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10 Strategic Questions

Every Banking CEO Should Ask

Todd Averett

The Good News: Bank Failures are Down….

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Number of Bank Failures Reported by FDIC

Bank Failures

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…But Change Is Still A Fact Of Life…

• Beginning in 2014, non-bank lenders became the primary source of new mortgage originations. (CNBC, April 2015)

• Over the next decade, as many as half of current US bank branches could disappear. (Forbes, July 2016 and Washington Post, April 2016)

• Overall, customers engage with their banks an average of 17 times a month. Yet only two of those interactions involve human contact. (Accenture, 2014)

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..And Executives Don’t Feel Prepared.Top 3 US Banking Industry Challenges:1. Regulatory Compliance2. Attracting New Customers3. Increasing Customer Profitability

Only 20% of Banking Executives feel very prepared to address these challenges.

Source: Retail Banking 2020, PWC

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10 Questions Every CEO Should Ask

• The Questions are intended to stimulate thinking and discussion about the strategy of your organization and how it is executed.

• Consider reviewing these questions—and their answers-- on your own first for insights and ideas.

• Then, consider reviewing these questions with your leadership team in a series of strategy discussions.

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Do We As a Team Spend the Proper Quantity—and Quality—of Time Working on Strategy?

How Executives Spend Their Time

80% of top management’s time is devoted to issues that account for less than 20% of a company’s long-term value.

5% of executives claim that their company has rigorous and disciplined process for focusing top management’s time on the most important issues.

3 hours or less is spent a month as a top leadership team discussing strategic issues.

12% of executives believe that top management meetings consistently produce decisions on important strategic issues.

Source: “Stop Wasting Valuable Time”, Michael Mankins, Harvard Business Review, 2004

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Improving Strategic Decisions and Meetings• Separate strategy meetings from operational meetings. Focus on strategy

discussions during strategy meetings.

• Distribute background information and data to participants for review prior to strategy meetings so that the meeting can focus on decisions, not background.

• Focus discussions on approaches that will build long-term value for your organization.

Source: “Stop Wasting Valuable Time”, Michael Mankins, Harvard Business Review, 2004

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Improving Strategic Decisions and Meetings• Provide options for the top management team to decide from. This

allows the group to compare and contrast value and risks/tradeoffs.

• Use a common set of criteria and decision-making approaches to come to decisions.

• Include discussions about risks and trade-offs with important decisions.

Source: “Stop Wasting Valuable Time”, Michael Mankins, Harvard Business Review, 2004

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Who Are Our Customers?

Who Are Our Customers Today?

Key Question: What do we Observe?• Our most profitable and least profitable customers today

• Customers that we are uniquely positioned to serve today

• The services that customers expect today

• Customer changes & trends that we have observed in the last five years

• Costs, Processes, and Technologies required to acquire and service currentcustomers

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Who Will Be Our Customers In the Next 5 Years?Key Question: What do we Forecast?• Our most profitable and least profitable customers in the next five years

• Customers that we are uniquely positioned to serve in the next five years

• The services that customers will expect in the next five years

• Customer changes & trends that we anticipate in the next five years

• Costs, Processes, and Technologies required to acquire and service our future customers

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How Does Our Customer Experience Compare to Experiences that Customers Can Receive Elsewhere?

What Do Banking Customers Want?In a 2014 survey of banking customers, Accenture found that:

75% consider their banking relationship merely transactional.

25% would likely consider a branchless digital bank if they were to switch from their current bank.

50% want their bank to proactively recommend products or services that can help meet their financial needs.

50% are interested in spending analysis that is forward looking and available in real time.

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The Omni-Channel Customer Experience

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Digital/Online

Mobile

Branch or Bank physical location

Phone Call

Seamless, integrated customer experience

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What Can We Learn from Technology Trends and From Innovations Outside the Traditional Banking Industry That Can Impact Our Business?

Technology Trends to Watch

• Mobile• Wearables• Privacy/Security• Biometrics• Payment systems• Digital personalized advice• Social Media

• Crowd-funding• Digital marketing• Video chats with banking reps

through apps• Digital banking• Data analytics /mining

transaction data• Proximity marketing

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Example: Digital Personalized AdviceAccenture survey of 18-34 year old banking customers:I want to be able to inform my bank that I am interested in purchasing a car and have them handle the heavy lifting, providing me recommendations on vehicle models that that meet my needs and be able to get me a discount. 55%

I want my bank to proactively recommend products or services to me which I may find useful taking into consideration which accounts I already have. 58%

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What Laws, Regulations, Policies, or “Business Rules” Will—or Could—Have the Greatest Impact on our Bank?

Regulation Questions

• Do you have both a risk management and a compliance strategy?

• How can automation and technology help you manage regulations?

• What is your approach to becoming engaged with the political process to impact future regulations?

• What regulations might create an opportunity for your bank to have a unique competitive advantage in the marketplace?

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Business Rules

• What rules and practices related to “how banks do business” are changing? How are boundaries changing or evolving?

• What “sacred cows” may no longer be sacred cows?

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How are We Uniquely Positioned in the Marketplace?

Sources of Uniqueness

• Serving unique customers/unique markets

• Providing unique products

• Providing unique services

• Providing unique customer experiences

• Providing a unique brand

• Operating using a set of unique internal capabilities, processes, or cost structures

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What Makes Your Bank Unique Today To Your Customers?

What Will Make Your Bank Unique in the Future to Your Customers?

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What Customers, Products, or Services Will We Choose to Focus on?

You cannot be everything to everyone.

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Choices

Which customers, products, services, or markets must we say “yes” to?

Which customers, products, services, or markets must we say “no” to?7/20/2016 27

Trade-Offs and Risks

• What trade-offs must be willing to accept if we make the choices we plan to make with our strategy?

• What are the risks to our business if we make the choices we plan to make with our strategy? How can we mitigate those risks?

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What Capabilities Do We Need to Execute Our Strategy?

Organization Capabilities-Overview

• Organizational capabilities are the collective skills, abilities, and experiences of the organization.

• They form the identify and personality of the organization by defining what it is good at.

• They tend to be stable over time and are more difficult for competitors to copy.

Source: Capitalizing on Capabilities, Smallwood and Ulrich, Harvard Business Review, 2004

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Organizational Competencies of Well-Managed Companies• Talent. Good at attracting, motivating, and retaining competent and

committed people.• Speed. Good at making important changes rapidly.• Shared Mind-set. Good at ensuring that employees and customers

have positive and consistent images of and experiences with our organization.

• Accountability. Good at obtaining high performance from employees.

Source: Capitalizing on Capabilities, Smallwood and Ulrich, Harvard Business Review, 2004

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Organizational Competencies of Well-Managed Companies• Collaboration. Good at working across boundaries to ensure both

efficiency and leverage.• Learning. Good at generating and generalizing ideas with impact.• Leadership. Good at embedding leaders throughout the organization.• Customer connectivity. Good at building enduring relationships of

trust with targeted customers.

Source: Capitalizing on Capabilities, Smallwood and Ulrich, Harvard Business Review, 2004

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Organizational Competencies of Well-Managed Companies• Strategic unity. Good at articulating and sharing a strategic point of

view.• Innovation. Good at doing something new in both content and

process.• Efficiency. Good at managing costs.

Source: Capitalizing on Capabilities, Smallwood and Ulrich, Harvard Business Review, 2004

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What Kind of Thinking and Culture Will Be Required for Us to Be Successful the Future?

Thinking

We cannot solve our problems with the same level of thinking that created them.

-Albert Einstein

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Thinking Approaches

• Strategic thinking versus tactical thinking• Transaction versus relationship oriented• Digital versus physical• New approaches versus “the way we’ve always done it”• “Go at it alone” versus “doing it together”• Ignoring issues versus digging into them• Victim versus accountable• Reactive versus proactive

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The Jaws of Culture

Strategies

Restructures

Process Changes

New Approaches

Managing the Jaws of CultureStrategy Execution

Positive Outcomes

Customer satisfaction

Employee Engagement

Strategy Failure

Negative Outcomes

Customer dissatisfaction

Employee Disengagement

Consider Your Culture

• Trust• Accountability• Teamwork and

collaboration• Customer focus• Driving for results• Openness to new ideas

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What needs to stay the same?

What needs to change?

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What Kind of Leader Do I Need to Be to Lead the Organization into the Future?

Strategic Thinking Skills

• Ability and practice to regularly look outside of the company at competitors, trends, technology changes, demographic changes, political environment shifts, and global industry changes.

• Ability to sift through this information and determine what is most impactful to your bank.

• Ability and practice to regularly look at your company and realistically evaluate what is working and what is not.

• Ability (and desire) to listen to new ideas and different viewpoints and opinions.

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Strategic Thinking Skills

• Ability to make strategic choices about what the company will do and won’t do.

• Willingness to experiment and to prototype new approaches• Willingness to “sacrifice sacred cows”• Ability to accept some risks and trade-offs

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Industry Knowledge

Inside the Company• Knowledge of current bank

customers and their expectations.• Understanding of current bank

performance and metrics.• Understanding of current bank

processes.• Understanding of current

regulations.• Understanding of current

technologies used at your bank.

Outside the Company• Knowledge of changing

demographics and customer trends.

• Understanding of competitor performance and metrics.

• Understanding of options for alternative bank processes used by other organizations.

• Understanding of potential future regulations.

• Understanding of potential future technologies.

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Leadership Skills

Leading Yourself Authentically

Leading Your Leadership Team Effectively

Leading the Organization Powerfully

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10 Questions Every Banking CEO Should Ask1. Do We As a Team Spend the Proper Quantity—

and Quality—of Time Working on Strategy?

2. Who Are our Customers?

3. How Does Our Customer Experience Compare to Experiences that Customers Can Receive Elsewhere?

4. What Can We Learn from Technology Trends and From Innovations Outside the Traditional Banking Industry That Can Impact our Business?

5. What Laws, Regulations, Policies, or “Business Rules” Will—or Could—Have the Greatest Impact on our Bank?

6. How are We Uniquely Positioned in the Marketplace?

7. What Customers, Products, or Services Will We Choose to Focus on?

8. What Capabilities Do We Need to Execute Our Strategy?

9. What Kind of Thinking and Culture Will Be Required for Us to Be Successful the Future?

10.What Kind of Leader Do I Need to Be to Lead the Organization into the Future?

What Will You Do Next?

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Thank you for the opportunity to speak with you today!

If you have questions or would like to speak more about these topics, you may contact me at:

Todd Averett

todd@leadingpeoplepartners.com785-478-0023

www.leadingpeoplepartners.com