Having lived for so long in a regulated and semi-regulated environment, many banks retain elements of the mindset spawned by that environment, which includes a preoccupation with process over content and a willingness to settle for less than maximum investment returns. This is true even in the credit card business, which is often viewed as one of the more advanced of retail banking businesses and therefore a model for the rest of banking.

Although clearly advanced, the card business does not yet qualify as a model. But being highly regarded by other bank executives, it will be scrutinized and emulated elsewhere in the industry when it makes any operational improvements, and this will greatly improve overall performance.

Despite their relatively advanced management techniques, a number of prominent card banks are experiencing profit declines or at best stagnation. A major problem is customer acquisition. The solution to this problem, in many cases, lies in the hands of the banks themselves, but the will to implement the solution is often lacking.

Improving cardholder acquisition depends on reforms in three key areas: strategy, process, and the database. Underpinning constructive action in all three are changes in the overall organization and its culture, changes that will serve to sharpen company reflexes, speed up response times, and narrow the focus.

Strategy. A basic strategic difficulty at many banks is a scattershot mentality. A card company can appeal to customers in at least six distinct ways: product innovation, low price, good service, multiple channel access, superior one-on-one targeting, and the attractiveness of its umbrella brand. Many institutions excel in one or more of these attributes - for example, First USA in the product area, MBNA in service, Capital One in one-on-one targeting.

But few excel in all. So it is generally a mistake to try to act as if one does. That road leads to fragmentation of efforts and sales campaigns that are too diffuse. How much better to figure out where one's strength lies and attempt to buttress this strength while maintaining perhaps only a baseline capability in the other areas. Yet such an approach tends to be inconsistent with long-standing attitudes which emphasize that a bank must be "all things to all people."

Recently, a major bank decided to turn away from tradition. Recognizing that its chief strength lay in its very size and heft - the fact that it touched the lives of its customers in so many ways - this institution resolved to stress its ubiquity while soft-pedaling customer appeals based on other attributes. Its efforts are now bearing fruit in the form of increased cardholder acquisitions.

Process. Banks tend to be process-fixated. How things get done is often as important as what gets done. As a result, the pace of work tends to be far too leisurely, and the time gap between a campaign's conception and its execution becomes inordinately large. This defect can be fatal in the fast-moving card business.

In order to reduce cycle time, banks need to disaggregate their processes and evaluate the utility of each component step. That this effort is often so painful, and at times abortive, is traceable, once again, to corporate culture. More than most company types, banks stress the need for committees and interminable meetings to involve everyone remotely connected with a given task. The phrase "getting someone's input" is thereby carried to an often counterproductive extent. At one institution, for example, getting the number of required executives to sign off on a campaign meant having to wait 15 weeks from inception to mailing.

Fortunately, some banks are coming to their senses and instituting steps to streamline procedures. The same bank that once required 15 weeks to get to market has been able to better than halve that time, with very happy competitive results.

The database. Most banks have abundant data resources, but the information is rarely organized to support action. That is, it is not summarized, assembled, or stored in a usable fashion. However, banks that try to remedy shortcomings by building a relational capability - one that facilitates ad hoc query and analysis from desktops - soon discover that the real problem is not the database or its accessibility. Rather, the problem is a shortage of talent. Having the capability to query the database is useless unless one knows what to ask - in a word, database resources must be buttressed by intellectual ones. Most banks simply have too few people who are adept at data analysis, pattern recognition, and hypothesis formulation. In principle, such people can be acquired in the marketplace, but many banks have not made this task a high priority.

Nor do institutions possess a cadre of mid-level executives capable of supervising and motivating the required talent. Indeed, banks have a history of compounding the supervisory problem by putting available executives with traditional banking backgrounds in charge of creative units. These executives often have not been able to cope with their new assignments and have become in effect roadblocks.

It seems clear that while banks have made some progress in rationalizing their operations, sustainable competitiveness depends on further organizational adjustments. At the very least, management must:

  • Struggle against the tendency to settle for mediocrity.
  • Recruit new people capable of thinking out of the box.
  • Curb the organizational preoccupation with politics and personalities.
  • Recognize that achieving radical results requires radical means, including the firing of obsolete executives.
  • Institute an appropriate performance appraisal system that rewards employees not for task completion but for tangible contributions to customer and therefore institutional net present value.

Mr. Studley is a partner and Mr. Hawkins a senior manager at Deloitte Consulting in New York.

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