As the mobile revolution has shown, bankers need to be alert to coming technological and societal changes that can transform their business. One person who can help them spot these future opportunities is management consultant and author Peter Sheahan, an expert on exploiting new business trends.
Sheahan, CEO of Sydney, Australia-based ChangeLabs, will discuss these opportunities in detail at the upcoming BAI Retail Delivery 2013. As we found in the following interview, Sheahan believes that banks are currently well situated to take advantage of recent advancements in data analytics, mobile technology and advice-based customer interactions. The challenge, he says, is “leadership behavior,” which includes the willingness to change the organization’s culture and shed the industry’s predominant “fast follower” mentality.
Q: Looking at the U.S. retail banking industry right now, where do you find new opportunities that can be exploited?
Sheahan: Applying data and analytics to the customer experience is first. Number two is moving up the value chain and truly positioning yourself as a trusted advisor to customers with an advice-based platform. And leveraging mobile technology from a channel perspective is third, although the difficulty there is how you do it and make money because no one seems to want to pay for anything right now.
The challenge of exploiting these three properly is appetite for risk and a willingness to embrace new ways of delivering banking services, because some of these new opportunities really are breaking the mold in terms of how we have to go to market and interact with the customer. Another challenge overarching all that is the threat of non-bank competitors. When you look at mobile, online and the new payments landscape, you’re talking about some pretty powerful brands, such as Google, Apple and Amazon, coming into the space.
Q: These non-bank companies are known for being very nimble and quick and flexible, while banks are often seen as very hierarchical in structure. How do you transform your organization to take advantage of these opportunities like the non-banks do?
Sheahan: That’s a really powerful area of conversation; you’re talking about what levers you can pull to create change. You could look at structure, how a bank is organized, or strategy, where it’s making its big plays, or even process.
However, I think the number one issue is around leadership behavior. You can spend a fortune on creating a future retail footprint and building these hyper-collaborative physical spaces, but if the leaders within the organization don’t change the organization’s culture it’s very unlikely that the desired changes will manifest themselves in the service delivery. So, you actually need to look at culture before you focus on the real estate.
Number two, we’re going to have to break some of this fast-follower mentality that you see a lot of in financial services. Many bankers wait for someone else to go first, which is fine when the scalability is slow. That doesn’t work so well in a digital and online space because critical mass can happen very, very quickly in an online environment and once you have that critical mass, it’s very hard to dislodge that competitor. It’s going to take some work to knock Facebook or Google off their perch, for example. There’s really an ability to create a monopoly in this environment. You see the same issue in payments; two or three big players can dominate that marketplace. If you wait, you might miss the tipping point.
It’s all about investing in the operations and technology platform so that you can leverage data, create a better customer experience and enable mobility. Because if you don’t have the tools to deliver against the value proposition, if you don’t have the tools to create this more collaborative customer retail experience, then you can wax as eloquent as you like about being the bank of the future but you can’t implement it.
Q: Bankers might push back by saying, well, it’s okay to tell us that but you don’t have to deal with the regulation we have to deal with now, which is getting worse and worse. How do you respond to that sort of pushback?
Sheahan: First, some of the most powerful banks in the world are operating in a much tighter regulatory compliance environment than American banks. In fact, some of the countries that fared best in the global financial crisis had some very strict prudential regulation in capital requirements. So, I hate to be blunt, but I’m not sure the rhetoric necessarily matches the reality.
Also, regulation as an excuse not to innovate doesn’t sound like a very inspiring leadership philosophy to me. Academic Michael Porter made himself famous studying how those who responded most aggressively to regulation and used it as a trigger for innovation out-performed the market.
Banking is not the only industry that’s ever had to deal with regulation and compliance. Look at health care. At least there’s some definition about what the regulation means in finance. In health care, we have no concept of what some of these things mean. Not only that, they’re changing the underlying compensation model in health care from volume to value and accountability. At least banks still get paid for the same thing – they’ve just got to find a better spread and work at competing with lower fees. At least the business model still exists.
Q: One of the major themes in your book Flip is that action brings clarity. You seem to be saying for leaders to innovate, they’ve got to just get going and do it. Could you elaborate a bit on that thought?
Sheahan: You can’t strategize your way to greatness; you have to execute your way there. At some point, someone has to take action. Now, the great challenge to that for banks is that obviously you’re dealing with people’s money and their personal financial information. How can you compartmentalize that risk? Can you pilot it with a very select group of customers? Can you pilot it in a certain part of your branch network? How do you develop a culture of experimentation where the risk is managed and acceptable?
Now, let’s say you’re looking at a new consultative retail service delivery model. You want to break down the branch environment and make it much more collaborative, maybe using video conferencing and people working remotely. You don’t have to do that across the entire branch network. You can test one branch or a select group of branches before scaling up. But don’t try to spend months and months trying to design the world’s perfect retail delivery network and then never do anything with it. At some point, you’re going to need to take the action on the basis of what you’ve learned.
Mr. Cline is managing editor of BAI Banking Strategies. He can be reached at email@example.com.
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