The document discusses potential game changing ideas for reshaping the banking industry. It presents 5 ideas: 1) Change decision-making processes to trust experience and intuition more. 2) Become obsessed with understanding customer demand rather than just supplying products. 3) Adopt customers' best practices. 4) Manage product lifecycles better and embrace planned obsolescence. 5) Embrace regulation as an opportunity for differentiation rather than just focusing on deregulation. The overall message is that the banking industry needs innovation and new approaches to differentiate itself in the future.

1. By
Frederick C. Militello, Jr.
Senior Thought Leader
Future Change Management LLC
www.futurechangemanagement.com.
fmilitello@futurechangemanagement.com.
Tel: +1 518.634.7003

2. GAME CHANGING: SETTING THE STAGE
The banking industry is beginning to rethink and reshape itself.
Newly articulated commercial/corporate, investment and retail banking re-
organizations are beginning to emerge.
The quest for a renewed sense of innovation and business differentiation is in the air.
The verdict on the future of achievable and sustainable differentiation for members of
the banking industry is still out.
Moreover, it is far too premature to begin conjecturing as to whom the winners and
losers will be.
But clearly, regulatory reform, bank performance and public opinion have changed
the game of banking.
Accordingly, it is time to offer—and consider—game changing ideas that will reshape
our industry for some time to come.
This is the spirit of this presentation…to inspire conversation about such game
changing ideas and practices.
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3. Change the focus of decision-making—put
more trust in experience and intuition
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4. BEYOND COGNITION
When it comes to leadership, banks that go beyond cognitive decision-
making will trump those who fear the human element of their business
decisions.
A game changer of the future is to re-examine—and change the focus of
decision-making processes (both those accepted and rewarded) of the
organization.
Cognitive decision-making—as embodied in decision-trees, trade-off models,
etc.,—may seemingly bring objectivity and simplicity to the table but they
leave out the importance of experience and resulting intuition.
Accountability for one’s decisions can only come about through a
recognition and reconnection to our emotive selves.
In almost every profession, except banking, decision-makers readily admit
that their most difficult (and rewarding) decisions are based upon
experience, intuition and emotions.
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5. EXPERIENCE TRUMPS
This reliance on objectivity over experience (and its implied links to intuition
and emotions) is reflected in a growing imbalance of experience/skill
diversity in the banking profession.
Put another way, emotional intelligence (comprising such competencies as
trust, teamwork, communications, and self-awareness/discipline) has
increasingly been sacrificed for a bias toward cognitive thinking and skill
acumen.
In fact, experience has been more than sacrificed—it has been intimidated
out of existence or relevance. For example, rogue traders have no heroes
accept themselves—experience and respect for such matters little.
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6. CHANGE THE GAME
Here is a real game changer for you.
Bring experience and intuition back into your organization.
Celebrate your heroes—both those with skills and experience and
especially those that seek to bridge and/or nurture the two.
There is a hidden workforce out there—a workforce of experience
that has much to offer in terms of helping to create organizations
with greater emotional intelligence and experiential grounding.
God only knows—we need more of that!
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7. Become a demand-obsessed
financial organization
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8. BEYOND SUPPLY
A real game changer of the future will be found not in supply efficiencies—
and lower prices—but instead in capturing preferred segments of
customer demand; customers which promise to become even more
scarce and discriminating as to who they choose to do business with.
In the future, differentiation will not be driven by what we internally choose
to supply but instead in how well we respond to the external realities of
what our customers demand.
The obsession with demand (expressed by and through the customer’s
value chain) must become integral to the customer relationship, product
development and sales strategy of financial organizations.
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9. VALUE TRUMPS
We will earn economic returns from customer relationships when we
understand how we create value for our customers—and that’s
about their business circumstances—not ours.
“Forget” about your sales quotas and agendas. You will sell more
products than you ever dreamed of when you stop selling
products and become obsessed with customer demand—
specifically, the customer’s value chain and the role your
products, services or advice play in the customer’s value-creation
process.
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10. CHANGE THE GAME
Regulations will make it more difficult for organizations
to achieve differentiation through economies of scale.
Systemic risk will be mitigated through market and
supply fragmentation.
These realities will lead to a new mantra of demand-
driven differentiation—which is a function of building
demand-driven organizational cultures that embrace
both skills and behavioral competencies.
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11. Become more like your
customers—adopt their
“best practices”
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12. BEYOND CREATION
When it comes to products and services—and their risk-
taking and reputational implications— banks that
embrace the importance of product life cycles,
product suitability and planned product obsolescence
—relative to their obsession with customer demand—
will trump those that continue to pursue diminishing
profit-margin product lines.
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13. CHANGE TRUMPS
Bankers have a tendency to take great ideas and stretch the limits of those
ideas to—and even beyond—the boundaries of non-greatness.
We are dealing with a culture that won’t allow us to let go of what we
create—regardless of the damage that may result from our
possessiveness.
Our “love” for our products has become totally unconditional—and blinded
by such. For example, securitization was a real game changer—and for
the better; but our inability to move on to something new (even while it
continued to display success) is not part of our culture. This must
change.
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14. CHANGE THE GAME
When it comes to the development and/or sales of products and services,
incentives must be changed.
Product life-cycles must be incorporated into investment/return analysis.
Segmentation analysis must take into account changing product life-cycle
characteristics—appropriately addressing changing product lives and
their economic returns—not by blind expansion into areas of increased
opaqueness; but, instead by the increased transparency that comes
from knowing our clients; and, the correlations that exist between risk
appetite and the eventualities that come with product life-cycles.
The passing of our products should be met not with a sense of dismay—or
worse yet financial crisis—but instead by celebratory achievement.
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15. Make risk awareness
cultural—not
functional
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16. BEYOND MISTRUST
Knowing the client better than anyone else has a great deal to do with
understanding customer circumstances and needs.
Rather than mandatory terminations of relationships or “tours of duty”—a
practice of many banks fearful that bankers will get too close to their
customers—we must encourage the opposite.
Banking is a personal business—taking people out of the equation—and
failing to build organizational and personal trust—is a clear way to further
commoditize the importance of business relationships.
Failure of trust—especially the mutuality of such—also leads to non-
accountability and the dangers of isolationism.
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17. CLOSER TRUMPS
When it comes to risk management, banks that diffuse risk
awareness throughout their organizations will trump those that
continue to compartmentalize such—namely, viewing risk (skills
and awareness) as a product area or special expertise; rather
than part and parcel of organizational culture.
Bringing credit closer to the customer is not something to be feared.
It should be embraced as part of the customer relationship
process.
Externalizing/outsourcing credit decisions simply does not make for
better customer relationships, credit decisions or a sounder
financial system.
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18. CHANGE THE GAME
A game changer of the future is to take down the silos of risk and re-
introduce risk awareness into the competencies and behaviors of all
those who should be bankers first and salespeople second.
Relationship managers frequently receive more sales training today than
they do credit training.
But the problem is we are selling risk-inherent solutions in everything we do;
and, not fully understanding this is why we can’t sell value—and, equally
important, get paid for it.
We must learn how to sell risk solutions by understanding how our products
relate to the risk sensitivities of the client.
This is a game changer—namely, sales and the sales process is not separate
from risk awareness. Knowing when to sell flexibility—or not—is key to
both increasing risk awareness and increased sales.
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19. Embrace the
competitive benefits
of the blue waters of
regulation
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20. BEYOND DEREGULATION
If there is anything the financial crisis of 2007/2008 has taught us
it is this; banks do not do well with de-regulation—or markets of
open space.
When it comes to strategy, banks seem to do much better
positioning—differentiating—themselves in regulated rather than
deregulated markets.
In de-regulated markets, banks tend to follow each other—over the
cliff if need be.
This is a key cause of systemic risk—it is based in psychological
behavior as much as market dynamics.
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21. REGULATION TRUMPS
Ideologically, like it or not, regulatory positioning will largely
determine bank differentiation—namely, which spaces or arenas
banks operate and compete in.
Moreover, it is within those spaces banks face the requisite
challenge of shifting from supply-mindedness to a world of
demand scarcity and discrimination.
Not all will succeed; however, differentiation will surface and
systemic risk will be deterred through regulatory “inspired”
differentiation.
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22. CHANGE THE GAME
Regulatory-driven differentiation is in our future.
A game changer is not to primarily focus on regulatory arbitrage;
but, instead in embracing those regulations that best allow you to
practice and demonstrate your core competency—the areas
where you can best employ your capital, for the longest period of
time, without the threat of competition.
Moreover, make sure your practices support the reasoning behind
such regulations—as sustainable differentiation is helped—not
hindered—by regulatory intervention.
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23. GAME CHANGERS
1. Change the focus of decision-making—put more trust
in experience and intuition
2. Become a demand-obsessed financial organization
3. Become more like your customers—adopt their “best
practices”
4.Become more like your customers—adopt their “best
practices”
5. Embrace the competitive benefits of the blue waters
of regulation
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