June 3, 2010
Events & Sponsorships
A Shared Wrong View
In his book The Age of the Unthinkable, Joshua
Cooper Ramo notes an observation by a Nobel Prize
winner that "big science"—multibillion-dollar
programs—almost never produce meaningful
discoveries. The notion is that scientists accept
a "common picture" of how things bind together, which
the author characterizes as a "shared wrong view" or
more simply, a delusion. One of my Nolan senior
executives has long classified this phenomenon in
financial services as "honest wrong beliefs." It is a
tricky area to consult clients on since discovery must
be absolutely documented and quantified to be
For example, many senior executive teams believe
that their branch networks are the backbone and key
interface with their customers, but many banks are
selling more than 50% of their retail and small
business new products through alternative channels
at a lower cost. Some management teams still
believe that human interface and attention is what
their customers want. In fact, 70-80% of inquiries are
either electronic or Web-based. With the advent of
mobile banking, we see the percentage increasing in
the near future. Excellence in banking does not need
to be about more human interaction with the
customer; it needs to be about making the service
(human or electronic) easier and more convenient.
Another area where there is a possible common
wrong belief is on cross-sell ratios. Many marketing
executives focus on this as an area of improvement
and, if designed effectively, it may be a good area for
revenue growth and anchoring valued customers. The
fact is, there is evidence that, in many banks'
unprofitable customer segments, the number
of products per customer is as high as or higher than
that of the most profitable customer segments.
This leads us to believe that a purely sales focus may
lead to higher cost when incentives are included for
those campaigns if not properly targeted at
break-even customers who will become profitable
new product or service.
There are honest wrong beliefs in nearly every
company that limit organizations from realizing true
profit potential. Why else would banks in the same
market with similar products and the same labor
pools have wide gaps in profitability? There is no
crime in having strong beliefs, only in limiting your
search for breakthroughs based on those views.
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