By focusing on operational excellence, a path to creating value for their customers, banks could build customer loyalty, increase earnings while reducing fees charged to recover transaction costs.
If you look out the window of the banking industry, you will quickly realize that banks are focused more in creating wealth for their employees and shareholders and perhaps not working hard for creating value for their customers. And shouldn’t it be the other way around?
So what do we mean by value creation for our customers and how can banks create value? Michael Treacy and Fred Wiersema in their article titled ‘customer intimacy and other value discipline’ published in the Harvard Business Review talk about companies that grew to become power houses in their respective industries, by pursuing one of three paths to attain market leadership. And clearly, there are no two opinions that organizations, regardless of the industry affiliation, need to create value for their customers to attain market leadership by choosing to focus on one or more of three value disciplines namely: Product Leadership, Customer Intimacy and Operational Excellence.
Let us examine how serious are banks in pursuing the three value disciplines to attain market leadership.
Lean thinking requires focusing on four issues in order to eliminate waste:
However, most banks are unlikely to consider this path for value creation. Why would banks revisit the capacity in order to eliminate waste, when they have an easier option to coerce their customers to pay for every activity undertaken with the bank? And at times the charges so outrageous that depositors end up getting no real return after adjusting for inflation and transaction cost on their account.
The question banks need to ask- Will tomorrow’s customers place their money in deposits for no real return? Is it not time that banks consider creating value for their customers or get ready for mass defection.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Shekar Ganesh, formerly a senior banker from Asia, is an independent consultant providing training to bankers in credit and relationship management. He is also a consultant for leadership and management.