Much is written and said about the magnitude and pace of change, which is manifest in the banking industry as consolidation, deregulation, and the resulting new forms of competition.
For all the challenges, declining market shares, and casualties in the merger wars, we must not forget that retail and small-business banking continue to be the greatest growth opportunities in our business. We must not forget that investment and savings products will boom asaging baby boomers turn into savers.
But success will not be automatic. It requires focus and clear, disciplined thinking about our methods of management.
Here are a few principles to keep in mind.
Winners excel in engagement. A clear vision and sense of focus must be continuously, repeatedly, and consistently communicated through the organization. Employees need to feel that what they do matters, that their creativity is a competitive advantage. The word "empowerment" has been over-used and too little understood. When all employees understand the true context of decision-making, as communicated openly by senior management, they will make the right decisions. To do this, they need to be recognized and rewarded in "currencies" that they value, and these forms of recognition and reward go well beyond money.
Engagement means employees' spirits do not die at the door every day. It means all team members are engaged every day in getting the job done and bringing the company to the next level.
"Customer-centric" is not just a buzzword. Words are easy; execution is hard. We still tend to try to differentiate ourselves with product features and functions, rather than by targeting and customizing for specific customer segments. A customer-centric organization will identify segments that are particularly valuable for shareholder returns. Such organizations look for value-generating volume, not volume at any price.
Retail equals detail. Our business is about blocking and tackling every day. The best information systems will fall flat if employees do not act on them and execute flawlessly, one customer at a time. The effectiveness of the sales process depends greatly on information-based marketing-using not just customer profitability, but customer lifetime value. A good salesperson can use the data base to follow up on direct-marketing contacts. Customer knowledge gained through continuous testing and refinement and put to use by an effective sales force is crucial to gaining a competitive advantage.
Accelerate change. It takes us too long to bring our products to market. We have to learn from Nike and many other premier marketing companies that have shortened product cycles to as brief as a few weeks. Being nimble and flexible is essential.
Properly define the competition. It is not just the banks, thrifts, and credit unions anymore. Just because we cannot measure the quantitative impact or "wallet shares" of a Merrill Lynch, Money Store, or Countrywide does not mean they are not cutting into our market positions every day. Properly defining the competition is a first step toward defining our niches and finding competitive advantages.
Focus, focus, focus. "Diversification is protection from ignorance," said Warren Buffett. "You've got to understand what you're doing better, and mercilessly focus on it," said Andy Grove, CEO of Intel Corp. For diversified companies to succeed, they must deliver monoline intensity in each line of business and distribution channel that they own. Overly complex visions or unclear goals are prescriptions for failure.
Focus, articulation, engagement, and meticulous execution will add up to sustainable competitive advantage.
