In late 2022, as the US unemployment rate hit a nine-year high, bank executives met to discuss changes in their strategy. Some reported that they were de-prioritizing digital transformation in favor of cost-cutting. One executive told me that while he still supported innovation, it would have to wait.
Pausing Innovation
This was on my mind when reading this article about Nike’s innovation woes. In the article Matt Powell, advisor at Spurwink River and senior advisor at BCE Consulting, is quoted, “What happened with Nike, and lots of brands during the pandemic, was they made a decision to play it very safe.”
Many banks seemed to be doing that in the past two years, despite accelerating innovation during the pandemic. We haven’t moved into a recession but like Nike, “they (have) essentially shut down their innovation engine.”
These banks should beware that even an organization that has innovation in their
DNA, like Nike, is now having a hard time going back to their old ways.
Cost Management
The myopia exhibited by organizations single threading their strategy is breathtaking. The reality is that organizations that are successful in innovating, and transforming their business models, include cost management in their main capabilities.
In an article about cost management from BCG, the consulting firm notes that “corporate leaders are making better cost management a priority as a hedge against ongoing economic, financial, and political uncertainties.”
They go on to describe a holistic approach to cost management that goes beyond simplistic layoffs that may ultimately hurt the organization. They present a series covering five elements for successful cost management. Readers should check it out.
Along the same vein, I stumbled into an article in the Harvard Business Review by Paul Goydan and Kevin Kelley. Like the BCG piece, Goydan and Kelley talk about taking a holistic approach to cost management.
They recommend “five critical actions that CEOs and other executives can take to tackle cost challenges. Collectively, these measures help organizations sustain efficiency and redirect resources to invest in innovation, promote growth, and capture value.” Ultimately, they recommend not to wait until tough times, whether a pandemic or a soft economy.
Innovation Gap
One of the continuing concerns I have by the lack of commitment for innovation in many banks is the growing gap between digital leaders and everyone else. In my estimation, digital leaders consist of the national banks, particularly Chase and Bank of America, a small number of regionals and community banks, and a few credit unions.
When organizations go from trying to innovate to cost cutting to chase the latest shiny tech and back to innovation they won’t do any of these things well. Organizations should have an overriding strategy and many of these actions should be part of the strategy, except for the chasing the shiny tech.
The latest example of this growing gap is Bank of America’s announcement of a “massive update” to its mobile banking app, combining banking, investing and retiring into one unified app.
While many CIOs talk about the future of mobile banking being a super app, like the Chinese WeChat app, BofA’s team has moved to unify their five apps into one (Bank of America, Merrill Edge, My Merrill, Bank of America Private Bank and Benefits OnLine).
A decade ago, I presented such an idea to my executive team. There were too many barriers, and the organization didn’t have the desire to address them. And so, the gap widens. By the way, if you are looking to tackle that gap let me know.
I’m afraid the lack of strategy will continue to hurt banking organizations that just go from one thing to another, aimlessly. Innovation and cost management aren’t mutually exclusive options. A balanced strategy can, and should, have both as strategic objectives driving an organization forward.
A version of this blog post was published on LinkedIn, here.