What retail bankers can learn from Microsoft

In a previous blog post, I stressed the importance of sustainable banking to restore the consumers’ trust in the banking industry, especially from the biggest banks that are considered to be too big to fail. In this blog post, I will focus on the biggest event this month and the giant that many critics want to fail. Naturally, I am referring to Microsoft.

I will use the frame work developed by the acclaimed author Jim Collins from his book “How the Might Fall” to show how Microsoft defies gravity and that Apple is the exception that proves the validity of the model. The purpose is not to compare the two companies. There are zillion authors, all with more insight than me, that already have done that. In this blog post, I will present five key success factors that I think contribute to Microsoft’s outstanding ability to adapt and overcome. Given the imminent take off in mobile payments, I hope that the lessons learned may be applicable to retail bankers that want/need to adapt and overcome in a new financial ecosystem.

Jim Collins earned recognition for his book “From Good to Great”. His most recent book, “How the Mighty Fall”, is based on the development of corporate giants that went from stars to oblivion. He identified four stages that all these failures passed on their voyage to their demise.

During the initial phases, the mighty company experience soaring stock prices and but do not understand that they are getting trapped in their own success.  When they realize they have peaked, they grasp for salvation through bold acquisitions and new charismatic leadership. Those of you that have read the Steve Jobs biography know that Apple were in stage four when they acquired Next to get Steve Jobs back. But, as Jim Collins argues in his book, the model is not pre-deterministic. Steve Jobs really proved that there is no fate, but what we make for ourselves.

Looking at Microsoft, critics would probably argue that Microsoft has passed both stage one and two. But they have to give Microsoft credit for their uncanny ability turn the entire company around when the industry experience disruptive technology shifts. We have all heard the stories about when Bill Gates sent the “Internet Tidal Wave”-memo to all his executives and subsequently refused to take any meetings with them unless they talked about how they intended to embrace the Internet.

The big announcement staged by Microsoft last week was impressive. With the new Surface-device, they showed that they recognize the shift from desktops to tablets. And, most importantly, they showed that they have a serious contender to Apple’s iPad. Personally, I would argue that the Surface leap frogged the iPad, but that is beside the point I want to make in this blog post (click here to judge for yourself).

When reading the buzz regarding Surface, I recognize some interesting patterns. I have identified five themes that often are mentioned when Microsoft disclose information on the “the-making-of” breakthrough solutions. These themes resonate with the latest management thinking and may very well serve as guidelines to companies that want to hone their abilities to adapt and overcome.

The five themes are:

  1. Only the paranoid survives. Andrew Grove, CEO at Intel, has identified the cure to phase three in the model on how the might fall. You cannot become complacent. You have to be paranoid to find the next competitor or disruptive technology early. If applied to retail banking, you should not rest assure that the current stalemate between the big four will prevail. What happens when Google enters the mobile payment arena and introduce peer-to-peer lending?
  2. Entire solution. In the famous book “Crossing the Chasm”, the author argued that innovators have to address the entire solution when they want reach the mass market with new disruptive technology. That is what Microsoft did with Surface. They realized that they had to build the hardware themselves to provide the optimal user experience for their new Windows 8 operating system. Most bankers claim that IT is banking but how many banks have formed strategic alliances with technology partners to develop entire solutions that provide innovative customer experiences?
  3. Embrace and extend. In a stroke of genius, Microsoft presented the Surface device and explained that it is a slate AND a desktop at the same time. Thereby, they embraced the slate phenomenon (iPad) and extended it to be a desktop that Microsoft dominates. When looking back at the internet banking trend, it is depressing to see that it is just recently that Skandia have extended on-line banking with on-line advice.
  4. No holy cows. When reading the Steve Jobs biography, it is evident that there has been a feud between Steve Jobs and Bill Gates on whether to provide an open or a closed solution. With the exception for Xbox, Microsoft has focused on software that they license to hardware vendors. With the Surface, they sacrificed that holy cow and will now compete with their hardware partners. Imagine a universal bank that would challenge the economies of scope in providing both retail and investment banking and potentially spin-off one of them to really focus on their customers.
  5. Skunk works. There are a number of stories on how Microsoft kept the Surface team isolated in a bunker to prevent rumors from spreading. But I do not think that is only due to secrecy. There are numerous stories from Microsoft, IBM, Apple and other companies on how they assign their best individuals into SWAT-teams, challenge them with almost impossible missions and isolate them from disturbance from the on-going mainstream business. The question is how many retail banks have established similar skunk works to develop NFC-based mobile banking solutions that will revolutionize the customer experience.

In a previous blog post, I told about an analyst at Gartner that ridiculed the CIOs at the big four banks in the Nordics that told him that they have a “follow-the-leader”-strategy. I suggest that you all take comfort from Microsoft that repeatedly has proven that you do not have to be first, if you have the ability to adopt and overcome. So, if you truly think that the only thing that is constant is change, I seriously think that you have some lessons to learn from Microsoft.

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