Key to Success
The chapter introduction makes it seem like a hodgepodge: it will "build on previous chapters" and "bring together the ... issues discussed in this book so far." I'll take notes, but I sense it's going to be a bucket of brain-vomit.
FINDING THE ROOT CAUSES: KEY TECHNIQUES
The author will address various approaches designed to "investigate strategic and managerial issues associated with e-banking."
Key Indicator System
The "key indicator system" identifies various factors that concern the general health of the business (such as revenue per customer, number of customers, number of complaints, etc.) to use as a basis for planning actions and measuring their success. It is extremely data-intensive, which makes it highly useful for e-banking (where customer behavior is easily quantified).
For more detailed information, see Rockart (1979).
SWOT Analysis
EN: The author mentions SWOT, then gives an explanation of the absolute worst way to do it (analyzing internal strengths and weaknesses and using those as a basis to define what opportunities and threats exist). Given that he couldn't be more wrong, I'm skipping the rest of this section.
Cost /Benefit Analysis
A cost-benefit analysis compares at the costs that a project will incur and the benefits that it is predicted to achieve as a way of determining whether a project is worth pursuing.
EN: While this is an interesting method of justifying project expenses, it doesn't accomplish the stated purpose of this chapter: to identify issues." It is also deprecated as inaccurate, in that it measures only financial costs/benefits, overlooks opportunity costs, and has been found to be highly inaccurate and unreliable.
Critical Success Factors (CSFs)
Critical success factors are areas in which an organization, as a whole, must excel in order to succeed. Similar to the Key Indicators, this approach provides more specific, concrete goals as a means toward identifying and evaluating potential courses of action. The primary difference is that a success factor may be nebulous and unquantifiable.
The author provides a wide range of examples - the term is currently in vogue, and it seems that a number of people are attempting to hijack it and brand it as their own.
HOW WAS IT DONE: REAL SUCCESS STORIES
The author provides three case studies. It's entirely clinical (and possibly fictional), but I'll capture the high points.
Case Study 1
This case involves a UK bank that was a market leader in mortgage loans, which diversified after deregulation in the 1980's to offer a wider range of financial services. To serve customers in various geographic areas, the bank established numerous branch offices and was eager using other channels to further expand its reach and provide greater service to its existing customers.
The company established an internet channel and was mindful of customer experience - used various tools to monitor customers' use of its site, primarily to evaluate advertising campaigns and discover functional problems with the site (where users were getting lost or dropping out of flow).
Organizationally, the company dedicated resources to its e-banking channel that were independent (and unencumbered by) traditional channels. Web site marketing focused on share-of-wallet rather than new customer acquisition, as it had many mortgage customers to which it could introduce new products.
The Web site was also designed to be a service center, that enabled customers get answers (and advice) online. A broad array of informational resources was provided, and there were reps who could engage customers in live chat sessions (interestingly, if a customer lingered on a page for a while, an agent could approach them via a chat window).
Together, these initiatives lead to a 65% increase in revenue per customer in the electronic channel.
One factor that was witnessed was a demand for rapid delivery: a funds transfer needed to be immediate (instead of taking two days), loans should be approved immediately, etc. The company recognized the need to meet this demand, and rewired their systems, creating a "middleware layer" that had an interface to all existing systems. It initially kept its legacy systems intact, but the architecture enabled front-end applications to operate independently, such that when a legacy system was replaced, it required no changes to the front-end systems.
On the front-end, the bank provided customers with a single page that provided summary information and access to all their accounts, rather than having to navigate to different pages for each account. Providing an at-a-glance summary of a customer's entire financial profile proved to be a boon to financial advisors and marketing as well as a convenience to the customer.
Support by top management was seen to be a key to the bank's success: the CEO supported it and championed the new channel, which flattened out a lot of hurdles.
Having an established and trusted brand was also seen as an advantage, in that the bank was a household word and customers were less skeptical of its online presence.
Most of the customers continued to use branches and phone banking, and the company continued to support them. The bank's perspective was that it would provide all services via all channels, and the customer could decide which was most desirable to them. The company did not consider adding incentives (such as lower interest rates on online loan applications), largely out of concern that customers who used other channels would feel short-changed.
Offering 24-hour availability was also a considerable hurdle, which required retooling their information systems and increasing staff to handle incoming calls. Retooling their systems was straightforward, as the company's systems were built on a single platform (Microsoft) by an internal staff, so they did not need to contend with an array of vendors.
Change management was handled by an "aggressive campaign" to promote the channel internally to reassure employees who feared the change would eliminate (or complicate) their jobs. The company also provided a number of perks, such as giving every employee an online bank account with #100 so they could experience it first hand as well as a mobile phone to use the e-channel.
One aspect they did not handle well was the operational functionality of their Web site. Sections of the site were often taken down for maintenance or upgrades, and too much emphasis was placed on having a constantly-changing look and feel to keep it "fresh", which bewildered customers. Cross-channel analytics are also cited as a weak spot. The company does well to monitor and measure the performance of each channel, but does not take an integrated approach (seeing how one customer might use multiple channels, or the difference in behavior based on channel).
Those shortcomings aside, the author assess their approach to e-banking as "very impressive."
Case Study 2
This case study involves a bank that offered a broad range of services to individual and small business customers. It expanded greatly in the 1950's by building branch offices, and did not broaden services until well after other companies had done so. In general, the organization is considered to be "very conservative" and "slow in embracing change."
Their first project was geared to launch a separate "internet bank" under a different brand, but was cancelled and plans shelved for a few years, at which time the bank decided to offer e-commerce under its existing brand (to leverage the brand's reputation). It wasn't until very later (the mid-2000's) that anything was actually done.
The bank served 6 million customers, and its point of pride was customer longevity and the breadth of service provided to each customer (share of wallet). It was generally not aggressive in pursuing new customers. Their approach to e-banking was slow and reluctant, motivated by fear that customers would leave them for other, more progressive, institutions if they failed to keep up.
Initially, the bank offered a few services online, in a very random and un-integrated manner. Customers could, for example, make a credit card payment but not a personal loan payment, nor would the transactions be posted until the following business day. The bank valued security (which is to say: it feared bad publicity), but to a degree that sacrificed functionality and stifled innovation.
Organizationally, the company formed an e-commerce team that included representatives of various product areas. While management stressed the need for the group to be very approachable and cooperative, they remained aloof from the rest of the business and often had internal conflicts of interest among the various product areas.
Having an established brand name served them well, but the company relied too heavily upon reputation to sell the new channel and devoted insufficient resources to marketing the new channel to customers. As a result, adoption of the new channel was slow, and customers were often unaware that the e-channel existed at all. Likewise, the company had a range of good products and services, and were well aware that the attractiveness of a channel would not compensate for a "poorly designed or wrongly priced" product. But again, the company took the "better mousetrap" approach (and waited for customers to discover their products for themselves). Both of these problems are attributed to the "meager" working relationship between the marketing and e-commerce departments.
The bank also suffered from a rigid information systems structure in which there were well-defined silos with no inter-operability. Their operational perspective was to make people (employees and customers) conform to the requirements of their information systems rather than taking a needs-based approach to information system design. There were several vendors, and considerable conflict among them when it came time to make the systems communicate with one another. The business recognized this problem, but was slow to integrate, largely driven by their security concerns. Eventually, they developed a middleware layer (similar to the previous case study) to facilitate communication among systems, but it was a much slower process.
Another serious hurdle was a lack of project-management skills within the organization. The company did not perceive the need for these skills, and instead assigned projects to product and operations managers, who didn't have the right skills, not to mention adequate time to manage projects on top of their existing workload. As a result, projects took longer, consumed more resources, and achieved "disappointing" results.
Regarding change management, the company did not involve the rank-and-file workers in the development of the new channel, but did a sufficient job of providing information on what was being done to allay concerns. In this instance, the workers were unionized, and prevent panic.
To enrich its web site, the company entered into a number of partnership agreements with niche firms, such as online payment processors and e-commerce providers. While this enabled the company to leverage their expertise, it meant putting their own customers in the hands of a third-party vendor for certain services, some of whom handled their customers badly, others of which failed and left their customers adrift for a solution.
The company did not have sufficient human resources (particularly in marketing and technical skills) and likewise outsourced development to other firms. This created difficulty in maintaining their site (the vendors held the keys, and the expertise, and were not responsive in dealing with outages and service delays). Their second attempt included using contract labor, but there was a similar problem in that, when the development task ended and the contract was up, the expertise walked out the door.
In terms of customer satisfaction, customer surveys indicated that the banks online presence was rated as unsatisfactory by 80% of respondents. The company reacted to this news (notably, by increasing phone support to deal with complaints and issues), but has ever been in a position of trying to recover, and customers have been slow to forgive.
In general, this bank did just about everything wrong that could be done wrong in approaching e-commerce. While the company remains in business due to its grasp on customers who prefer the traditional baking channels, the trend in customer preference toward the electronic channel spells serious trouble for the bank unless they take an entirely different approach to their operations.
Case Study 3
This case study focuses on a bank that opted for a fighting-brand approach by establishing a e-bank subsidiary, separate from its traditional banking. While there is significant cost in supporting an entirely separate business operation that is essentially a start-up, it enables the e-bank to operate as a pure player, unencumbered by the systems and procedures that apply to legacy channels.
In this instance, it also represented horizontal expansion, as the parent bank did not engage in retail banking, but instead dealt with mortgages and certificates of deposit. This also means that the parent company did not have many of the resources necessary to operate a commercial bank (ATM network, branch offices, credit card products, check processing, etc.) In effect, he e-bank was a start-up business that received funding from an established one, but could not leverage expertise, resources, or reputation.
A key challenge to getting the e-bank off the ground was marketing: it was an unknown "new" bank competing with established brands in a market where trust (in brand) is critical. However, it stands to mention that the Internet has been a level playing field, in which an unknown brand can hold its own, and sometimes outpace, established brands (Amazon vs. Barnes and Noble), especially in instances where the established brands are passive.
The author dwells on this point a bit: how the Internet enables information to spread quickly, and from a customer to move from ignorance to awareness to action at a much faster pace than traditional channels.
Since the e-bank was a stand-alone business, the channel had full support from every employee, it did not compete with other channels, did not depend on patching or kludging legacy systems, used its own success metrics, and generally escaped the pitfalls suffered by many established businesses.
The author draws no conclusion here, though it seems to be implied that a pure e-bank suffers fewer encumbrances than a traditional bank, and the latter should consider ways to eliminate or minimize those encumbrances to facilitate the success of its e-banking channel.
Brand Management
The author diverges from case studies to provide some general information and advice on brand management in the online medium. It's random bits:
- A Web site is a brand, and every visit is a brand experience. (I suppose this is for those who consider the site to be a gadget and feel the need to do something quirky and different online)
- If the bank has an established brand, the Web site should be commensurate in terms of its identity, promotion, and positioning.
- On the Web site address, there may be a consideration of developing a short, easy-to-type domain name rather than a longer name that reflects the bank's actual name (EN: The "short URL" advice never was much good. Most people user search engines and bookmarks and very seldom type in a site address)
- Including the Web site address in all company materials is an endorsement of the channel and can help instill confidence (and awareness) in users of traditional channels.
- Online advertising has undergone many changes, and there was a time it was seen as pointless (high cost per conversion), but current business models (pay-per-click and pay-per-conversion) make it more economical and less intrusive to users.
- Prospects who know your bank's name can generally find the site on their own, through search engines. It is a better ad-spend to market specific products (checking account, auto loan, credit card, etc.)
- The experience of using your site is a key factor in brand development. Any difficulty or frustration in using the site darkens your brand to prospects, and makes it more likely that customers will consider switching.
- Publicity (including word-of-mouth) is often more effective than paid advertising in attracting prospects who are the most likely to convert.
- Your Web site should facilitate comparison shopping rather than attempting to force users through a conversion funnel. The latter practice is a negative experience that is most likely to result in your being excluded as a consideration for the product the user is seeking (and others they may seek in future).
PLANNING FOR INNOVATION AND SUSTAINABLE GROWTH
The author concedes that there are many different opinions on what "innovation" actually means. He presents several perspectives (EN: skipping these - they're mostly wrong-headed), but does not seem to take a side. Instead, he distills the common element: change, with an intention of improvement.
The need to innovate is far more pronounced in the electronic channel. Technology itself is rapidly advancing and competition for the online customer is intense. To stand still is to rapidly fall behind.
He dwells for a bit on a four-square diagram that categorizes innovation as either an "improvement" (a small change) or a "breakthrough" (many small changes or a large one that has wide impact) that affects either a single function or the entire enterprise. And so, he has four kinds of "innovation" (functional improvement, functional breakthrough, enterprise improvement, enterprise breakthrough), the details of which are self-evident and not very enlightening.
He suggests that IT can be the source of innovation in a company - though in my own experience, that's the tail wagging the dog. Business would do well to pay attention to developments in technology, and seek to exploit them, but the technology itself should not be the tool, not the driver, of change.
He does not mention customer-driven innovation - which is odd, as he often mentions in other chapters the value of monitoring customer behavior as a method of recognizing patterns of use to identify areas where processes or products can be improved or developed.
He mentions the difficulty of getting customers and employees to "accept" innovation - much of which is redundant to what has been said about change management. (However, this is a problem when technology drives change - you have to "sell" the benefit).
CHAPTER SUMMARY
In general, banks are interested and have made significant investment into the Internet, but the returns have been less than anticipated. The author attributes this to inexperience in e-banking, and the difficulty in exploiting the new medium and integrating it with traditional channels.
The key factors for success are: adoption of a customer-centric perspective, support of top management, marketing and promotion, and seamless integration of the channel in both information systems and business practices.