Popular speaker and 'trend hunter' Jeremy Gutsche says banks need to reinvent themselves in difficult economic times by 'obsessing' about customers.
by KENNETH CLINE
Just when bankers thought they were finally emerging from the 2008-2009 financial debacle, new turmoil descends in the wake of the U.S. debt downgrade and Eurozone crisis. Now, more than ever, bankers may want to take a close look at the old ways of doing things and figure out how to reinvent their institutions for the new normal.
Helping to move that conversation along is Jeremy Gutsche, author of the book Exploiting Chaos: 150 Ways to Spark Innovation During Times of Change and founder of the popular Web site Trendhunter.com. A former banker himself (with Capital One), Gutsche will appear at this year’s BAI Retail Delivery to advise bankers on how to transform their business and re-engage with customers.
We recently visited with Gutsche to get a preview of what he will talk about on October 13 in Chicago. He pointed out that some of America’s greatest companies were launched during economic downturns because that’s when “consumers start to re-evaluate what’s important to them.” Bankers, he said, should “tremendously obsess about your customers and really try to understand how their needs are evolving.”
Q: Your book Exploiting Chaos describes how companies can use periods of crisis to innovate and reinvent themselves. The banking industry has certainly been in a period of crisis since 2008 and is still struggling. Is this a good time for banks to re-think old ways of doing things?
Gutsche: If you look at successful companies like Apple, General Electric, Hewlett Packard and Fortune magazine, they were all created during periods of economic downturn. The reason is that, during such periods, consumers start to re-evaluate what’s important to them. They still buy things but they re-think what’s important to them and why.
The same with banking. Companies that have the alternative products and are a little bit more innovative in staying on top of consumer trends are going to be a little bit more appealing. Secondly, during the last four years, consumers in North America or around the world started a period of what we call “next besting,” where you start looking at the next best alternative in almost every aspect of your life, whether that involves your phone provider, housing situation, automobile or fashion.
Now is when consumers are actually willing to make the switch in more than one product category, including something like banking, where otherwise, they could often be satisfied for a decade with the same bank. So to sum up, there are two powerful trends at work: one, people are changing what’s important to them and two, they’re willing to try alternatives. That means now is when your competitors can steal away your customers, or you can steal customers from your competitors.
Q: Any thoughts about how bankers should think differently about their business, given that scenario?
Gutsche: Once you recognize that you’re in a period of turmoil, the next big thing to do is to tremendously obsess about your customers and really try to understand how their needs are evolving. One of the biggest challenges bankers face in terms of consumer faith in their industry is that banking is a very technical industry. When bankers talk about products, whether it’s a credit card, bank account or mortgage, they start to use a set of terminology or lingo that keeps distancing them from their customers. They forget that customers just want to finance a new car, house or whatever and don’t really understand all the different terms.
I remember that when I was at Capital One how easy it was to get caught up in all those numbers so that you forgot what the consumer actually needs. So we set up kiosks in places around the country, like malls, where people like myself, the heads of advertising, credit cards, etc. could talk to people as we took product applications. The point was not really to sell products but to better understand what people were looking for.
To give you examples from other industries, the editors of Fast Company magazine called subscribers to see why they were cancelling subscriptions. The CEO of Continental Airlines would fly coach to see what the service was like. And the head of design for General Motors once went to the worst neighborhood in Detroit to ask why people liked the Cadillac Escalade, which is an icon in the hip-hop culture.
When you do things like that, you get a truer understanding of what the customer thinks is very cool about your product and what’s not. You can get away from all of that terminology and lingo that you use in the office that complicates how an actual person thinks about what it is that you’re doing. That’s important because people have a very different view of banking than they did five years ago, in every category of banking. You end up with a class of managers and executives who are quite distanced from what people today are seeking in financial products.
Q: What about mobile banking? Do you see that as an area of innovation for banks?
Gutsche: It’s interesting to see the wave of innovation that is happening in the wonderful world of mobile. There’s part of me, as a developer, who thinks some of it is a little bit over-hyped. At the end of the day, it’s just another platform for existing services. The barriers for entry are very low so everyone will end up doing it. But from a consumer standpoint, at the end of the day, do I really need to be able to do a big transaction from my phone or do I need to go into a branch? If branch banking was Banking 1.0 and online banking was 2.0 then mobile banking is like 2.1.
Q: Having once worked for a financial institution, Capital One, you’re well aware of how siloed the industry can be. How can banks break down those barriers to become more innovative overall?
Gutsche: One thing I learned in banking was that “culture eats strategy for breakfast.” To fight that you need to create a culture of innovation, to get people to work together through these things. That requires a situational perspective, where you get your whole team aligned against the problem you’re trying to solve. You also have to give permission for failure so people are free to experiment and try new things.
Mr. Cline is managing editor of BAI Banking Strategies. He can be reached at firstname.lastname@example.org.