Dangerous Games – Why we need to take another look at the real purpose of Retail Banking

 (Health Warning:  This blog is a touch convoluted, but hang in there because it does all make sense eventually - promise)

Here's the thing.

Banking is a pretty simple game – Use our money to make us more money whilst managing the risk.  Simple yes – but the devil’s in the detail – let me try and explain.

When you ask the public why banks exist they come up with some pretty simple ideas: 

1) “Provide me with a free, safe, easy to access place to store my money”

2) “Provide me with a line of credit to help me improve my domestic or business situation”

3) “Provide me with a good rate of interest on my savings”

I'll call this Game B – Free Money - Use our (the customer’s) money to make us (the customers) more money whilst they (the Bank) carry the risk.

When you ask senior bank executives (in a non-threatening way) what their role is they will most likely tell you it is simply:

1)  “Improve the share price and provide a return on equity for the Bank and the investors”

I'll call this Game C – Big Money - Use our (our customer’s) money to make us (the senior executives and/or shareholders) more money whilst they (the customers) carry the risk.

Now without over romanticising or oversimplifying it both these Games (Free Money and Big Money) have their roots in same game.

I’ll call this Game A – Retail Banking – Use our (our customer’s and shareholder’s) money to provide us (the customer, executive and shareholder) with a fair and decent return on our investment whilst we (the customers, executives and shareholders) carry the risk.

Now whilst all three of these games are similar the semantic differences I have included in their definitions above makes all the difference in the world to the way the Banks have been/are run.  Over the last 30 years the economic conditions have been such that the variants of Game A, notably Game B and Game C have rapidly developed and moved away from their simple roots developing very different and now clearly toxic norms and rules in the process.  However, in an environment of global growth and expansion, these two games have happily co-existed on the same big pitch and neither has paid much attention to what the other was doing as getting a positive result for both games was relatively easy.  The outcome of Game B is happy customers and the Outcome of Game C is happy investors and happy (well paid) bankers.  So if one of the norms of Game B is free banking (a uniquely UK phenomenon) and one of the norms of Game C is big bonuses nobody really cares as everyone appears to get what they want. 

However, when the world and the pitch that Games B & C are being played on suddenly contracts, due to the global financial crisis, it throws into stark relief the difference in values and purposes of the two Games, highlighting the shortcomings of each code, as the key players get in each other’s way, followed by the inevitable recriminations and mud-slinging as each side justifies its own norms and values.  Suddenly all we see are the referees (regulators, ombudsman and politicians) who’d been having “a quiet game” for the last 30 years.

Today, due to lax ethics, controls and an overblown sense of entitlement the banks are being slammed with fines, greater regulation and social derision.  Many of their heroes have been sent off (Goodwin and Diamond) and Game C is on its knees.  So does that mean that Game B has benefitted?  Temporarily perhaps, but far from being “the beautiful game” Game B has its own problems.  Game B has created a customer mindset that believes it’s entitled to free banking, is happy to enter fraudulent miss-selling claims on an unprecedented scale and is happy to absolve themselves of any personal responsibility for over borrowing.  If there’s a problem (regardless of who created it) the banks must pay!  Game B has created a sense of entitlement that is deeply dangerous and reactionary.  Now whilst Game B may temporarily be in the ascendant this blogger can’t see how Game B can continue long-term as it seems equally as misguided and ethically questionable as Game C.

Hence the point of this blog – surely we (customers, shareholders, executives, politicians and regulators) have to go back to the future to agree a definition of Retail Banking that echoes that of good old Game A.  Only when we are all playing the same game will we be able to fight off the economic troubles that currently confront us.  Until that time comes Game B and Game C will continue to be played and borrowing a reference from a 1980’s pop group, “Banking will eat itself”

Olympic Inspiration from Olympic Innovation

I have so loved the Olympics and have laughed, shouted and cried at the feats of my sporting countrymen - along with the vast majority of the UK population.  What a Games it has been, what an emotional roller coaster - surely a Games that will inspire a generation.

So, not wanting to feel left out and over the hill I thought I'd take the opportunity to share how the Games has been a source of inspiration for me.  Now I know we all love the heart-warming triumph over adversity stories but I have been particularly struck and inspired by the stories that relate to innovation.

In particular I'm loving the stories about the application of science in support of athletic performance.  I'm intrigued by how the very fabric of athletics track has been designed to help the athletes go as fast as possible.  I'm loving the fact that the velodrome is being kept at a constant 28 degrees so that the track and the air are in the optimum condition to produce fast times and I am left speechless at the hours spent in designing the optimum pole with which to vault.

But perhaps the most impressive innovation story is that of the thousands and thousands of incremental changes that the individual athletes have been able to make to their styles and equipment through the application of insights gleaned from the analysis of data.  More than any other Games, this Games has seen the application of data analysis to improve the performance of the elite athletes.  Data is the new drugs.  Data is the new competitive edge.   Watch out for the inevitable new legislation arriving (a la Formula1) to try and level the playing field).

Of course, I can't help but ask myself about the implications of this data oriented focus for driving business performance.  Now data analysis to improve business performance is not a new concept but I can't help but think we businesses have a lot of work to do before we can claim to be anywhere near the levels of our sports scientists in relation to capability.   If truth be told (and speaking with a number of my more aged colleagues seems to confirm it) the quality and development of data analytics inside the large traditional businesses has stood still over the last 30 years.

So come on Team GB business – let’s get our act together on the global business stage and use the innovative brains we have in abundance in this sceptered isle to truly reinvent the way we conduct our businesses to deliver high performance.  Let’s take a leaf from our inspirational athlete’s notebooks and follow a few simple rules that will enable us to rediscover the power of data analytics in the business community and create an unstoppable GB economic resurgence:

1)      Remember that you have to be in for the long game – data analysis requires investment over the long term – think about building for a generation, not a quarter

2)      Develop a spirit and culture of experimentation and learning – hypothesise, test, analyse, learn and go again

3)      Remember that people are an integral part of business performance – they are central to your business performance and need to be provided with the data that helps them perform rather than kept in the dark and treated as Human Resources.

These are all easy to say but really quite challenging to achieve within the confines of business as usual in our mature organizations.  For my part I’m building these lessons into the very fabric our new Innovation Production Service – wish me luck – I’m aiming for the stars.

That’s the end of this Olympic inspired blog.  Go Team GB.

Unicorns, A Flat Earth, Innovative Cultures and other myths

I think I’m about to surprise myself by writing this blog.   I feel a little like a previously devout believer about to recant on a lifetime of firmly held beliefs.  Not because I have a knife at my throat or a gun to my head but rather because I think I may have been wrong.   With that in mind I will write with care as I have no desire to upset anybody (especially my former self) as I explore the contention that you cannot create an innovative culture in a mature established business.

“Whoa there!” I hear myself saying “Have you lost the plot man?   Aren’t you the former psychologist who has spent the vast majority of his working life trying to pull off just that trick?”  Well yes – I am, but I think I owe it to myself to have a good hard, honest look at what the outcome of my efforts have actually been.  So with 25 years of innovation experience behind me let me articulate three things, that on reflection, I now hold to be true:

1)     It is possible for mature organisations to innovate – it does happen – just not frequently or consistently enough or at a high enough level of quality.  The current demands from all quarters for “growth” merely highlight the lack of speed and quality currently being delivered.

2)     Some cultures within mature organisations appear to be more conducive to fostering innovation than others – without doubt some organisation’s cultures are more receptive to external ideas but, and this is a big but, experience suggests that this doesn’t mean that they actually translate into a delivered innovation any more rapidly or frequently.  Whatever, the culture, BAU has a ruthless knack for killing innovation.

3)     It is possible to create a temporary innovation culture within a mature organisation through the application of external effort – but when the external support dissipates the innovative culture decays.  Like a paranoid white blood cell the BAU machine is brilliant at sniffing out and rendering impotent any unprotected foreign body. 

So against, that background of doom and gloom – where us senior execs in mature businesses  are faced with the imperative to innovate but are also faced with the likelihood that anything we try to do to create a more innovative culture is likely to be short lived and inevitably doomed to failure – the question looms as to what should we actually do.

And now for my personal get out of jail card.  I do believe it is possible for organisations to create standalone innovation capabilities that feed innovations into the mother-ships.  I also believe that these capabilities are currently as rare as badgers in Harrods.  However, it is exactly these capabilities that have currently captured my imagination and are driving my own creativity.   I will be writing more about my blueprint for this type of standalone capabilities in future blogs, but, suffice to say, for now I am very, very excited about the possibilities.  Which given the rest of the content of this blog is a welcome relief.

Conduct and People Risk: Tackling the Digital Beast

This short and punchy blog has been contributed by Francseca DeHaven.  The blog is firing some opening shots in the newly emerging field related to the management of digital risk.  It's fun and relevant - hope you enjoy it.

Whether it is the collapse of a well known jewellers when the CEO’s flippant joke about doing a good job selling ‘crap’ was recorded on an employee’s smart phone, or the severe reputational damage caused when a CEO’s advice to employees to ‘grow up’ (eloquently offered between swigs of beer) was witnessed via webcast and shared across the web and National news, we can all think of incidents where the misconduct of employees has had disastrous effects on a company’s reputation and operations. These kind of organisation annihilating incidents are often collectively blamed on mismanagement of People or Conduct Risk.

Over the past few years, particularly since the economic crisis and popularisation of the Digital Age, many companies have been working diligently to develop policies that limit their People and Conduct Risk. However, despite strategies and tick box exercises to mitigate against these risks, companies continue to be struck down by the actions of people – their own and external observers.

This must beg the question, why are people and their conduct still a risk?

In terms of Conduct Risk, there has been a lot done in the Financial Sector. The FSA has defined principles around ‘Treating Customers Fairly’. The definitions are clear and the principle of putting customers at the heart of it all sounds sensible. Off the back of this, many conscientious companies have put Risk Frameworks in place. However, in practice, how do you make this work? Frameworks may lay out policies, procedures and roles on paper and even give a company a number of lines of defence against behaviour in the office. How though, does this translate into controlling or influencing employee and customer behaviour online? Given that the majority of banking and the majority of information sharing now happens online, how critical is digital risk and how can we protect ourselves against it?

As we can see in the examples above, commonplace digital tools like smart phone cameras and recording equipment, lethally teamed up with easily accessed social media sites such as blogs and YouTube can be weapons of organisational destruction when wielded by individuals who want to damage an organisation’s reputation or IP integrity. The Digital Beast of social media and normalcy of handheld media equipment are not going to disappear and indeed, given the many positive applications, we would not want them to. So, how do we ensure a happy ending to this story?

The beauty of Digital is that it is very much a double-edged sword. 

At Capgemini, we think that the digital beast can be tamed by employing an arsenal of appropriately tailored digital tools through your Conduct and People Risk framework. Tools such as Insight Into Action, the social listening tool that tracks and analyses social media for any references to the company so it can take action early to diffuse any potentially contentious chatter before it escalates (the tool has an output of recommended actions based on propensity modelling, kind of like predicting the future and countering it early if it looks likely to be dark), Silanis – a tool that locks down documents once they are digitally signed so the original version is set in digital stone or Backtrack – a tool that reduces the risks around new product launches and drives compliance when auditing FS back catalogues.

We can tackle the ominous Conduct and People Risk demon with a fresh perspective and approach. By mastering and taming our own powerful digital force, we can plug the gaping holes that have left companies so direly exposed to date.

The Power of an Engaging Idea

Earlier this week I had the good fortune to come across a fabulously funny, moving and deeply creative video.  The link to which is here: http://www.youtube.com/watch?v=5_v7QrIW0zY  The video is of one man's creative marriage proposal and it is brilliant - if you haven't seen it yet watch it now. 

Right now you've watched it let me make a point that is very simple and yet so seemingly difficult for us to grasp.  People will go to great lengths, at some personal cost to take part in things that they believe in.  The video is a great example.

My challenge, as a man who is trying to help myself, my clients, my team and my organisation drive innovation is to constantly ask myself the question - is the task that I'm asking people to take part in delivering meaningful enough (either directly or by association), fun enough, bold enough or social enough to ensure that those of us taking part can occassionally enjoy those moments of unbridled joy (as witnessed in the video) from carrying out the hard work that makes our lives worthwhile.

Sadly for me, my age and professionalism seem to have taken the edge off me.  Note to self, must try harder - life's too short.

The Visualisation Imperative

One of the most satisfying things in life is serendipity - the act of "lucking in".  This blog is itself a beautiful example of serendipity as it has its origins in a converation over a buisness lunch with a friend (who will be remaining nameless).  We were both getting very animated (no pun intended) on the subject of data visualisation when I suggested that he write up his thoughts and that I'd publish it in this blog.  He did.  I did. Serendipity.  Hope you enjoy and many thanks to my mystery friend.

A picture tells a thousand words, but a bar chart isn’t going to win any prizes.

This was the nugget I took away from a recent conversation highlighting the bland and inefficient nature of the current suite of visualisation frameworks we have at our disposal when presenting data sets. On further reflection I was struck by how limiting the common stock of available tools are in helping us understand the inherent complexity within data sets. Rarely is animation possible, and including additional dimensions is tricky. This doesn’t bode well in a data rich world where investment budgets are rife with data and information initiatives. Houston we have a problem

The challenge of understanding the relationship between data sets is constrained by the frameworks we apply. With the exception of a few classes of individual, most of us have been under the thrall of the cosy Microsoft world of visualisation; the handy little icon at the top of the screen which turns a row of numbers into something marginally more engaging.  But that’s it. Go beyond the a la carte menu of offerings, and we quickly run out of conceptual frameworks for visualising data.  This can only lead to complacency when presenting data sets – it’s simply too difficult - which in turn inhibits developing and presenting a deeper understanding of the problem across the organisation and externally.

The effort (and skill) required to translate complex sets of data in to a work of art which people "get" quickly is a massive limitation, and an injustice to the hardware and software available to capture and orchestrate the data sets themselves. Our diet of spreadsheets and PowerPoint is very bad for our stakeholders and bad for the brain! So, assuming the case is made, what do we do about it?

Exploring the Web yields something – Edward Tufte strikes me as a good starting point showing some of the beautiful possibilities http://en.wikipedia.org/wiki/Edward_Tufte ; but I’ve yet to hear his name mentioned in any Finance departments I’ve visited. There’s also a very helpful Periodic Table of Visualisation http://www.visual-literacy.org/periodic_table/periodic_table.html which is a useful starter for 10 when thinking about alternatives to powerpoint.  But, for my own part, I am delighted to see a specialist discipline emerging to support the data architects in translating the data sets into something meaningful (and beautiful) which could one day end up in the gallery of 21^st century innovations. I’m keen to hear what you think (via Rick) – and don’t hesitate to send me picture

PS from Rick - In another act of synchronicity I met a lovely niche supplier yesterday who showed me the fascinating potential for presenting data sets in 3D.  Wow.  The future is already here... let me know if you want to play

Fast Follower: Are you having a laugh?

It’s been a while since I delivered a full on ranty blog but after a couple of weeks interviewing executives about innovation I’m now fully in the mood for a good old, eye rolling, eyebrow raising hissy fit.  Why?

Because I am sick to the back teeth of people who are so far behind the game when it comes to Innovation justifying their piteous position with the use of the phrase “strategically we see ourselves as fast followers”.   Aaargh!

Since the mid 00’s the concept of fast followership has slowly percolated its way into the lexicon of business language.  Today, it has managed to migrate so far away from its original meaning and purpose that we can award it full membership of the business “bullshit bingo” Hall of Fame.    Originally it was used in relation to those who were actually carrying out innovation and alluded to a well thought out strategy of how to bring “new cutting edge products” to market at a speed that afforded most of the benefits of first mover advantage but avoided some of the costs.  The clue to the purpose of the phrase lay in the words themselves, FAST (as in actually happening, rapidly, at pace with meaning and intent) and FOLLOWER (as in actually moving closely enough to be associated with the leader).  Those firms who truly adhered to the fast follower philosophy and strategy designed and built organisations that were designed to deliver new products to a mass market by a) copying almost exactly someone else’s intellectual property or b) enhancing some prototype development and using the strength of their global distribution networks to drive sales.

Today the term fast follower is confidently offered up by myriads of executives as a Pilate like excuse to exonerate themselves and their organisations recurrent failure to deliver innovation (which in their organisation’s case usually means really old stuff that everybody else now does) at the speed of a laconic glacier.  

Come on people – let’s get with it.  I have yet to meet more than the tiniest handful of organisations that actually do have a thought through and structured fast follower strategy (and they are mostly in pharmaceuticals).  Instead I have met many organisations and executives who claim immunity from the charge of “you and your organisation are actually pretty crap at innovation” with a wistful look, an apathetic shrug of the shoulder, a beatific smile and a gentle utterance of the “but we’ve chosen to be a fast follower” mantra.  You haven’t – you’re just bad at innovation.

I could go on, but I won’t.  I should know better, I’m 45 for God’s sake.  Ranting over for now.