It’s a sociological fact that new technologies have changed our lives. What has been the impact on companies?
Olivier KLEIN: It cannot be denied that new technologies have redefined the world order. They have given rise to a series of revolutionary chain reactions in our day-to-day existence, and especially for companies. The first is a commercial revolution, one which has transformed the balance of power between producers, sellers and consumers. It comes from power being transferred to the consumer as a direct result of new technologies: more aware and better informed, consumers enjoy a far greater freedom of choice.
Sellers can emerge stronger than ever if they are able to understand their customers and earn their loyalty. Supported by the effective management of the data they have about each customer’s behaviour and by the long-term relationships they are able to establish, sellers must find the right product-service combination in terms of both price and quality that best meets individual customer needs, creating solutions with each and every one of them.
What must be stressed in this new balance of power is that any absence of added value in the consumer’s eyes, namely any lack of quality in the advice provided or of offers for improved and customised product-service combinations will lead directly to the complete digitalisation of the customer-supplier relationship. This means the disappearance of the seller’s economic role, with the emergence of a direct producer-consumer relationship or the emergence of pure players based on the internet, a low-cost channel for establishing customer relationships.
The behaviour of producers, sellers and consumers is changing. What about employees?
O.K.: That’s right. Another consequence for companies is the change in employee behaviour. The technological revolution places employees at the heart of the company, which has an impact on the organisation. Nowadays, for example, managers are no longer credible – and are unable to lead their staff – if they do not base their authority on the added value they bring to their teams, as opposed being a repository for information which, in today’s world, circulates freely and unhindered throughout the company.
All the more so as employees are increasingly demanding greater autonomy, sustained and driven by the very same technological revolution. Developing an entrepreneurial spirit has become a major challenge for large companies. Nowadays individuals – and especially company employees – aspire to understand their contribution to the company: they wish to buy in to the strategy and the organisational structure in order to feel that they belong.
Does this mean that traditional organisational structures will have to change?
Clearly, and unless they have been able to modernise, the highly hierarchical and vertical structures born in the 50s and 60s have become less effective and more difficult to manage as the lack of managerial proximity makes it harder to motivate employees. Such structures are more rigid and less flexible and are no longer in sync with a world and business environment that have become ever more complex and fluid. Conversely, companies organised in a network structure, one linking different parts of the company or even between different companies, are more adaptable and more agile, better able to absorb shocks and to manage complexity.
And then there is the social factor. This has to be taken very seriously, as society has become a real stakeholder for the company, thanks to the impact of the internet and social networks. CSR, involvement in wider society and corporate reputation have become key success factors.
In short, to be heard in this new world we have to follow, and even anticipate, how people use technology. This is the very crux of the matter: we are not talking about two different worlds, namely those of the digital and the pre-digital. New technologies have fundamentally changed the way we act and our relations with the outside world.
Greater managerial proximity, a better understanding of customer needs, receptiveness to the entrepreneurial world and an enhanced capacity to absorb shocks, upheaval and complexity; these are the essential ingredients for the modern company. And how do banks feature in all this?
O.K.: Banks are also companies… and, what’s more, the driving force behind the economy. The bank as a company, and more specifically the commercial bank, is not immune to such upheaval, in fact quite the opposite, due to its place at the heart of economic activity.
Whether it’s online banking, mobile banking, payment methods and, more generally, the relationship between the bank and its retail customers, the acceleration of the digital revolution begs the question whether there is still a place for the high street branch. For me, the answer is in the affirmative.
But we must examine the evidence: new digital tools have changed two parameters, namely the time factor and the distance factor. The relationship between the customer and the bank has become direct and the purchase of bank products and services is now performed remotely. The customer is visiting the branch less and less, now typically only to deal with significant projects. And this is the central issue.
The bank has to reinvent itself, and without delay. But the distinction must be made between outdated practices and those that remain indispensable through constituting the very essence of the profession. Two invariables are the pillars on which commercial banking is based. Firstly, demand for banking services is not reducing in volume: it is being expressed differently with new requirements. People do not need banks any less.
Secondly, the personal relationship remains a fundamental element of the role of the high street bank. Banking is not a business that produces products as such, it is all about human relationships based on the ability to offer good advice and good service at the right time, irrespective of which channel is being used. Banks deal with long-term personal and corporate projects, which presupposes a personalised and sustained relationship with the relevant bank advisor. This is precisely what our customers are telling us.
So what is to be done? Should online banking services be set up, without human contact and to the detriment of the branches?
O.K.: Our goal must be to reinvent the high street bank. I stress that the personal relationship between the advisor and the customer is non-negotiable, especially for a banking group composed of regional high street banks.
Our strength lies in our ability to promote what I call “non-remote” banking, as opposed to remote banking which assumes that a complete range of banking services can be provided without a branch network.
What is the basis of this concept? Quite naturally, what customers are demanding with the technological revolution but without curtailing a strong personalised relationship: greater convenience. Maintaining strong relationships with their banking advisor but via the channel of their choice, whether by phone, e-mail or physical appointment, depending on the matter at hand and the time of day… But this also demands a better response to the need for advice that is better thought through, more relevant and more appropriate. It’s the end for products that banks have wanted to sell via a succession of poorly differentiated campaigns.
Provided that it is more agile, more interconnected and more proactive, the branch network has everything it needs to maintain its fundamental relationship with the customer by combining its strength – proximity – with new tools, such as the internet, tablet and smartphone. This means combining the best the traditional bank has to offer with the best of the online bank.
In practice, in each branch each advisor must therefore become a multi-channel agent. As I have already said, this means offering customers the possibility of approaching their regular advisor in order to deal with their important issues in the manner of their choosing, whether face-to-face, by phone or by e-mail, without having to change location. And above all, this must be always with the same advisor. As for the rest, namely day-to-day banking, this can obviously be conducted by mobile phone. Of course we can also develop online banking alongside the branches, with named advisors for highly mobile customers or those with little availability.
What are the risks of developing such a corporate strategy?
O.K.: The greatest risk of all would be not to admit that change is vital. But it must be done in harmony with certain basic and unchanging principles. We must also mention the amount of investment required. Such a model of “non-remote banking” automatically means higher wage costs than those associated with low-cost remote banking. This will require the bank to focus its resources – beginning with its employees – on providing added value in order to justify the costs of the services offered. And, consequently, to exploit our human capital, the bank’s only real differentiation factor. Competence, reactivity and proactivity are all key. As is the intelligent and non-intrusive use of pertinent CRM (“big data”) in order to best anticipate individual customer needs. But also, and above all, we need to profile the networks to make them more agile, distribute expertise better and optimise physical and digital structures. The branch is not dead, far from it. But in the future it must combine two concepts: the e-branch and the physical branch, i.e. the best of modernity and the best of tradition. It has to be more mobile, more alert.
The point is to ensure that we come out on top. This can also be achieved through new technologies. They do not simply a threat. In an environment where banking revenue is showing a clear downward trend in macro-economic terms, the major challenge of such a model is strategic. Should we fail to meet customers’ expectations, they will naturally move to the cheaper pure-player banks online, without a qualm.
So the issue is internal transformation, namely to increase each advisor’s added value and our ability to make our network more responsive. New technologies will be able to help us in return.
But we cannot bury our heads in the sand: this new direction implies a number of long-term development projects. In broad terms, we need to redesign systems to support sales staff and review processes using digital to redefine the customer experience, extending from front to back office. This means, for example, that the lives of our customers and of our employees must be made easier while keeping a lid on costs, that customers must be included in and must be able to benefit from the development of new product contracts, that we must be able to offer e-signature, etc. A genuine process of organisational reform is underway.
Which element would you like to stress in order to gain the commitment of your employees to the project?
O.K.: Our employees understand that, more than any other bank, we must be receptive to the new modes of behaviour and new technologies used by our customers and in wider society, all the more so as, once again, it is our focus on the relationship and the quality of the service provided that set our bank apart from the competition. So this is vital.
But the reforms will also enable each advisor to develop a role as the manager of their own portfolio. In practice, this technological revolution will offer a level of freedom that will empower our sales personnel. A career in banking is becoming more and more exciting. And the position of branch manager will regain a real sense of purpose. Could there be any greater motivation? We must bear in mind that the bigger the institution, the more it needs proximity – in terms of both customer relationships and the management of its employees.