Banks and Customers: Why Many Banks Still Just Don’t Get It!

Banks and Customers: Why Many Banks Still Just Don’t Get It! 

It has been an interesting period for me. One of the things about being a consultant is that you can’t really discuss what you do for a living in any great detail.

However, once in a while, you spot issues within your customer base that seem to be shared. Further, when you begin to get into a specific industry, those “problems” seem to become even more commonplace.

In 2011 Ernst and Young’s Annual Global Banking Survey was entitled “A New Era of Customer Expectation”. Three years later, the consulting firm harks back to the same topic, with the 2014 Global Survey entitled “Winning through Customer Experience”.

In 2012 McKinsey’s EMEA practice chided banks for their apparent difficulty to become more customer-centric in a report called “Banking on customer centricity – Transforming banks into customer-centric organizations”, and suggested some steps banks needed to take in order to transform themselves.

Given how much most banks actually know about their customers (after all, they handle our money) this may appear to be a somewhat puzzling situation. But dig a little deeper…

Banks have long lived in a world in which they behaved as if their customers needed them, and not the other way around. This perception has led to an almost unreal degree of arrogance in processes and also amongst many bankers. Customers are routinely submitted to interrogations and inquisitions that would make McCarthy or the Spanish proud. And customers are supposed to feel grateful that they have been granted a loan. That’s like GM expecting me to be grateful because they sold me an automobile.

Even as a known, existing customer, one European bank will still ask you how much you spend weekly on petrol before considering your mortgage request. The old adage about bankers being bad umbrella salespeople is not completely without merit many people seem to feel.

Over the last five or six years, I have been invited to spend time with a number of different banks in Europe and Africa, researching and sharing ideas on customer centricity. Almost all of these are facing similar challenges with regards to customers and segmentation, regardless of geographic location. Perhaps the key difference is that in most emerging markets, banks generally have a good reputation, whereas bank credibility in the world’s more developed economies has taken quite a hit (according to Ernst and Young) as a result of recent debacles and high bonus payments to losers (i.e. Co-Operative Bank).

The response to this situation so far has been mixed at best, some banks trying to redesign the traditional model, at least superficially (Virgin Money), others to re-define their focus (ING) or others working upon killer implementation in customer orientation (Garanti Bank).

During a recent stint with the senior management of a major European bank, the CEO turned to me and asked two questions. The first, was what did I think was preventing his bank from moving forward with respect to customer centricity. The second question, perhaps to be expected, was what did I think was needed to help transform the organization? In recent years I have had several opportunities to interact with this bank and indeed have been involved in training some of their high potential younger executives.

As I thought through my response, I realized that some of these issues while obviously specific to this particular organization, might also be resonating in other historically product or technology driven companies.

The following issues came to mind:

The research is fairly damning: most people do not like banks. While bankers often act surprised when they hear this, I think most of them know this to be true. This is one of the reasons they don’t always connect well with their clients. It is not a relationship of equals.

Customer centricity has not been a serious management agenda issue in many banks as evidenced in the McKinsey and Ernst and Young research. It has been talked about, but the requisite modifications in processes and procedures have often been lacking.

There is a significant cultural reticence within the organization with respect to moving in a new direction. The move towards customer centricity for many people represents a major shift in focus after years, if not in some cases a century or more, of being a predominantly product driven organization.

As one of the managers of a major bank mentioned to me, there is “a certain amount of arrogance within the banking industry that is often reflected in the DNA of the organizational culture”. The idea seems to be that the customers need the bank and not the other way around. He mentioned a bank document which when granting a mortgage to a customer stated that the customer would now be “allowed” to buy his or her house. Some banks don’t even realize how offensive their SOPs are often perceived.

There does not appear to be a sense of urgency with respect to the issue of customer centricity. One bank that I know of has been talking about the issue for over a decade without having made any serious or significant organizational modifications.

Perhaps the lack of urgency also stems from the fact that there is often no clear plan to address the issue of customer centricity and by that I mean clear timetables and deadlines, allocation of resources and accountability. Several of the banks I met had myriad projects running throughout the different SBUs (which give the impression that a lot is happening) but with no central co-ordination or “red thread” tying initiatives together.

In some cases you also have the wrong horses running the wrong courses. One of my customers referred to “culture killers” within his organization that were a break upon moving the bank forward. However when examined a little more closely, it became clear that these so-called “culture killers” were actually products of the organizational culture itself. Ouch.

Customer centricity revolves around three key issues - people, processes and technology. Some banks have a number of different systems operating within their internal networks and this has sometimes been an impediment to the implementation of a company wide, system wide, information platform that would allow common access to common customer data as needed by employees. Related to this is also the difficulty and cost impediment of full CRM implementation throughout the organization

And finally, perhaps some people just really don't know what to do. They have been operating in a culture of SOP for so long that perhaps there is a need to educate them and to provide them with the tools to deal with a new reality.

The second question, obviously the money question, was what was needed to try and transform the organization.

Recent, and indeed earlier research suggests that the major determinant of people's behavior within an organization is company culture. Therefore it's pretty clear that a major internal cultural shift may need to be orchestrated.

There is also a need to focus on customer metrics as business drivers: customer satisfaction is a key driver of financial return.

The organization requires unfiltered voice of customer input to top management. Some organizations achieve this by rotating top management into customer service jobs. As I like to say, if you want to sell bananas to monkeys, you need to swing with them in the trees. You can't sit on the floor of the rain forest expecting them to come to you.

A clear vision and a clear plan to move forward as mentioned earlier with specific timetables and deliverables is essential. There is a need to move beyond what I call corporate theology, to implementation.

For many organizations, business process reengineering (BPR) is an essential part of the mix. If you want something you haven't had before, chances are you will have to do something you have never done before. Customer based process design is key.

In many large banks there is a need for technology review and a potential overhaul of existing systems. There is often a plethora of competing systems within different SBUs of the same bank. There is a need to pull it all together. In one company I researched, a given customer representative needed to consult nine different screens in order to view the totality of the customer's holdings within the company.

An extension of this is the need to make sure that technology experts are included at top level when customer decisions are made. Some research that I did with HP some years back, suggested that the older the manager, the less conversant they were with emerging technologies. Of course, many remain current, but research suggests they may be the exception rather than the rule. I often refer to this need in my lectures as what I like to call “reverse mentoring”.  Get younger execs working with their older colleagues.

So what’s the bottom line?

Money is a high involvement product, and people are loathe to take chances with their customer’s cash. Traditionally, banks were the custodians of capital, and this is the relatively fat cushion upon which most banks have traditionally resided. Capital was in short supply and lending it was a risky business to be left to professionals.

However, some banks need a reality check and a serious kick in the asset. This is no longer today’s reality. They are no longer the sole source of funding for companies or individuals. And as a private banker in Geneva said to me recently, “there is more money than there are good ideas.”

Discontent with banks has led people to create new models. Crowdsourcing and micro-financing are helping transform modern capitalism for better or for worse. Kickstarter and Kiva are just a couple of successful examples. And this is a new industry in the early phases of its growth.

New technology platforms allow private individuals to trade currencies and commodities from anywhere. E-banking capabilities mean that for many customers, less and less human intervention is needed, or in many cases even wanted.

Traditional banks need to re-make themselves in the image of their customers or face continuing incursions from new competitors who do a better job of generating value for customers, not just shareholders.

Take a look around and dare to be different. There are novel solutions out there for those tired of the same old run-around.

 #banks #customercentric #customers

Whither Africa?

Whither Africa.....?

These days, there is a lot being said and written about Africa. Over the last decade, the perception of the continent has changed from one of a billion beggars, to one of a billion potential new consumers. Countries that were not so long ago deemed “third world” or "LDC’s" (least developed countries) are now referred to in corporate circles as hi-growth markets. Indeed some African markets such as Ethiopia have been demonstrating GDP growth that rivals China.

CNN and BBC both now dedicate prime time to various types of coverage aimed at familiarizing the West (and the rest of the world) with African politics, culture and business. It is clear that the eyes of the western world are now on Africa. For those of us with a history of working there, it is interesting to note the change.

Why the change in focus? There are a couple of major reasons and they are both economic in origin. As always, follow the cash.

Firstly, Africa is arguably the last commercial frontier for many global companies looking for growth. The U.S.A. and Europe are mature markets, and have been beset by economic difficulties for half a decade. Growth is an imperative. Most large companies have already staked out positions in Asia, Latin America; which leaves Africa as the last frontier. Companies such as Diageo have recognized this and have begun to acquire local breweries and brands; competitor SABMiller is making similar overtures.

Secondly, Africa was traditionally viewed as the commercial turf of the Western powers, and specific countries seemed to have assumed certain responsibilities that were clearly agreed, i.e. witness French intervention in Mali – supported by the U.S.A. and warily applauded by most African heads of state.

Things have changed dramatically over the last decade. The post-colonial hegemony has been fractured by global requirements for raw materials and natural resources. The share of African markets in the hands of Western companies has decreased by over 20% in ten years, and China is now the continent’s largest trading power. Further, this Sino-African relationship is set to grow as Chinese investment increases. A Chinese company now manufactures shoes in Ethiopia for export directly to the U.S.A.

 Indian companies are also expanding their traditional presence and influence in key African regions and markets such as East Africa and Nigeria. Some seem to be more recently targeting Ethiopia.

Is the West losing the commercial battle in Africa?

The battle for African resources and consumers is clearly engaged, and recent skirmishes seem to favor Asian interests. It can be argued that the new level of competition is healthy for African markets – but only if exploited properly.

So where does this leave smaller domestic African companies as the majors scramble for bits of the African pie?? Is it all doom and gloom for local entrepreneurs?

One thing that local companies almost always have in their favor is knowledge of the local market. In markets where personal influence and social connections often count more than performance per se, this is a crucial advantage. This is often enough of a strategic lever to guarantee survival. Look at the Saudi example. If you finally really can’t compete, try at least to leverage that intangible into your sales price.

Strong local brands also provide market leverage, but smaller companies will need to move quickly to expand or risk being smothered. There are few, if any internationally recognized brands from Africa, and for many large African companies, real marketing is in its infancy still. Very few African products cross African borders. If African consumers do not have African brands to buy, they will buy foreign and consumers sometimes develop long term preferences for their favorite brands.

Many of the current crop of young African managers and intelligentsia have been western educated. Further, as markets increasingly open, these younger “technocrats” are coming into their own. These are people who have often learned to play the game by Western rules, but have, with savvy, adapted practice to local realities. Shoe manufacturers, security firms, street vendors, telecom providers - are all blending local and imported into market success.

Africa clearly offers enormous opportunities to those who learn to deal effectively in what can sometimes be somewhat convoluted markets. But if the past is some guide to the future, the next decade will see huge developments in African economies, and much of that growth will come from domestic consumption.

Maybe its time for some of us to start thinking think of what was the “dark continent” as the land of Sunny Start-Ups?

creativity and money

https://www.youtube.com/watch?v=kt4NX-qCy0s

This has been an interesting summer.

For purely commercial purposes I have been trying to get information on consumers of Black and North African origin in Europe. Why? I have a U.S. client ( a Black owned company) which sells hair products predominantly for Black people. The texture of our hair being different, we require different products than people of European origin. Clear and simple.

I contacted over a dozen major market research firms in Europe to do a multi-country survey and was surprised to discover that initially none would accept the mandate. In most of Europe, it is illegal to collect and collate data with respect to ethnic background and income. The idea is that the governments do not want to discriminate or encourage such discrimination and therefore there is no need for such differentiation. Data that is freely available in the U.S.A. or Canada, often as part of the national census, is illegal in most of Europe!

In other words, they don't really know how many of us there are!

Furthermore, current ethnic and religious tensions in Europe means that any such research would have to be done with a degree of delicacy that the mainstream firms just don't seem to have. One quote I did finally receive, for a million dollars, was submitted by a German group of a dozen Blonde haired, blue eyed females who did not even have any Black or Arab/Turkish employees or associate companies. While probably technically competent, I can just imagine these young MBA's trotting around the "banlieues" of Marseille or parts of London. Who is going to confide in them?

The one company that did come forward with a credible quotation, refused categorically to conduct the research in the Netherlands and I am being forced to conduct the research there myself. Holland is apparently a racial tinderbox.

Discrimination against Blacks and Arabs, particularly economic discrimination, is rampant in most of Europe. The situation ranges from avoidance in Western Europe to outright violence in parts of Russia and Italy. Indeed, one of the problems that the research firms faced in trying to quote me, was establishing credible outreach into the "ethnic" or "immigrant" communities. They just did not have the right profile of employee.

As there is no publicly available data on these communities, it becomes difficult for companies and marketers to estimate purchasing power, design products and support them as they do elsewhere in the world. This also means a lack of economic and political clout for the concerned group, who never realize how powerful they just might be. Some 25 million Black people who are European citizens are a force to be reckoned with. And don't assume we are all poor! The same applies to North Africans in France or the newly arrived Moroccans in the Netherlands.

The lack of research capability is another example of the commercial and political marginalization of Blacks and Arabs in Europe, and while perhaps laudable in its original intent, is actually an insult to a large group of consumers. The French government recently appointed a Minister for Diversity, who soon after realized that there were no official statistics upon which to base policy decisions. How are decisions made then?

In 2009, this situation is ludicrous and insulting.

Hey Mr. Sarkozy, Ms. Merkel et. al: how can we dance when you're standing on our feet?


W.L. Carney
September 2009

Newsletter No. 1

News from the frontline.....bill@billcarney.org

Market Meltdown : consumers all over the old developed world are tightening their purse strings as they weather the downturn. Housing markets are on the decline in the U.S.A., U.K., Spain, France….the list goes on. With oil prices still high, consumers are feeling squeezed. There is a general spending slowdown and many companies are wondering about the impact on their current marketing strategies. Maximizing efficiency is key.

You cannot fight the wave. But in the same way surfers can work a small wave as well as a large one (admittedly, perhaps with less reward), there are some things you can do to adjust and take advantage of the slowdown.

Developing new business is a no-brainer. Remember that times are tough for most, so it could be a good time to explore additional partnerships and networks. Everyone is looking to grow revenues, so some will be much more amenable to discussion.

Be careful about cutting prices. This is perhaps obvious, but it is always tempting during hard times. Lowering prices sets a new floor which others will react to and perhaps worse, sets a new psychological level for customers. Line of last resort.

Many of us put off things we know we should do when times are fat. Use this opportunity to think about issues like updating your customer databases if you do not automatically; maybe think about a website graphics overhaul. Get a little more religious with your business cards and new potential business opportunities.

If you have underutilized people power, put it to work on developing new ideas and experimenting with new processes. Necessity can also be one of the drivers of innnovation.
Think again about training and people development. I know cash flow is tight, but in terms of opportunity cost, there may be no better time than the present.

Remember those books you have been meaning to get to ? Use some of the time to invest in your own development and expansion. Ever made a better investment than the grey matter between your ears ?

Some more tips next month ….. ;-)
www.billcarney.org ;-)

Newsletter No. 2

Hey…has anybody noticed ?

The markets are crashing, we have a credit crunch, yet a fair number of folks are sitting on huge amounts of cash »waiting to see what happens ».
Everyone has a view on why this is occurring, but I think too many of these opinions are anchored on past models which we know now to be fallacious .

The question of the coming year for all of us is how to get money back into the markets and get people to swallow some risk again. And how do we stimulate growth ?

Traditional wisdom says that the major problem now is one of market confidence, and that we need to shore up existing institutions and weather the storm. We have been here before in some respect, and we therefore almost know what to do.

I am not convinced.

The problem is that the « market », you and me, as well as a lot of large individual and institutional investors, is not listening. We now know that the emperor has no clothes.

Is it possible there has been a fundamental shift in investor / investment thinking ?

Do we really want to bail out a company like GM or Ford ? Lock people into a dying framework for another few years ? Anybody remember the last Chrysler bail-out ? Is the company now any better ? The industry has had more than a decade to re-make itself and has failed miserably. Why not let the market do its work ? Instead of trying to fix the past, let’s create the future. It’s cheaper in the long run.

The growth and wealth of many of the countries in the NAWMW (north atlantic white man’s world, thanks to Tibor Mende ;)) was built on leveraging technology, (whether it was steam, electricity, the internal combustion engine or petroleum) and risk. Major innovation created wealth, both directly and indirectly.

Maybe part of the answer to our current predicament, oddly enough, may come from looking behind us.

There are technologies now available, whether clean-tech or others that can fundamentally change the way we do a large range of human activities ; from new energy sources, self generation of domestic power, self processing of water, to new forms of social connectivity. Mag-lev trains. Maybe its finally time to give innovation a serious policy and investment boost.
The national infrastructures of the USA and other developed countries, (i.e. the UK, by way of example) could use a serious dose of innovation and renewal. Incentives for investment in alternative energy sources could provide additional stimulus for development in new tech and new jobs. The mind boggles at the possibilities and opportunities.

While many of us are a little shy to invest in the past, maybe investing in the future makes more sense.

Hey…..has anybody noticed ?

HAPPY HOLIDAYS !!!!!!
WLC 2008-12