driving well-being. For example, the Morgan Stanley at Work program offers holistic features for both financial security and empowerment.  

5. Human Capital and Strong Cultures Deliver Even More Competitive Advantage    

Post-COVID, more companies have rediscovered the power of their people (okay, maybe not Twitter). It’s more than companies having to compete for scarce talent. Rather, those firms that embrace cultures of learning, creativity and flexibility typically realize better results in terms of customer-centric innovation. And it’s not a matter of choosing to invest in tech or people, but rather getting the right people in place to boost returns on your tech investments.  For all of these reasons, 2023 will not be the time to cut back on learning, development and upskilling/reskilling programs. These initiatives help strengthen cultures and create a more resilient workforce, just what financial services firms will need to thrive in the near term.  

Whether and to what extent inflation or a recession impact the job market remains to be seen. But it’s possible that wage increases may rise faster than price increases. And financial services firms have an opportunity to hire more tech-savvy talent after widespread Silicon Valley layoffs; this is another opportunity to “buy the dip.”  

But even if there is more talent available, banks and others must ensure their cultures are attractive to the right type of talent. Typically, that means emphasizing collaboration and taking a human-centric approach. Our research into the Collaborative Advantage shows that higher levels of teamwork enrich individuals, building new skills that increase engagement and job satisfaction – what financial services firms need to complete in a dynamic market landscape today. 

6. Balancing ESG Expectations With Reality  

While the bright spotlight on environmental, social and governance (ESG) matters will not dim significantly in the coming year, attention will shift toward closer brand scrutiny, both in terms of greenwashing and the authenticity of their ESG claims. More companies – including the “big 6” banks that have aligned to the Paris Agreement – will be evaluated in terms of how well they are “walking the walk” relative to their commitments. That scrutiny will come not just from regulators but the full range of stakeholders, including employees, investors, and clients and customers, who will not react well to big gaps between brand perceptions and actual ESG performance.  

Tensions and contradictions will be called out. For instance, many of the firms marketing green products and aiming for inclusion in ESG funds and indexes also continue to underwrite fossil fuel infrastructure. No wonder some banks are considering leaving industry alliances.  

Financial services firms should be thoughtful in understanding their ESG efforts from a broader range of perspectives. Certainly, there will be more focus on the “S” or social dimension “People well-being” is one potential lens for evaluating commitments and monitoring progress. For instance, the employee experience can be viewed in terms of its social impacts, as can loan portfolios’ inclusion of minority-owned businesses.  

Financial services firms should not shy away from articulating their value relative to ESG, but they must be careful about mere virtue signaling. They should also look to get beyond compliance focus, though of course, lawyers are going to restrict what can be said about green offerings. Further, firms will need to become experts in ESG data and reporting, not least because more detailed disclosures are coming soon.   

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Banks that go on offense and remain committed to innovation will have the competitive edge as the economy returns to growth cycles.

Based on ongoing market research and interviews with industry experts and executives, “Winning the Innovation Game in Banking,” provides insights for senior banking leaders seeking to re-energize their organization’s innovation engines. Specifically, this report:

• Provides pragmatic actions for avoiding costly mistakes and translating innovation investments into market impact and improvements on the top line
• Defines leading practices and proven frameworks that accelerate efforts to operationalize and scale innovation programs
• Identifies the most promising market territories for innovation aligned to the growth agendas of incumbent banks

Download the report today. 

So far, this economic cycle is so loaded with 1970s throwbacks like soaring gasoline prices, inflation, and interest rates that we half expect to see a resurgence of the Burt Reynolds mustache and tie-dye ponchos. Whether we are at the beginning of the next Great Recession or just a minor downturn, history tells us that when brands scale back investments in growth, they typically end up with regrets. This is because when the next growth cycle begins, they tend to trail the field as competitors capture significant opportunities.  

For financial services companies, the current times seem particularly dire. CMOs in this industry are increasingly less optimistic, with 44% of those in banking, insurance and finance saying they are less upbeat about the U.S. economy compared to 39% of all CMOs. No one is happy about saying goodbye to the sizzling stock market, red-hot housing sales or consumer spending swagger. 

Scary? Maybe. Time to invest in growth? History resoundingly says yes.  

Research shows that companies who double down on defensive plays tend to limp out of recessions. But those that fare best invest in new markets, products and services. A “Harvard Business Review” analysis of companies in the Great Recession of 2008 to 2010 found that 17% of the 4,700 public companies studied fared quite poorly, either becoming bankrupt, private or acquired.  

Though the majority muddled through, 9% emerged from the downturn as elite success stories, outperforming competitors by at least 10% in sales and profits growth. Why? In simple terms, they stayed focused and invested in areas of relatively lower opportunity costs.

“You cannot overtake 15 cars in sunny weather… but you can when it’s raining.”

– Ayrton Senna, Formula One Champion 

This is a lesson in how firms build resiliency in uncertain times. They evolve and make intelligent choices, ultimately emerging stronger than competitors.  

So what should you do now? We believe those financial services brands that lean into these three areas are more likely to tap into uncommon growth once the economic engines reverse course. 

Below is a summary of each of the three areas. In future articles, we will dive deeper into each to provide actionable recommendations to set your organization up for uncommon growth.  

Align Everything You Do to Your Customer’s Values

“Three classes of factors affect what an organization can and cannot do: its resources, its processes and its values.”

― Clayton M. Christensen, “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail”

The importance of a company’s purpose has changed dramatically in the last several years. It is no longer enough to establish purpose-driven brand messaging. Companies need to align everything they do to their customer’s values. The growing demands for progress on racial justice, climate concern and social issues no longer come just from consumers. Investors, employees and other stakeholders expect purpose-led thinking too. 

But how do you make your purpose part of your organization’s DNA? Part of the operating model that is core to how stakeholders hear, see and feel the business? Prophet’s Human-Centered Transformation Model serves as a framework for effectively aligning the way your purpose and values are integrated throughout your organization.  

Customers and stakeholders want to see corporate purpose defined in a more meaningful sense. They expect products, services and experiences that align with what matters most. It has become a core component of a brand’s reputation and relevance.  

Example Winning Strategy:  Define your purpose-driven operating model

Financial services brands that are leaning into driving purpose throughout the organization are positioning for the future. Some firms are beginning to build purpose-driven operating models, incorporating purpose into project charters and establishing “Purpose Teams” into the project management structure.  

ESG commitments continue to be a focus of a brand’s purpose, promise and principles. Aspiration, an online financial services company and Certified B Corp, is a favorite example. Its “Leave your bank, save the planet” positioning allows customers to decide how much they will pay for services. It has even built a mobile tool to help customers assess their overall impact on climate change based on where they shop and how they invest. 

While ESG was once about compliance and risk mitigation, we believe it is now a requirement for unlocking uncommon growth. And the companies having the greatest success with their ESG strategies are the ones who have created authentic changes in the culture of their full stakeholder ecosystem.  

Financial services firms can maximize their impact by choosing ESG-driven growth strategies that are specific, ownable, applicable and measurable. 

Invest in Humans Over Technology  

Today, companies have more technology at their disposal than they could ever use in a coherent customer journey. It takes a combination of sensibilities and methods to create value. Humans–not digital tools– are better at building these interactions.  

Humans–the roster of employees and all stakeholders–matter more than equipment. That being said, in no way should we diminish the importance of the continued digital transformation across the industry. At its recent Investor Day, for example, JP Morgan revealed it would spend a staggering $14.1 billion on technology this year. However, the firms that will win in the future are those that can also build an organizational focus on the humans using the technology.  

Example Winning Strategy: Build a compelling employee value proposition – develop an EVP that:

1. Articulates what makes your company an awesome place to work and to grow a career

2. Improves how your company wins in today’s talent marketplace

3. Develops an enhanced foundation to support future talent needs and can evolve in line with future business and brand strategy

Leading companies are using technology to focus on pattern recognition, then inviting humans to understand it and put the relevant insights in context. Technology is great. Human capital is greater. 

These companies are also actively working to decentralize, freeing human capital by shaking up organizational structures. Decentralized companies emerge from recessions with higher levels of innovation and more resilience, adapting better to changing conditions. 

Prophet’s research has shown that this human-centered approach leads to greater levels of innovation, especially in the financial services industry. The key to it all? Finding ways to heighten avenues of cross-organizational collaboration. 

Define Your Brand’s Role in Embedded Finance Era 

Customers need financial services, but they do not need the current legacy construct of delivering those services. Whether you use Affirm to buy a mattress, the Starbucks app to buy a latte or a Lyft for your transportation needs, embedded finance is all around us and presents an opportunity for financial services brands to extend into other industries, such as healthcare and retail. According to recent research, the U.S. embedded finance industry is expected to grow at a CAGR of 23.5% from 2022 through 2029, reaching $212 billion by 2029.  

Long viewed as a transactional element of the customer journey, we are now seeing an expansion of use cases. Take DriveWealth as an example. It is working with healthcare companies to offer comprehensive investment advice as part of healthcare savings accounts. And with the emergence of companies such as Column, billed as the “only nationally chartered bank built to enable developers and builders to create new financial products,” we are poised to see an exponential increase in use cases that cut across all industries.  

What does each of these companies have in common? They have defined the next market battleground using a combination of platform and design thinking, focusing on the value of activating ecosystems. So, it is easy to understand why incumbent banks, insurers and investment managers feel threatened. However, they should not.  

As the industry moves from linear finance to embedded finance, understanding your organization’s role in the new value chain created by this disruption is the first step.  

Will you play the platform-creator role? How should you think about the allocation jobs-to-be-done? How will you control the experience customers have with your brand? 

The faster financial services leaders realize the value of delivering an omnipresent financial services experience in people’s daily lives, the faster that value can be achieved for both the customer and the enterprise. The concept of Time to Value (TTV) will play a critical role in the embedded finance era. 

By positioning an organization’s brand and core capabilities around its aspirational role in the evolving value chain, companies can embrace the embedded finance era.  

If you are a senior financial services leader and have not yet embraced the implications of the pivot from linear finance to the embedded finance era, you are putting your organization at risk of lagging behind in the next growth curve.  

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While insurance companies have made much progress in reinventing themselves for today’s customers, the results are clear: there’s still some way to go. As many turn their attention toward planning and formulating their strategies for the year ahead, this playbook from our Financial Services practice outlines the different levers to pull in order to speed up digital transformation efforts and customer experience initiatives.

In this playbook you will learn:

• How insurers can transform their organizations from the inside out by effecting culture change and equipping the business with the right talent and capabilities to succeed in 2021.
• How a customer-centric approach can help your business, how to get started and how to measure you efforts.
• What the state of transformation is in the industry today and the reasons to hit the gas now.

Download the full report below.