Lars Vollmer made me think with his latest book about self organization. There is some sort of a chicken and egg problem – as soon as there is a rule or policy there needs to be some governance to verify its adherence.
“Governance is the way the rules, norms and actions are structured, sustained, regulated and held accountable.”
Many organizations have developed tons of rules and policies. I don’t think that this was planned upfront – it happened over time. Let’s rock an idea and think about what would happen if those rules and policies would be deleted? Would this lead to chaos?
This depends I guess on the organization. If the organization is driven by an external purpose and a mission, then the members of the organizations would continue to do the best to move the organization towards the vision. In a healthy organizations mistakes made by individuals would be corrected by the others on the base of common sense and shared principles. The organization learns by example how to act. It walks the talk.
In some organizations the members must sign that they have read and understood all rules and policies. In a healthy organization this is no issue – there are a few rules only and it is not a problem to keep them consistent and contradiction free. In large bureaucratic organizations such behavior can only have the purpose of ‘backside covering’. Somebody needs arguments he can use in case something goes wrong – look, it was clearly stated in the policy.
An organization which has many rules needs a lot of governance. Somebody needs to train the people on the rules, and track that all the rules have been followed. For the members of the organizations this reduces the amount of personal responsibility – it’s not intended to do what’s outside of policy even if it would make a lot of sense and it is fine to do things which don’t make sense as long as they comply to the rules.
Complexity is one of the key aspects in a world of VUCA (see Dance on the VUCAno) – it is not so difficult for a common sense based organization with a clear purpose and healthy structures to adapt to the increasingly fast changes. But it is impossible for a governance dominated organizations to do so for at least the following reasons.
- Policies cannot be changed and adapted fast enough and keeping them free of conflict is impossible.
- Members as a consequence have to react according to policy and will miss important developments and client needs.
- The ones who define the policies will try to embed all eventualities to be on the safe side – the amount of rules grows.
- Every mistake tends to result in new or changed rules.
It would be much better to have a small set of principles. Please note that a principle is not a rule – it is a meta rule which helps to identify the right decision. Many organizations have such principles in addition to the rules and policies. Just be careful to really stick to principles and avoid to state the obvious.
So what would be a good approach.
- Clear vision and external purpose everybody in the organization shares (see Giving Direction)
- A few guiding principles which help to channel the activities
- The minimal set of rules and policies required to allow the organization to operate safely
Then let the people create the social structures and norms based on this.
Trust is an often used term in financial services. What is trust, how is it built, gained or lost? Has trust building changed in the last few years of emerging digital hyper connectivity and will this have an impact on banking? (see “Banking evolution: Service Innovation
,” “No Off Switch
“) Let’s together explore this a little bit …
There are at least four dimensions of trust:
- predictability – ability to predict actions of others and situations which might occur
- vulnerability – giving others the chance to take advantage of vulnerabilities
- value exchange – exchange of values even though there is no full knowledge about the peer
- delayed reciprocity – giving something now with the expectations to be compensated at some future point
The trustor has logical and emotional expectations against the trustee. The logical expectations are often contract related. In case of a loan a payback including interests is a logical expectation. The emotional expectations include the level of comfort and the experiences made during the time where the loan is granted and beyond.
The following little example explores these dimensions. Let’s assume you want to make a ride home and you call a cab.
- An ordinary cab arrives with a smiling driver. Before you enter the cab you need to trust the driver that he knows the place, has serviced the car properly and will not crash the car while you are in. This quick assessment is nothing simple but humans have developed senses during the evolution which support this interpersonal check.
- The cab arrives – but nobody is in. There is a screen showing a friendly face in an office telling you that he is your driver. The cab is remote controlled in a way that it feels for the driver like being in the car. You can again perform the quick assessment described above based on the reduced amount of information and available senses.
- A self driving car arrives with a smiling man in it. He has been mandated by law to sit in the car to intervene in critical situations. You may be tempted to make the quick assessment as in the first scenario but then you notice that this person has limited chance to intervene and influence the sequence of events in an emergency situation as the available time to react would be to short. In essence you notice that you need to trust the system, its sensors and the algorithms.
- A self driving car arrives – completly empty. That’s a different story – the interpersonal element and the usual base for quick asseementis is completly missing. Maybe you should do a short ride first to see if this is safe and then, once you gain confidence into the car, its sensors and algorithms go for longer trip. With good experience, trust is built.
There are futher factors influencing your final emotional assessment – the taxi could be dirty, the driver may have an unpleasant driving style or the climate control may be broken. Even when the target is reached on time, the experience may not great and you may decide not to rely on the services of this company again.
I guess it is rather clear what follows now. All these situations also occur in financial services today. The chance that you meet a banker which is an entrepreneur and personally engages in the trust relationship with you are rare. Such a banker would stand up with his name for the agreement made and would do the best to meet the logical and emotional expectations.
So let’s explore the other three scenarios in a little bit more detail.
- The secenarios have all one thing in common – the ‘driver’ has limited skin in the game.
- Remote meetings with specialists who can come up with creative solutions for complex problems are quite the norm in business and personal live today. Finding the right specialist may already be a challenge and arranging a physical meeting may be close to impossible.
- You may have an assigned employee representing the bank as a sales clerk or relationship manager. The relationship manager will talk with you and then key in the data into some engine which finally processes the agreed business. You may build up a personal relationship to your relationship manager. If this is strong, then you will be tempted to follow him if he moves to another bank. If you trust more the brand, its system and processes, then you will stay and engage with a new relationship manager.
- You may also be routed to a customer services desk which is used to deal with requests like the one you have. With each call you get to know another person – building an interpersonal relation is not intended.
- You may also interact through an electronic channel with the system. A hopefully cool user interface guides you through the necessary steps to get things done.
The objective of most companies is to operate with standard processes leaving the relationship manager very limited flexibility. Hyper connectivity leads to more transparency, the logical element of the trust relationship is performed by an engine and the emotional one is more and more an outcome of the digital experience.
Trust is still a key element in many things. In banking the logical element of trust is more defined by processes, algorithms and infrastructure while the emotional aspect becomes more and more a result of a great digital engagement.
Trust is shifting from personal relationships to systems and experience.
- Transparency is the new currency – people estimate transparency. Its about enabling people to reach their goals independent of the provider and about being informed in good and in bad times.
- Openness is the new norm – we are living in a network economy. Openness is the key to unleash the combined potential of all services in the network. Closed and monolithic systems are relicts of the past.
- Holistic services – users want to have an end to end service and an broad overview. There is just the choice of providing it or let somebody else do it.
- Simplicity – the different pricing schemes used by the various service providers are hard to understand for the consumer. But all this complexity can be hidden using smart technology – either by offering a flat rate scheme which enables general usage or by simply billing the actual consumption with the optimal price for the consumer.
These points are very true for a mobility provider and also for financial services and other industries as the relate to big shifts in society. There is one huge difference – the SBB has a huge logistic challenge with a lot of infrastructure which is required to realize the desired degree of mobility. Financial services companies in essence just deal with information and have a simpler problem to solve.
I also would like to highlight a few other aspects which I found very interesting:
- Empowerment – the people who are in contact with the users must be empowered to solve problems in creative ways. They see the problem and they can directly engage and solve them with their creativity. The SBB has allocated a budget at discretion for the ‘railway companions’ – this are the people in the train who make sure that the travelers have a smooth journey. This empowerment of employees at the point where the company engages with the clients is just cool.
- Team – the rail clean organization is now a part of SBB again and wears he SBB logo. In more an more automated railway stations they are often the only people. Now the wear an SBB logo again and can help support travelers in case of problems. This is a win-win situation as the job has become more interesting and as clients have a further human touchpoint with the brannd.
- Development – all roles are changing due to the evolution of the environment and the technology. It is of strategic importance to think about the roles and their evolution paths. SBB grows and moves together with its employees into the future of mobility.
- Data – SBB as a provider collects a lot of data about its users. Monika stressed that the data belongs to the client and not SBB. So the client decides when and how this information is used.
Again four aspects which can be translated very well into financial services. The empowerment of the staff is key, every employee is a part of the brand management and client data belongs to the client and not the service providers.
The notion of VUCA was introduced by the U.S. Army War College to describe a volatile, uncertain, complex and ambiguous multilateral world which resulted after the end of the Cold War. This applies well to the world we see today where a lot of things evolve in parallel influencing each other. VUCA stands for:
- Volatility – fast rate of change
- Uncertainty – as things change fast we seem to live in a world of uncertainty
- Complexity – small things can develop huge effects, nothing seems linear anymore
- Ambiguity – things can be interpreted differently, context matters, answers depend
People like stability and simple situations – but in reality is different. The elements of VUCA can be seen as a threat or an opportunity. I prefer the opportunistic view with observable developments within each elements of VUCA
- Volatility – opportunity for those who can adapt, are agile and have access to resources
- Uncertainty – opportunity for those who look at the bigger picture
- Complexity – opportunity for those who can adapt and influence
- Ambiguity – opportunity for those who live and breath diversity
Here are some thoughts triggered by VUCA
- Having a vision or a longer term purpose is key to channeling activities towards a common goal. It enables all to make the right decisions at any time (giving direction)
- Projects or initiatives must be structured as small steps each leading to a stable and beneficial state.
- Approaches may look promising upfront but may become unattractive or even unpractical when being implemented. It s key to acknowledge, learn and move on (never fail to fail).
- Try to travel light – adjusting direction and acting quickly does not work when we have lots of baggage.
- Avoiding technical and business debt becomes instrumental in enabling the ability to renew systems and organizations.
- Old patterns and theories become stumbling blocks. Be creative and innovative to develop patterns and tools which match the new reality.
- Best practices are good to learn. They are for a specific situation – yours is different.
- We live in a world of networks and network effects matter. Its about connections and influence not about hierarchy.
- If one acts to isolated he loses influence which lacks the stimuli and interactions in order to drive innovation and creativity.
- Try new things if you expect something new. Be curious and open for surprises – there is always something positive in it which can be used to build on.
In the world of ambiguity it may sound promising to try to keep and defend one’s current strong position. Why try to be creative and innovate? Why not just wait, optimize the current state and buy what turns out to be a success. This does not work well in a networked world. Such strategy typically leads to a limited time success followed by a serious threat.
The word bank immediately depicts the picture of queuing in branches, limited quality products, and legacy processes ( e.g. time to process transfer or payments, etc…). The list goes on and on whether it is overdraft charges, processing/ service fees, overseas call centre. Although in the past, prior to the digital revolution, communication and processing were performed physically and was an important valued service appreciated by its consumers (Change is inevitable, Importance of a brand’s digital behaviour). However in the digital age, this will change with the introduction of financial capabilities not through new capabilities from existing incumbent banks but by new players outside the financial sector.
What will these players offer? Will they offer radically different products, new approach(s) to customer service and radically different ways of integrating to the customer’s ecosystem offering customers genuine and value added financial services? Or will these new ventures, like many of our existing banks, simply pay lip-service to such ideas?
What would we expect these new ventures to provide? To say the least the following:
- Fewer but relevant and value-based products base on the customer’s preferences. Keep it simple, make it fun, empower the customer.
- Financial services anywhere anytime (Omni-digital). Ubiquitous and available when we need any forms of financial services through the customer’s ecosystem. Services that interstate with their connected life.
- Personalized services and recognition. Knowing the customer personally. Listening to the customer
- QR code a standard for payments where payments happens instantly with limited to no infrastructure required
- Work the way customers work. Be where they are, be there all hours, respond now.
- Be the kind of financial services that I want to work with: be involved.
- Rate and fee sensitive/ free
- Be the overall financial caretaker. True advisory relationship.
What are your expected capabilities?
2017 was an interesting year where many developments started to get real traction. Just think about blockchain, bitcoin and artificial intellgence.
2018 will be even more interesting and substantially more challenging. A few predictions for 2018 are as follows:
There will be three core changes for financial services:
All three aspects levitates a shift towards a distributed decentralized financial system. This affects the core and challenges legacy status quo and its existence in the future.
In addition fueled by the increasing tokenization and availability of blockchain based systems there will be a shift towards
- Mobile Payments
- Holistic mobile wallets
- Global Solutions
There will be no other options for incumbents to integrate into the evolving mesh than to provide API’s to access information and services and to start to rely on others to provide crucial information. Self contained and closed financial services companies as well as local solutions will increasingly face headwinds.
- Open Banking / API’s
- Global solutions
Last but not least – user interfaces will become much more natural and transparent. The users will be amplified with new sense and access to information supported by intelligent agents.
Regulators will start to come up to speed with the changes. They will find ways to agree with business changes but also ethical standards across borders acknowledging the global nature of digital eco systems. A big challenge will be on the very old tax systems which are not ready yet for the shaping economy.
These changes are fundamental – there is a ongoing paradigm change where inherent distributed digital approaches start to outperform the automated legacy processes. There are two big dangers out there
Many of the current developments seem to turn time back and bring up systems again which were used in the past but difficult to apply as physical distance was a limiting factor. Digital changes this – the world becomes some sort of a global village. Have a look at Yap, The Island Of Stone Money – the first productive blockchain system.