Harvard Case - Vontobel Deritrade: Platform development
"Vontobel Deritrade: Platform development" Harvard business case study is written by James Henderson, Natacha Akribas, Amrou Hassanein, Philippe Schenk, Grigory Terentyev. It deals with the challenges in the field of Strategy. The case study is 17 page(s) long and it was first published on : Oct 23, 2019
At Fern Fort University, we recommend that Vontobel Deritrade prioritize a digital transformation strategy to enhance its platform, leverage technology, and expand its reach in the evolving financial services landscape. This strategy should focus on disruptive innovation through business model innovation and product development to create a sustainable competitive advantage in the global market.
2. Background
Vontobel Deritrade, a subsidiary of Vontobel Holding, is a leading provider of structured products and derivatives trading platforms. Facing increasing competition from fintech startups and established players, Deritrade seeks to enhance its platform, attract new clients, and maintain its market position. The case study highlights the challenges of balancing traditional business models with the need for digital innovation in a rapidly changing industry.
The main protagonists are:
- Stefan Kernen: Head of Deritrade, responsible for leading the platform development strategy.
- Vontobel Holding: The parent company, providing financial and strategic support to Deritrade.
- Deritrade's clients: Institutional investors, hedge funds, and private banks seeking access to structured products and derivatives.
3. Analysis of the Case Study
Porter's Five Forces Analysis:
- Threat of new entrants: High, due to the rise of fintech startups with innovative platforms and lower operating costs.
- Bargaining power of buyers: Moderate, as clients have access to various platforms and can switch providers based on pricing, features, and service.
- Bargaining power of suppliers: Low, as Deritrade relies on technology providers for platform development and maintenance.
- Threat of substitute products: High, as alternative investment strategies and financial instruments are constantly emerging.
- Rivalry among existing competitors: High, as established players and new entrants compete for market share and client acquisition.
SWOT Analysis:
Strengths:
- Strong brand reputation and established client base.
- Expertise in structured products and derivatives.
- Access to Vontobel Holding's resources and financial backing.
- Experienced team with deep industry knowledge.
Weaknesses:
- Legacy platform with limited functionality and user experience.
- Lack of focus on digital innovation and technology adoption.
- Limited global reach and market penetration.
- Potential for disruption from fintech startups.
Opportunities:
- Growing demand for structured products and derivatives in emerging markets.
- Expansion into new product segments and investment strategies.
- Leverage technology to enhance platform functionality and user experience.
- Develop partnerships with fintech companies and technology providers.
Threats:
- Increasing competition from established players and fintech startups.
- Regulatory changes and market volatility impacting the financial services industry.
- Cybersecurity threats and data breaches impacting platform security.
- Technological advancements leading to rapid obsolescence of existing platforms.
Value Chain Analysis:
Deritrade's value chain consists of:
- Inbound logistics: Sourcing technology and data from various providers.
- Operations: Developing and maintaining the platform, processing transactions, and providing customer support.
- Outbound logistics: Delivering platform access and services to clients.
- Marketing and sales: Promoting Deritrade's platform and attracting new clients.
- Customer service: Providing technical support and resolving client inquiries.
Key Challenges:
- Digital transformation: Adapting to the evolving technological landscape and developing a digital-first strategy.
- Innovation: Creating new products and features that meet client needs and differentiate Deritrade from competitors.
- Market expansion: Reaching new client segments and expanding into emerging markets.
- Talent acquisition: Attracting and retaining skilled professionals with expertise in technology, finance, and data analytics.
4. Recommendations
Develop a Digital Transformation Strategy: Deritrade should prioritize a comprehensive digital transformation strategy that encompasses all aspects of its business, from platform development to client engagement. This strategy should focus on:
- Modernizing the platform: Investing in new technologies and enhancing the platform's functionality, user experience, and security.
- Leveraging data analytics: Utilizing data to understand client behavior, personalize services, and develop new products.
- Adopting cloud computing: Moving to a cloud-based infrastructure to improve scalability, flexibility, and cost efficiency.
- Integrating AI and machine learning: Implementing AI-powered features to automate tasks, improve decision-making, and enhance customer service.
Embrace Disruptive Innovation: Deritrade should actively pursue disruptive innovation by developing new business models and products that challenge existing industry norms. This could involve:
- Developing a white-label platform: Offering a customizable platform to other financial institutions, expanding Deritrade's reach and revenue streams.
- Creating a marketplace for structured products: Connecting issuers and investors on a single platform, facilitating transactions and increasing liquidity.
- Developing innovative financial products: Introducing new structured products and derivatives that cater to specific client needs and market trends.
Expand Global Reach: Deritrade should prioritize market expansion into emerging markets with high growth potential. This could involve:
- Establishing strategic partnerships: Collaborating with local financial institutions and technology providers to gain access to new markets and clients.
- Developing localized products and services: Tailoring products and services to meet the specific needs of clients in different regions.
- Investing in talent acquisition: Hiring local professionals with expertise in the financial services industry and emerging markets.
Foster a Culture of Innovation: Deritrade should encourage a culture of innovation and experimentation throughout the organization. This could involve:
- Establishing a dedicated innovation team: Creating a team focused on developing new products, services, and business models.
- Encouraging employee participation: Fostering a culture where employees are encouraged to share ideas and contribute to innovation.
- Investing in training and development: Providing employees with the skills and knowledge needed to thrive in a rapidly changing digital environment.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Deritrade's core competencies in structured products and derivatives trading, while also supporting its mission to provide innovative solutions to clients.
- External customers and internal clients: The recommendations address the needs of external clients by enhancing platform functionality and user experience, while also empowering internal clients with the tools and resources needed to innovate.
- Competitors: The recommendations focus on developing a sustainable competitive advantage by leveraging technology, embracing disruptive innovation, and expanding global reach.
- Attractiveness ' quantitative measures if applicable (e.g., NPV, ROI, break-even, payback): The recommendations are expected to generate positive returns on investment through increased revenue, cost savings, and market share gains.
6. Conclusion
Vontobel Deritrade has a unique opportunity to leverage its expertise and resources to become a leading player in the evolving financial services landscape. By embracing digital transformation, pursuing disruptive innovation, and expanding its global reach, Deritrade can create a sustainable competitive advantage and achieve long-term success.
7. Discussion
Alternatives not selected:
- Maintaining the status quo: This option would likely lead to declining market share and competitive disadvantage.
- Acquiring a fintech startup: This option could provide access to new technologies and expertise, but it carries significant risks and integration challenges.
Risks and key assumptions:
- Technology adoption: The success of the recommendations depends on Deritrade's ability to effectively adopt and integrate new technologies.
- Market acceptance: The new products and services must be well-received by clients and meet market demand.
- Competition: The recommendations assume that Deritrade can effectively compete with established players and fintech startups.
8. Next Steps
- Develop a detailed digital transformation roadmap: Outline the key initiatives, timelines, and resources required to implement the digital transformation strategy.
- Establish a dedicated innovation team: Recruit and empower a team of experts to drive innovation and product development.
- Pilot test new products and services: Launch pilot programs to gather feedback from clients and refine offerings before full-scale launch.
- Monitor progress and adapt: Regularly assess the effectiveness of the recommendations and make adjustments as needed to ensure ongoing success.
By taking these steps, Vontobel Deritrade can transform its platform, embrace innovation, and position itself for continued growth and success in the global financial services market.
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Case Description
This case illustrates how Vontobel, a mid-size Swiss private bank successfully built out its multi-issuer platform for Structured Products (SPs). The case starts by describing the industry of SPs, the market for SPs in Switzerland, and on Vontobel building its know-how in SPs. As a result, deritrade® Single-Issuer Platform (SIP) was launched in 2010. The platform helped gain operational efficiency, relieve employees from doing manual operations and thus allow scarce resources to focus on the core businesses. The bank then gained experience in the market with its SIP. Once the SIP delivered its full power and the SP market stagnated, Vontobel considered opening its platform to its competitors to become a Multi-Issuer Platform (MIP). Yet, there were numerous challenges faced by the company with this decision: cannibalization, convincing competitors to join, pricing, and governance.
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