Fintechs’ Struggle to Execute Growth Strategies
What is “strategic growth” and why the “struggle”?

​What is “strategic growth” and why the “struggle”?

 

Welcome to the KGA Blog. 

The information here will be focused on struggles that fintechs (both incumbent and emerging) experience in the execution of their growth strategies. We’ll share the methods and best-practices KGA has developed in working with its fintech clients to overcome those challenges.

Simply put, too many great strategies are wasted on poor execution and risky approaches.

So, what do we mean by “strategic growth” and what do we mean by “struggle”?


Strategic Growth Defined

Successful fintechs have an existing business that is doing well, as evidenced by a recurring growth rate from delivering existing products to existing markets. Over time that organic growth-rate will come under pressure because market share is so high that further growth is limited, or because the product markets simply change (change in buyer need, change in competitive position, etc.).

Before organic growth slows, it needs to be enhanced by “strategic growth”. For instance, a product or business may be generating $10mm in profitable revenue and a strategy is formulated to boost revenue to $50-100mm. That stepwise strategic growth will often be based on some combination of (1) bringing new product to market, (2) selling to new markets, or (3) partnering with or acquiring businesses that already do these things.

As examples,  a fintech may decide to develop (or acquire) a hosted, SaaS version of its on-prem, custom product. Another vendor commits to take its success serving the Global 50 retail banks to serving US super-regionals. 


The Fintech’s Struggle

Those kinds of 2-5X growth strategies put great pressure on the organization’s ability to execute on the strategy and hit its growth milestones. Here are three examples of real-world struggles with strategic growth execution:

  • “We decided to serve small FI’s globally and needed a SaaS version of our product. We spent a year overcoming surprises and had little except a list of software features. We lost early revenue to competition.” 
    -BU GM of financial crime provider
  • “We doubled the size of our salesforce to enter new verticals, so we needed more (and faster) deals. Vertical-specific product packages were required. We couldn’t define the right packages because we didn’t understand the buyers. “
     -SVP of billpay solution
  • “Our new, strategic growth would come from bigger buyers who needed a highly configurable solution. We implemented a risky plan to sell a few …none were standard …we could not dig out of our inability to deliver.
    -GM of banking payments products



The Risks in Struggling

Perhaps the most prevalent, risky approach is “…let’s go sell a few and we’ll figure out the solution later…”. The consequences of approaches like these include:

  • Unprofitable growth from not understanding the cost structure of the new solution or the new market, and from closing customized deals that will not scale
  •  Loss of share because, since the strategy is a good one, competitors are also pursuing it. However, missed milestones gives them insight into what isn’t working for the buyer and gives them lead time to gain share
  •  Personnel risks arise in two ways. The GM assigned to capture the net, new revenue envisioned by the strategy will be putting his/her career at risk. In addition, talented people will become dejected with the lack of success on something about which they were, at first, very excited. Some of them will leave.

There are two major root causes of a fintech reaching this state of having a great strategy but inadequate results. We’ll talk about them soon.

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KGA Advisory, LLC helps financial technology providers (incumbent & emerging) realize their growth strategies.

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