Outperformers focus on developing high-quality, hyper-relevant services and experiences for target customers, rather than pushing products through traditional sales and markets. They continuously explore and create new offerings that better meet the needs of customers, regularly assessing service quality to ensure exceptional client experiences and drive retention.
One Danish bank rewarded customers with strong credit with a new loan structure, which was more attractive than traditional mortgage loans. The product helped the bank make up for the loss in fee income and falling interest income in traditional products. From 2013 to 2016, the bank issued US$9.3b in new home loans, while its traditional loan portfolio contracted.
Adopting your own high-performance culture
These attributes may seem fundamental, but the truth is they are poorly embedded in most banks. Even those that do seek to apply them, don’t do very well, sometimes because of efforts to adopt all three. In our experience, even high-performing banks focus on a maximum of two of these three capabilities in their business. The first challenge for banks seeking to emulate these top performers may be to determine which of their trait(s) they should adopt, in their own organization, recognizing that if they try to do them all, they will fail.
Next, leadership teams must establish the governance and culture which supports this common vision, agree the behaviors required to achieve it, and strive to execute against them. High performers are guided by long-term strategic plans, rather than switching back and forth in response to fast-moving market trends. These plans include a clear destination 10 years out and the interim measures and initiatives required to get there.
Making short-term gains to reap long-term benefits
But while it’s clear these behaviors drive long-term success, the reality may be different for those banks operating without a long-term strategic plan in a challenging market. These organizations need a short-term plan for 2020 that prepares them for this strategic shift – in essence, managing through the “now” to prepare to meet the “next” and to be ready for the “beyond.” And while it may seem that the easiest way to improve profitability is to cut costs by reducing investment in transformation programs, this is not the best approach. Instead, banks should consider what action taken now will reap both immediate and longer-term benefits.
For example, while a bank cannot redefine its core competency overnight, it can mitigate risks and strengthen resilience. A culture of continuous cost reduction takes time to nurture, but action can be taken now to free up investment in organizational transformation. Customer-centricity requires banks to invest in developing an agile mindset, but incumbents can leverage their significant advantage as trusted custodians of people’s money and data to strengthen client relationships. Organizations that work over the coming 12 to 18 months to do this will be well-positioned to drive sustained outperformance in the longer term.