19th century advice for 21st century problems
I do not subscribe to ‘bank bashing’.
Although I will be the first to admit that banks have been slow in digitising, I don’t believe that is because they are either malicious or stupid.
I rather think it’s for three reasons – three reasons I have discussed at length both in this column over the years and in my book, Bankers Like Us. But if you are new to #LedaWrites, welcome, and here are your cliff notes.
The economy is digital. Banks are lagging behind. The reasons for that are complex and multifaceted but can be grouped under three rubrics:
- The financial services world thought we had more time… and that the pace, direction and content of the change would be more in our control than it turned out to be. Although the digital era was never in doubt, the industry didn’t expect it to come so fast, be so all-encompassing and happen… to us… to the extent that it did.
- The way banks are set up from a business perspective doesn’t lend itself to making long-term bets and planning for an open-ended horizon when making choices that affect investments into technology infrastructure, pricing and market positioning.
- The way banks are set up from an organisational perspective doesn’t lend itself to learning, adaptive change, dynamic re-planning and lateral thinking.
I am sure we will go back to those topics again and again in future as well. But not today. Today I want to talk about a different set of dangers. The dangers faced by banks that, by hook, crook, design or default, got themselves on the journey.
They are moving to the cloud. They are looking at embedding corporate payments and straight-through mortgage approvals.
They are asking hard questions about their mainframes but also about their organisational principles and risk culture and the way they attract and retain talent. They are asking hard questions finally because they know there is no way around them. They were hoping there was and now know there isn’t.
They have started the work.
And the work is hard.
The road ahead is long.
The path is not linear.
And we are not sure where it all ends. When is it all done? Who knows, right? The tech landscape is only getting more complex, change keeps coming.
In this context, as in any context, mistakes will be made. Plus.
Some decision-makers will lose heart and try to half-arse the whole thing. Plus.
Budgets will get tight and some hard choices will be made. And hard choices don’t bring out the best in people. They bring out short-sighted decision-making. They often lead to self-protection. Frayed tempers.
Not a good mix, that.
But imagine… after years of trying to do innovation in the Innovation Centre and business as usual everywhere else – which brought its own tensions and disappointments to people on both sides of the office divide – banks have started getting with the programme. They know it’s hard and expensive, but they also know they have no choice.
The regulators make that clear.
The competition is making threatening noises.
And anyway, if you want to process payments for Uber or Apple, you will find yourself faced with some questions that you may not want to answer with ‘we can organise a visit to our data centres’.
But I don’t want to be unfair. Some get on the journey because they have the rare benefit of visionary leadership. Leadership that wants to make a dent in the world, make a name for themselves or both.
So whatever a bank’s reason for finally getting on the journey, and it’s usually a blend, it’s fair to say that the vast majority of banks are on the way.
None of them have gotten to the finish line, or anywhere near it to be honest. But they are on the way to change. And they are trying to change culture, structure and infrastructure all at once. Systems, products, pricing and organisational disciplines. All at once. With no real blueprint on dependencies and what will happen if you introduce new systems and skillsets before you change your risk governance and HR processes.
This stuff is hard. Doing all of it at once while also doing all the other stuff (you know… the business-as-usual stuff) is hard.
And it is dangerous.
The most dangerous moment for a bad government is usually when it begins to reform itself.
Alexis de Tocqueville wrote that, in case you’re wondering. And no, obviously he was not talking about banking.
The first text I was assigned to read in my first week as a social and political sciences undergrad at Cambridge was by him. I hear the name now 25 years on and I feel compelled to sit up straighter like a cadet under inspection.
You may not know who he is, and that’s OK. He’s a very interesting man, if you’re tempted to indulge in some random reading. An aristocrat interested in the standards of living of the common man, God forbid.
I am a fan. You don’t need to be. Both in the ‘it’s a free country’ sense and also, specifically, you don’t need to be a fan or even to know anything about him to reflect on the truth of the sentiment.
History has proven him right when it comes to regimes. But actually, what makes regimes vulnerable when they start reforming themselves is firstly the fact that they are big, bureaucratic organisations with a lot of internal logic that hangs together in ways that have not always evolved as intended; organisations that spend as much of their time doing the thing they are meant to be doing (issuing loans if you are a bank… collecting taxes and maintaining roads if you are a government…) as they spend making sure they continue to run. If you are in a bank (or have ever been in one), think how many of your colleagues and how many of your days were spent never talking to a customer or a regulator, a partner or a supplier. Unless you are in sales, in a branch or in procurement, the answer will be all of the days for most people.
So, if you are trying to change the thing whose main job is to maintain itself, the thing itself will get in the way through inertia, incomprehension or resistance.
And that’s before you have accounted for the second factor that makes this a dangerous time, and that is the ill will your organisation may be surrounded with. Whether you are a government or a bank, it’s fair to assume that many people and entities out there have never liked you much.
Evidently, my man Alexis was not thinking about banks. And he was definitely not thinking about digital transformation as he died in 1859. That said, he gives us useful advice for any organisation seeking to transform itself.
Because let’s face it: if a big bureaucracy decides it’s time for change, the status quo is really, really not working. Otherwise, as history has taught us, they hold on.
So, in the context of inevitability, there is pressure and anxiety. This isn’t the bureaucratic equivalent of a spring clean or remodelling your kitchen.
This is survival territory.
This is the hermit crab being at its most vulnerable when it sheds the shell it has outgrown and while the new shell is not yet hard and set.
The organisation is vulnerable during transformation because it is a time of stress. And stress always creates vulnerability.
Plus, it’s vulnerable because the organisation needs to change itself in a wholesale fashion without a clear blueprint of all the bits that the future needs and where all the bits you have today go, if anywhere. And getting the sequence wrong may very well mean that you are doing the hard work of transforming yourself under stress and some of your own organisation is fighting you because you didn’t transform them yet and what they are meant to be doing according to the old world is killing what you are trying to do to survive in the new world.
Plus, while your organisation is fighting itself while undergoing radical change under stress… you exhaust yourself. Your time and your money and your people. You make yourself more vulnerable to either collapse or attack to your market share or cyber presence.
Like the crab.
Like Alexis warned.
Now the most observant of you are probably thinking, “He said bad government, surely what makes them vulnerable is their nasty repressive ways?” But no. Their nasty repressive ways are what made them bad for me and you and Alexis, but not themselves. Those ways are also what makes them unpopular and vulnerable to attack from the outside if a weakness is spotted. And let’s face it, banks aren’t exactly the people’s favourite. And their competitors (big tech, challengers or incumbents) won’t hold back to give them a break in their hour of need. Hacktivists and bad players won’t hold back till the soft shell hardens and you get the hard work done in your own time.
None of these players will care whether you were good or bad when you start trying to reform yourself and your own past habits get in the way of the future.
In the midst of change, you are uncertain, over-wrought and less alert. Even when you don’t get in your own way, you are vulnerable, like the crab.
But unlike the crab, you don’t know how long till you are safe.
It’s uncharted territory, really. We don’t quite know what the finish line is.
But we do know what the start line is.
We know what we are and what we have and what we are changing away from, right?
So maybe, just maybe, pay attention to all the places where your own organisation sabotages your own bids at change and future survival as you start to reform yourself. Because Alexis called it: you don’t get a medal for deciding to transform yourself. If you get it right, you get to survive. That is the prize. But while you are doing the work, it is the most dangerous time. And considering all the unknowns you have to contend with, the way you get in your own way is actually known and in your control to fix.
It’s just hard.
Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.
She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem. She is chief client officer at 10x Future Technologies.
Leda is also a published author – her first book, Bankers Like Us: Dispatches from an Industry in Transition, is available to order here.
All opinions are her own. You can’t have them – but you are welcome to debate and comment!