Aside from joining forces last month with Google Wallet, and turning retail payment systems on its ear, Citi is turning retail banking inside out. It is in the process of redesigning every one of their 700+ branches across Asia, calling their branches ‘stores’, where consumers shop for and buy financial services. And it has engaged the guys who designed the Apple stores worldwide to do this. Francesco Lagutaine, CMO for Citi Asia Pacific, shared more about what is driving this change across Asia Pacific. We talked about Citi’s approach to innovation:
Rafe Ring: Innovation is a nebulous term – how does Citi define ‘innovation’?
Francesco Lagutaine: Innovation is applying creative thinking to solving business problems. And there are different types of business problems. Some are problems that are about internal processes, but we are concentrating most of our ‘innovation efforts’ on this… ‘start from the consumer in – as opposed to from the bank out’. And we are relatively lucky as a company - our production line is very short - we create and sell financial products and have the luxury of focusing our creative thinking clearly on the customers that we serve. Even when we do process engineering to drive productivity – and we do a lot of that – we start by looking first at the customer experience that the process is actually affecting, and looking at it differently to improve that experience.
Rafe Ring: How important is the relationship between technology and innovation?
Francesco Lagutaine: One of the most common misconceptions these days is that one equals the other. There’s certainly strong correlation between the two, but I think that innovation is different from technology. Even though technology opens up a world of potential, innovation is not about applying technological solutions, and not even necessarily applying new solutions. It’s about applying creativity in doing things differently, to get a better result.
Rafe Ring: When it comes to doing things differently, does Citi have a defined process you use to approach innovation, or is it more organic and evolving?
Francesco Lagutaine: It’s more organic in Citi - innovation has been at the core of our DNA for a long, long time. So innovation and the ability to look at our business in novel ways is a trait we look for in people joining the company. So it’s not having a few involved in innovation while everybody else just goes about the usual business. We look for innovation from everyone. That said, we also have a team based in the US – sort of an innovation lab – that looks at things in the future – new technologies, new companies, new trends, new needs from a customer’s point of view.
Rafe Ring: Tell us more about this global ‘innovation lab’?
Francesco Lagutaine: We recently moved this group from New York to Palo Alto. A financial organisation like ours has active relationships and partnerships with many technology and application companies. And that’s one reason for the group to move to Palo Alto so that there’s more daily contact with these companies. This is a relatively small but very senior group with a background in working with innovative companies. They are thinking at least a year ahead of where we are now and looking at trends and small companies creating innovations, and what impact that could have on how we do business. The group doesn’t just sit in their California offices; they actually come out and work in the regions. For example if they identify something interesting, they come out to the country or the region and work with our business people to see if it is really worth pursuing. If it is, then they work with Citi people to bring the innovation to life. That was how Smart Banking was created.
The innovation group decided that Asia would be the best place to develop this new retail banking model and it was piloted in Japan at the Nihonbashi branch. It’s a very interesting model. They were able to isolate an idea that looked at how technology would allow us to serve our customers in a more seamless way, by connecting everything we do and to cut significantly the number of process steps that our customers have to go through from the time they decide they want to buy something to the time they own it. Then we were able to very quickly take the Japan pilot and replicate or adapt across the entire region. This new model has already gone back to the US and implemented there.
Rafe Ring: How was that decision made? How did Citi measure your success and make the decision to roll out the model across Asia and US?
Francesco Lagutaine: Innovation in service is all about delivering a better customer experience. So anything that makes the life of our customers easier and delivers a superior service is a successful innovation. And there are financial implications so innovations have to make us more nimble and generate greater returns for the bank. But again, the decision is not driven by a financial equation but that desire to build relationships and create engagement with our customers. We’ve been tracking customer feedback and response to our Smart Banking in Japan and around the region and it has been very positive. In Japan we noticed an upward shift in business indicators - visits in branch, ability to sell and cross sell to more people, etc. Ultimately, the one statistic that really indicated the success of this innovation was our ranking in the Nikkei Index of Customer Satisfaction. In Japan two years ago we were ranked number 57. Last year we ranked number 1.
Rafe Ring: How are your competitors reacting and responding? Are they trying to duplicate, replicate, ‘out-innovate’ Citi?
Francesco Lagutaine: The financial industry is incredibly competitive, so no competitor sits back and applauds. There are certainly a lot of emulators, but we’re confident that our Smart Banking approach is not simply a cosmetic innovation - not just a different look and feel. It’s not even just using touch screens to create a better browsing experience. It is actually linking all the aspects of the sale cycle, and making sure customer’s experience in browsing, exploring and buying is enjoyable. Service innovation actually goes much deeper than technology. It includes our processes, our systems, and our technology architecture. It will take time to copy. I’m sure that every single competitor is looking at what we’re doing and will come out with something that may look like what we are doing. Some are already changing the customer-facing contact using touch screens. But the rest of the sale cycle takes longer to develop. We’re determined to stay ahead of the curve and continue to innovate at every stage. It will be much harder for others to catch up.
Rafe Ring: Financial institutions are risk averse. Risk aversion and innovation are uncomfortable bedfellows – how does that impact on the innovation process?
Francesco Lagutaine: It’s true that financial institutions are conservative by nature and risk averse. Financial institutions are also heavily regulated, as they should be. This means that a greater degree of care is needed in bringing new ideas to market.
In order to capitalise on the phenomenal growth of consumer markets in Asia, and the opportunities that new technology is offering, for us the greater risk was in not acting. We needed to quickly and responsibly activate all these innovations. Until a few years ago, Citi had a big disadvantage in an industry that was driven by brick and mortar branches. We are a foreign bank and in some markets we’re regulated in terms of the number of branches we can have. Even in markets that are more flexible, there are limits to expansion and significant costs involved. Now we’re able to create greater connectivity and invest more in alternative stores because we don’t have the legacy of an extensive branch distribution model that is a cost in a balance sheet. We see this as a great opportunity.
Rafe Ring: As a marketer what was the biggest single challenge you faced to bring these innovations to market?
Francesco Lagutaine: It was to think of our business as retail and not as transactional financial services. It was a fundamental shift in the way we approach our relationship with our customers, and it needs to be an idea that grows bottom up. It has to be seen as an incredibly powerful competitive advantage, at every level, at every touch point. It was interesting, I visited our first Smart Branch in Sydney Australia in its first week. I walked in as a customer, browsing, because I wanted to see what was happening. I could see that our people were incredibly excited to be working in that environment. Enthusiastically greeting customers coming in. You could see they weren’t going through a script, they were genuinely enthusiastic - and that enthusiasm was contagious. When you talk to someone who loves what they do, it's hard not to be affected by that. The level of engagement staff were getting from the customers walking in – it was phenomenal.
Rafe Ring: What advice would you give senior managers who want to create a culture of innovation in their organisation?
Francesco Lagutaine: It is a difficult challenge. It requires structures that give people space to think, and room to fail. You need to give people the ability to come up with the solution, fine tune and refine it. When you do something that you’ve done for 25 years, every time you do it, it has to be perfect. But when you are trying something for the first time, you probably have to improve it along the way. It’s not going to be perfect the first time. This is a fundamental shift from an organisational perspective that you need to have. The even more difficult part is you have to have individuals who are capable of thinking creatively and at the same time able to transmit that enthusiasm for innovative solutions. Most important, you have to have brave leaders who will not just take the risks but show enthusiasm about those risks. That’s the human part and that is the hardest to replicate. I’ll give you a great example. I’ve worked in Citi for over six years and not once have I heard the line “that’s not the way we do things here”. And that goes to the root of innovation - the ability to throw an idea out there that may sound crazy but maybe, just maybe, it may work. That’s how we approach innovation. We have structures and programmes that celebrate success but invariably our success has been - and will continue to be - through innovation. It’s part of our business life.
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