Most of today's Big Banks are akin to Super Tankers not from an efficiency point of view but from a mindset point of view.
Understanding need for a Super Tanker :
Super Tankers are a by product of a spark that innovative entrepreneur Malcolm McClean started. A good starting point to understand is here . Malcolm was a real disrupter who saw things differently from others. From their initial days , Tankers have come a long way. They were one of the principal reasons why Globalisation really took off. From a mere 100 million metric tons , they are responsible for shipping 1.5 Billion million metric tons by 2012. All of this is good.
So what lies in the core of this and what we can learn.
The heart of Containerisation is standardisation. If you are into jargons, Intermodalism. Malcolm paved the way for carrying goods in safe containers and this got adopted quickly. In 1960s ISO stepped in and standardised the containers into two categories. 20 feet containers termed as Twenty Feet Equivalent (TEU) and 40 Feet Equivalent or 2 TEUs.
This standardisation has its own adverse effects too. An entire thriving industry of Dock workers who made a living loading , unloading , sometimes accused for disappearance of valueables too was made redundant.
Here is a new age Industry which brings us toys from China, Cigars from Cuba, Cheese from France etc etc and makes it available in the next door supermarket. A tanker
Now Super Tankers are the way to move things from A to B in a repeatable , consistent and cost effective way. In our context, they represent Big Banks which have become big elephants.
So what has this got to do with Big Banks ?
Big Banks evolved from their days to be Industrial scale efficient through standardisation. In initial days they had armies of staff talking to people, getting their deposits, giving them loans, processing word documents etc etc. Efficiency was driven mainly by division of labour.
Then it was the dawn of Computer era.
Banks automated their AS-IS process using computers. There was really no innovation at this point because there were lot of efficiency gains through sheer adoption of computers. All was well. Monstrous Core Banking engines were built. When it was difficult to change or add new features, new systems were added out side these core engines. As years passed by layers and layers of systems were added. More personnel were added to keep these running. Banks were happy thinking they have robust standardised ways to doing things.
Banks became Super Tankers with containers for different businesses. There were/are Payment processing containers, Trade Finance containers, Debit Card containers, Credit Card containers. There were containers for everything with Core Banking engine carrying the heavy loads sailing slowly. Containers have a world of their own. Locally Optimised. Risk minimised. Robust etc.
Then came the age of outsourcing. Outsourcing for cost-only reasons delivered results for a period of 10-15 years. Since the guardians of the systems could only focus on keeping the lights on there were no revolutionary innovation that happened. All those who could do stuff become architects priesting what could be , mostly what could not be done.
What about Speed Boats ?
Let's take a pause here and take a look at Speed Boats.
Speed boats are built for agility. Speed boats cannot carry huge loads and travel for long distances.
In our story , they represent businesses which can move at incredibly faster speeds. If speed is your objective, you need powerful engines. Old squeaky steam engines are not going to be of use.
A threat that started with simple and cliched question "If Google, Amazon, Facebook or Apple become a Bank" has become real in the last two years. Interestingly none of these companies have shown keenness to become banks. Rather the Digital revolution started off by these , and other innovative companies, is redefining our very view of what Banking is and what it is not.
You can refer to a good list here. These disruptive innovators are real speed boats. They can travel at the lightening speeds. Since they do not have any legacy baggage, their business models are sleek and focused towards achieving few things. Perhaps this an unfair advantage that they possess over the big banks.
Few key attributes of this "Speed Boat Business Models" :
1. Known only for one or at the maximum 2,3 things
2. Understand the customers instead of just knowing
3. Digital business model and not Digitisation of an existing business model
4. Systems built with data at the core
5. Technology is business. It is no longer just an enabler
This is the age of instant gratification. Speed need to be core of what you do. If your business model cannot promise speed and reliability, there are other SpeedBoats waiting to disrupt you.
Few core arguments of "Super Tanker Business Models"
1. Complexity
2. Too big to fail
3. Too many regulations
4. Important part of the society
5. We have weathered several such storms
6. We will adopt these technologies
Most of the Big Banks have started multi-million pound Digital initiatives. This ranges all the way from Revamping their channels/marketing [all of them] to transforming their core systems [few of them] to starting Digital Banking offshoots [BBVA - Simple].
Many often people confuse between Digitising an existing business model and creating a Digital model. The key is to move to the latter.
Lets discuss more about the SpeedBoat Business Models in the next post.
References & Acknowledgements:
http://www.worldshipping.org/about-the-industry/history-of-containerization
http://www.statista.com/topics/1367/container-shipping/
https://www.youtube.com/watch?v=KGAW6NuKdms
https://www.youtube.com/watch?v=-9gfB2N5aN0
http://paleobiology.si.edu/dinosaurs/
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