Summary document & highlights from BMGI's recent Executive Breakfast Strategy Discussion - February 2013.

1. Executive Strategy Breakfast: Financial Services
Discussion Summary: 21 Feb. 2013
Meeting Topic: Perspectives and challenges for strategy formulation and
execution within the financial services industry
Discussion Summary and Overview
There was agreement that in the last few years everyone had been following each other in terms of
redesign projects and that not much had changed significantly. Many of the “redesign” projects failed to
deliver any large or sustainable value and so had very little visible impact on the business or customers of
financial services firms.
Since the financial crisis, individuals and organizational
entities have become increasingly aware of cost in terms
of personal, business value and stock price. It was also
recognized that the industry during the boom years had
benefited from high levels and easy access to money
(cash), resulting in profit targets being constantly
exceeded to such an extent that there was not an urgent
or important need to be efficient or customer-focused.
Success was one-dimensionally defined in terms of
quarterly or yearly profit. Now this is changing. The
following ideas that were discussed are based on the
recognition that strategy, operations and cultures need
to change to adapt to the new financial environment.
Interestingly, and just when it is needed the most, there is a general sense that many finance organizations
might be suffering from strategy fatigue. The word and concept of “strategy” has recently been used and
applied a lot, with new strategies every year. In market conditions where just about every strategy led to
profit, little attention was paid to long-term sustainability. In fact, there was a view that strategy was not
that critical since money was being made and that the only limiting factor to success was the resources
needed to carry out the deals. For the majority in the attendance at the discussion, it was recognized that
strategy is being given a renewed focus but, in the view of the majority, current corporate strategy seems
no more than a vision. More importantly, current strategies are not much more than “nice slogans” that
fail to resonate with those working at lower tiers of the business.
Further to this, it was also recognized by the meeting attendees, that many corporate-level strategies had
historically been based on industry trends, rather than on an individual company’s strengths and
expertise. When everyone follows the same path, there comes a time when the “herd” happily marches off
the cliff and no one can blame one another. So rather than strategy fatigue, maybe the issue was
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2. benchmarking and trend fatigue. Most organizations to date have been focused on matching competitors,
not striving for anything new and often second place has been good enough.
Based on initial discussions and key observations about the financial crisis, two key areas were further
developed. (Other topics that were put forward will be followed up in subsequent breakfast meetings.) The
two discussion points centered around the disconnect between operational improvement methods and
approaches not being aligned to strategy. One example of this disconnect, was the countless stories of
departments and individuals getting bonuses despite companies losing money overall.
Discussion Focus Point 1:
The customer as strategy, i.e. becoming more customer centric
Questions by participating attendees were:
 Is a customer focus always possible? What about conflicts with customer values?
 Did we not do just what the customer wanted, i.e. make money?
 Do the current regulations and service level agreements (SLAs) currently help or hinder this? Are
there times when regulations work against customer centricity?
 Who is the customer? How do you segment your customer? Do you need different strategies for
different customers? Can you have one strategy that suits all?
 What does “customer experience” or “customer focus” really mean to people working in financial
services operations?
 Does the customer exist in the classic individual sense for many types of financial services? Or is the
customer shareholders or other organizations?
Challenges and key strategic areas for improvement discussed were:
 The need to translate and better understand what “customer focus” means to internal
operations. Many individuals working in financial services are not customer-facing (i.e. no direct
interaction) and so an understanding of “customer focus” is not clear. In some cases individuals
consider that they serve markets rather than customers making this concept of customer-centricity
hard to define.
 How do you figure out a strategy that will best serve the customer? What they ask for is not always
what they want, but many companies still do not have a way of finding out really what their
customers want. How does the financial services Industry really start to innovate?
 There is and will continue to be competition with cost vs. service, i.e. creating the customer
experience is often not the most efficient or cost-effective solution and therefore can conflict with
short-term notions of profitability. At what point do we make decisions that balance cost to the
business and value to the customer?
 There is currently no forum internally in finance organizations that brings people together across
the business to improve things for the customer. People may have individual ideas, but these are
not shared and there is too often no way to look at the customer experience across processes and
departments. It was suggested that using social media and technology chat channels could help
connect people virtually so they could collaborate across all levels of the organization and across
silos. For example, an internal chat board and Facebook groups could be helpful in initiating this,
but those are far from being complete solutions.
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3.  Recently, many companies have moved away from a product focus to a client focus across the
whole customer lifecycle. As such, many finance companies are restructuring key operations across
the traditional value streams and silos so they are less disjointed and more closely aligned to the
customer. They are using this new lifecycle model/strategy not only to increase connections with
the customer, but also to allow more opportunity for growth across the full product portfolio.
In the course of this discussion, the panel came to the conclusion there could be only one version of
success. It was also agreed that success could not be one-dimensional. In fact, the panel concluded that
success should be three-dimensional, and the only shape that was the same whichever direction you
looked at it was a cube. Using this image, true success would be achieved when each of the sides was of
equal length. The question then became: What are those sides?
It was agreed that Profit should remain and that Trust and Risk should be added. There are many
elements/key criteria that make-up a strategy that is customer-focused and would shape decision-making.
Since each element of the criteria has an impact on the business and the customer, each area should be
taken into account when creating strategy and making key strategic and operations decisions. If the three-
dimensional shape is not a cube (i.e., all sides aren’t the same), then it would mean that someone (the
customer, financial institution or regulating authority) would not be satisfied and that such dissatisfaction
would be cause for alarm.
In short, we should be looking to build cubes! Could it be that the Egyptians had got it right all those years
ago and that success eventually will look like pyramids?
PROFIT
TRUST
Discussion Focus Point 2:
Transforming vision into operational action
The second topic of discussion chosen by the panel had to do with strategy execution. The following topics
and strategies for improving the status quo were discussed amongst meeting attendees:
 Strategies don’t go deep enough—they do not address the day-to-day operations of the business.
We buy strategies that feel like novels when what we should be buying are manuals.
 There is an ongoing issue with culture within traditional financial services organizations. Many
employees are resistant to change because they think “this is the way we have always done it” or “I
am the expert.” Change is especially hard to achieve culturally when many managers feel attacked
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4. or “it is being done to them.” Many companies only know of the “doing to others” approach from
traditional consultancies, but there is space for the “doing it together” approach, more of a
partnership, and a move away from the historic providers of strategy execution advise.
 Many companies are operating globally. There are also challenges with disseminating strategy
across different cultures, and strategy is often not adapted to realize this.
 There is little definition around what “world-class” actually means. Often this is defined at an
operational level with no real strategy to guide the direction. Or, alternatively, it is used as a catch
phrase in the vision without outlining what this means to the business.
 There is a need for operationalizing strategy, i.e. how do you close the gap between strategy and
day-to-day operations? It was discussed that businesses need to provide an increased focus on how
to set the steps for achieving the strategy, not just creating it, and becoming more tactical in their
approach.
 There are a lack of effective communication and collaboration methods across organizations. Silos
are still a big issue in large financial services organizations and substantial work still needs to be
undergone to break these down.
 The current mode of engaging with third-party and external suppliers is not sustainable or
successful. Could it be that current procurement models have become unfit for purpose? There is a
perception of “handing keys over to consultants” for a project, and then after completion they are
handed back with no real knowledge sustained in the organization. There is a need to build internal
and sustainable competencies for strategy and innovation. Maybe the phase of “quick wins” is
over and now is the time to really innovate.
Potential strategies and solutions that were discussed:
 Cross business collaboration or working groups – The idea was discussed of creating dedicated
groups for strategy, change and transformation; however, a model for how this would work in
practice effectively would need to be proved. Examples from attendees included a “process quality
working group” and an “innovation team” that would aim to bring together and align strategic
imperatives and operational improvements across the business units.
 Attribution – The concept of attribution was suggested as an effective way to allocate resources for
strategic imperatives/initiatives that should cascade down into the organization. These would
provide the ability to trace back which operational activities have had a real impact on the strategy.
It was noted that strategic challenges often occur when top-level leaders and organizations are
slow to withdraw resource and funding from operational activities that are not delivering. It was
noted that this is a current challenge with the size, lack of transparency and bureaucracy of the
traditionally structured global finance organization. To be agile in terms of strategy and operational
alignment, this needs to be addressed.
 Technology enablement – While this delivers improvements and advantages, others will catch up
in the next 12 to 18 months, so technology enablement is not the answer to strategic competition.
The question was then asked: What is it that will give a strategic advantage in 10 years time? We
need to think about ‘what we do not know about’ and go beyond the next step, however in most
cases it was agreed we often follow a path set by others.
 Short-term wins vs. long-term restructuring, strategy and innovation – Many of the current
transformation initiatives in financial services have been focused on reducing debt, increasing
liquidity and profitability. However, whilst this remains an imperative, there is a need to look
toward longer term gains to invest for the future. The next point was an extension of this.
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5.  Innovation as part of strategy – The role of innovation in financial services was discussed as a
strategic and operational imperative. It was suggested there is a need to challenge current thinking
and allow us to think beyond compliance and the status quo. Organizations need to be thinking
more long-term and ahead to what will make them successful and innovative in product, service
and operations. This sense of innovation is expected and will need to increasingly feature more
strongly in strategy. It was recognized that there is a current need to “shake people out of their
complacency.” For instance, those that used to be No. 1 in the marketplace for innovation are no
longer the front-runners; they have been left behind. However, it was also recognized that
effectively enabling innovation is hard; there is a current misconception of innovation from people
in the business as being associated with
change, making it culturally hard to achieve.
 Hoshin Kanri – This was proposed and
discussed as a way to create alignment and
focus toward a more long-term goal, rather
than on a yearly or 5-year basis. Many
strategies fail when they come to their first
hurdle of a course change and are then
scrapped. Hoshin provides a way to help
align short-term changes in direction and
operational needs whilst still creating the
focus and direction for the long-term success
of the business. Hoshin was discussed in
more detail and examples given to
participants attending.
Meeting Conclusion
Overall the panel agreed this was a worthwhile exercise and we should find a way to keep the discussion
going. Further discussions are in the planning, and it is BMGI’s intention to keep organizing such informal
executive breakfasts on a quarterly basis.
In summary wrap-up of this event, three points stand out:
 Benchmarking as a substitute for strategy has proved its limits.
 Is it time for the financial industry to embrace improvement methodologies such as Lean, Six Sigma
and innovation? Many institutions have made success from prescribing them to others. Why not
look to the next success by applying these methodologies to themselves? We can all innovate,
reduce waste and eliminate recurrent errors.
 Is it time to go deeper by building execution roadmaps alongside strategy? Hoshin Kanri-based
approaches have been successful in achieving this.
For further information about the authors and these types of events please contact:
Megan James, Marketing & Operations Europe, BMGI
Email: megan.james@bmgi.com | Tel: +44(0)7788292824
Web: http://lp.bmgi.com/ExecBreakfastMay.html
The next breakfast discussion will be hosted on the 24th May 2013 at The Gherkin, London, by invite only.
Please email to request a formal invitation.
www.bmgi.com | Email: info.eu@bmgi.com | Tel: +44 870 389 2221
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