"The biggest profit center at banks is customer ignorance, which banks have mistaken for customer loyalty."
— Gary Hamel, speaking to 1,000+ bankers at BAI's Retail Delivery Conference, Nov. 15, 2006
I've always been a sucker for management-guru speakers. I can still remember Tom Peters speaking at a sold-out show in Peoria, Illinois, back when I was a wet-behind-the-ears management-trainee for Caterpillar. It was 20 years ago during the height of "In Search of Excellence" mania and it helped me realize a lot can be done to improve business performance.
So every year I make it a point to sit up front when BAI trots out the guru-du-jour to inspire the banking crowd. This year, it was Gary Hamel, a Harvard guy that, I'm sorry to say, I hadn't heard of prior to Wednesday (see the End Note for a summary of his recommendations presented to the BAI crowd).
But man did he grab my attention with his challenge to the assembled bankers and tech-company reps (see quote above). He believes banks are vulnerable as customers become better equipped to compare the price of various financial services, a natural role of the Internet.
The importance of switching tools
Hamel believes financial services loyalty will disappear once customers discover how easy it is to move their accounts to pick up a hundred basis points on their savings rate, or avoid $35 overdraft fees.
In his BAI presentation, Hamel pointed to U.K.-based uSwitch <uswitch.com> as an example of a new tool to help financial customers compare and switch banking accounts (we'll profile it in an upcoming article).
As Hamel was delivering his keynote, Intuit was busy in a nearby Mandalay Bay eatery briefing analysts on its new account switching service, scheduled to go live December 15. The clever service is built on the Teknowledge aggregation engine acquired last year (data sheet here). Intuit's service is similar to Yodlee's service announced in September (see our coverage here). We'll be covering it in more detail as it goes live.
End Note:
Hamel's management philosophy
I have yet to read Hamel's books, but what he talked about Wednesday could be boiled down to the following:
- Employees shouldn't be "managed" they should be "led."
- In practice, he'd like to see nearly all management eliminated and replaced by small, self-managed teams working to achieve company goals.
- As much as possible, teams would make their own product, pricing, and staffing decisions.
- Compensation would be highly dependent on the team's results in achieving the ambitious profit goals set for them by the company.
- His examples: Whole Foods, W.L. Gore, and Google.