A banana skin may be slippery and may cause you to stumble or even fall when you Stepp on it. Hence, ‘Banking Banana Skins 2010 – After the ‘quake’  is the name of a new study from the CSFI Centre for the Study of Financial Innovation   which is sponsored by PricewaterhouseCoopers. As PwC describes it, Banking Banana Skins 2010 puts together a league table identifying potential sources of risks to banks and ranks them by severity. This year’s survey is based on over 400 responses from 49 countries.

I found the results not overly surprising, but nevertheless interesting: The number one risk seen for 2010 is political interference, followed by credit risk on number two and too much regulation on number three. Political interference made its first appearance in the banana skins table this year, whereas too much regulation was on number eight in the last survey 2008.

The study states that these perceptions of banana skins is common to all major banking regions and shared by bankers and non-bankers alike. It is shared by me too. There is no doubt that the banking industry needs a new regulatory framework, since the existing one was not able to prevent the latest financial crisis. This crisis had an extraordinary impact on the worldwide economy and at least a perceived impact on almost everyone’s personal life. Hence, there is a high public awareness and a potential pressure on governments and regulators to act quickly and decisively. This is where my personal fears come in. Banking regulation is a complex issue. Even today scientists and practitioners alike are still debating on what measures might be helpful, without any effect or even contra productive. There is a serious risk that the upcoming changes in regulation will be too fast (i.e. not well enough analysed for their real impact) and not target-orientated enough. It won’t do to make it more difficult for banks to earn money and to grow beyond a pre-defined size. Who, by the way, knows at which size exactly is a bank too big? In the end of the day, this might act as a stimulus plan for consultants and other clever folks to find ways to increase profitability despite any new regulation. We must not forget that the majority of banks still have owners who expect a particular return from their investment and who compare the profit earning potential from an investment in banks with other investments. Banks still have to compete for investments. In my view the more important (and more difficult, of course) issue is to impose a regulatory framework that monitors the stability of the whole sector more precisely and that allows to react quickly to early warning signs of potential problems.

Back to the Banana Skins Survey. It lists a league table of the 30 most dangerous banana skins for 2010 and discusses these in detail. It also compiles the top banana skins from 1998 on. This is an interesting review of the changing issues that have troubled bankers during the last years. There is also a ‘Who said what’ section that breads down results to different re-gions and respondent groups. All in all it makes an interesting reading for anyone interested in or affected by the banking industry.

The establishment of a single market for services and goods – including banking - has for several decades been one of Europe’s core policy objectives. The way towards these objectives is termed integration process. The benefit of integration is to offer new business opportunities in Europe for the banks through more competition and the option to increase returns to scale. For customers integration offers EU access to a similarly broad and fair prices range of banking products. The potential segment regarding Pan-European retail banking has been estimated with approximately 40 million customers among EU-25. Across the markets for goods and services different levels of integration has been reached. COM (2007) argues that significant progress has been made in establishing a single market for retail financial services with the introduction of legal frameworks regarding financial soundness of retail financial service providers. However, according to DIECKMANN (2006), COM (2007), BDB (2008) and SCHÄFER (2009) one of the least integrated markets in the EU is retail banking. A full integration of retail banking markets would represent “a truly single internal market for retail banking products would imply consumer demand for bank services EU-wide and provision of these services EU-wide by banks”.

DIECKMANN (2006) and SCHÄFER (2009) describe several economic benefits of retail banking integration. In general integration can increase economic welfare due to two channels. The first reason is an intensified competition on formerly national markets. In an integrated market “foreign” retail banks are able to launch banking business there at any time. In this case consumers have a broader selection of better banking products at lower prices. Secondly market integration would enable banks to realise economies of scale if they could offer their banking products across the countries of the EU. This option would lower the costs of making their banking products. Furthermore the break-even point of innovations would be reduced. Economies of scale could also be achieved in risk management, since banks could diversify their risks more in a larger market, e.g. by offering personal loans in different countries. Furthermore a better integrated banking market should improve the competitiveness of EU financial centre globally.

Continue reading ‘EU-Integration level of retail banking markets’

trendwatching.com, a leading trend firm, has just released its ‘10 Consumer Trends for 2010′. According to this trend report next year will bring a bonanza of opportunities, as even cautious consumers crave pragmatic or exciting innovations.Its argues that we will see a scene from ‘urban pride’ to ‘forced sustainability’.

The summary:

1. BUSINESS AS UNUSUAL | Forget the recession: the societal changes that will dominate 2010 were set in motion long before we temporarily stared into the abyss. And even when the downturn ends, there won’t be a return to ‘business as usual’.
2. URBANY | Extreme urbanization will lead to more sophisticated and demanding consumers around the world. Urban culture is THE culture.
3. REAL-TIME REVIEWS | Whatever new product or service gets launched in 2010, it will be reviewed in real time. Transparency tyranny (or triumph) is upon us.
4. (F)LUXURY | With status symbols becoming more fragmented, luxury is whatever consumers want it to be in 2010.
5. MASS MINGLING | Online lifestyles are actually fueling real world meet-ups, shattering all predictions about a virtual and socially isolated future.
6. ECO-EASY | In 2010, corporations and governments will force consumers to be more green by restricting the alternatives. Say goodbye to consumer choice.
7. TRACKING & ALERTING | Tracking and alerting are the new search. Next year, consumers will further expand their sphere of control.
8. EMBEDDED GENEROSITY | Generosity as a trend will further adapt to the zeitgeist, leading to more pragmatic and collaborative charity.
9. PROFILE MYNING | With hundreds of millions of people now nurturing their online profiles, 2010 will be about consumers making money from these profiles, from intention-based
10. MATURIALISM | 2010 will be even more opinionated, outspoken and raw than 2009; thank the anything-goes online world for that. Which brands will be equally daring?

The full, free briefing of consumer trends 2010 can be found on this site (pdf-file).

In the last one and a half year the financial crisis has changed the views of many people, in particular their perceptions concerning corporate responsibilities and corporate ethics. Taking this into consideration I have to stress that in some discussions I miss an important issue: The crisis’ impact on trust, no matter whether it is trust in enterprises in general or trust in banks in particular. The latter one was tremendous: A large number of banks, in particular US American banks and European banks, experienced large losses directly or indirectly due to the devaluation of securitized subprime loans at the same time in 2007 and 2008. The phenomenon has been described as bursting of the subprime bubble or very frequently as the “subprime crisis” or “US subprime mortgage crisis”, the latter one to indicate the root cause of the crisis. LAEVEN and VALENCIA (2008) called it “ongoing global liquidity crisis originated with the U.S. subprime crisis”. The crisis had major impacts on the economic system, from a loss of confidence between banks as well as from customers in banks, the latter caused so called “bank runs” in UK and nearly “bank runs” in Germany.

So what’s the matter? Trust is the fundament of our economy (and of our banking system!). To be more specific: Trust is the decision to rely on another party (i.e. person, group, or organization) under a condition of risk. This definition can be applied to persons, groups as well as organizations. And in terms of one of my favorite research objects: Trust is a very important matter for retail banking: Before customers are willing to risk their capital in a financial transaction, they want to have appropriate assurance that they will receive the product what they closed the deal for; i.e. when customers deposit their money in a bank, they trust the bank not to fail and to pay back the money. Hence intending to buy a financial product from a bank may represent a willingness to be vulnerable in many ways: The product purchase can be faulty and the bank can refuse to refund the customer; the product may require service or adaptations in the future, or the bank or the bank’s product supplier can fail to provide such services or even payback in an adequate manner. Financial products are very sensitive services, since customer cannot overview the bank’s ability to offer the promised service at the time when they sign the contract. Customers have to trust in the bank and its promised reliability. It also is impossible for the customer to check and compare the bank’s ability in advance, since some of the products are not easy to compare. At last the customer has to trust the bank as a whole, and not just to focus on a single product.

Continue reading ‘Developing and maintaining trust in retail banking’

As you might remember, our team was completed by our baby last year. Our little daughter is now 14 months old and makes us very happy. Looking back at the time with her, I see some parallels between living with a baby and strategic management:

Let’s start with the time before the baby arrives. The expecting parents are more or less in-formed about their future challenges. By this time, most parents have a general idea of how they want to live with the baby, how they want to bring the baby up and what kind of person it should (hopefully) become. Most parents wish their baby to become a strong, self-confident and happy person. Hopefully it will be very intelligent and will outsmart its little friends in the toddler group. Nevertheless, many issues still are very vague to them and they need to figure out many details. But not all of these details need to be decided right now. Many issues can wait until these particular situations arise. It will be easier and wiser to solve these questions with the detailed knowledge of the real-life situation.

You can compare this stage with the pre-startup phase of a new business. In this stage, the expectant entrepreneur has a general idea of what kind of business he is going to start and what he wants to achieve with it; i.e. he has developed an overall vision of his business. However, many details of his business plan still need to be worked out. Continue reading ‘Babies and Strategy’

This is a little story from my daily travel to work that happened some years ago. I went to work by car and had to refuel about every two weeks. There was a gas station that was situ-ated very conveniently on my morning route. Thus, I was a regular customer there. I did not care if the price per liter was half a cent lower somewhere else or if any other gas station had more tasty morning coffee. This gas station was easy to reach and that was all that was needed to keep me happy.

But someday, they lost me as a loyal customer after several years. What had happened? The company had decided to introduce a customer loyalty program in order to increase my loyalty. Continue reading ‘Aggressive selling does not always pay off’

Tuck professors Vijay Govindarajan and Richard D’Aveni have once again been named to the Thinkers 50, the 4th biennial ranking of the world’s most influential living management thinkers. Tuck professor Sydney Finkelstein is also named as a management thinker to watch.

Created and compiled by Stuart Crainer and Des Dearlove of CrainerDearlove*, Thinkers 50 has established itself as the definitive biennial guide of both thinkers and ideas which have shaped strategic management thinking today. Among this year’s top thinkers are Indian-born management expert CK Prahalad (1), Malcolm Gladwell (2), and Paul Krugman (3). The entire top 50 list is available on this website.

“I am proud that two Tuck professors are recognized on this list of most influential living management thinkers. This dual honor is indication of the quality of our faculty,” Dean Paul Danos says. “Not only are Professors Govindarajan and D’Aveni at the forefront of strategic management thinking, they are also master teachers who inspire students. At Tuck we take great pride not only in developing new research but also in bringing that research into the classroom.”

Govindarajan, the Earl C. Daum 1924 Professor of International Business at Tuck and director of Tuck’s Center for Global Leadership, hits this year’s list at 24. Now working as a special adviser on innovation to GE, Govindarajan’s latest work was published in Harvard Business Review’s October edition. Co-authored with Jeff Immelt and Tuck colleague Chris Trimble, the article promotes a new concept pioneered by Govindarajan at GE called ‘reverse innovation.’

D’Aveni is professor of strategic management at Tuck and jumped significantly in the 2009 ranking, moving from 46 to 26 this year. According to the authors, D’Aveni’s star has been on the rise thanks to the prescience of his 1990s bestseller, Hypercompetition, which anticipated the business-scape of the last decade. His new book, Beating the Commodity Trap, is due out in January and tackles one of the biggest business issues of our time.

The ranking is compiled using a unique methodology. Thousands of people vote for the guru of their choice on the Thinkers 50 website. The top 100 names are then assessed against 10 criteria ranging from the originality and practicality of their ideas to their so-called “guru factor.” More than 3,500 votes were cast in the 2009 Thinkers 50 poll.

In addition to the main ranking, CrainerDearlove* provides an introduction to the thinkers they believe will shape the future. Sydney Finkelstein, Steven Roth Professor of Management at Tuck, was named as one of the few “On The Radar: Thinkers Shaping The Future.” Finkelstein is a prolific author with 11 books, including the best-selling Why Smart Executives Fail and co-author of his most recent book, Think Again.

For more information on Thinkers 50, visit its website.

Keeping track of all tasks and projects can be difficult sometimes. However, this is an essential part of manager’s roles. That led us to the question, whether there are any small pieces of software which might help managers to keep track of all their duties. Well, in most cases you might use MS Outlook (or other types of groupware) but that is not the best solution for all situations. Of course you can spend extra money to buy several types of add-ins, but sometimes I don’t want to spend extra money to solve a specific problem.

So let’s have a look on my laptop screen which tools I use.

I have installed 5 small pieces of software which I found most helpful. Furthermore they are all free software. To be more specific, 4 are true open source programs and 1 is shareware but it works fine without registrations (there are no limitations within the unregistered version of the software). Let’s us start on the top of the left side.

Total Commander is an excellent file manager that has additional features like file compressing, ftp-server access and comparing folders. Some of you may remember the Norton Commander – and that is what “Total Commander” actually wants to be. Hence the second part of the name is commander. That piece of software is easy to use and helps you to organize all your files. The two window screen is most helpful. You can download the software on this website. TC is shareware and the programmer has been made releases in a constant way.

ToDoList is – as expressed by the name – a program to organize all your “to-do’s”. You can create and organize tasks and their subtasks, set priorities and structure your tasks by categories. There are dozens of flags to organize or to mark your tasks, and of course you can filter and group your tasks by those flags. You can download the software on this website. TDL is open source.

Continue reading ‘Essential small open source tools for managers’

A provider of on-demand sales tools and related services has published an interesting paper on cost cutting. Its title is quite promising: “Simple Savvy Savings - 9 ideas to make anyone a Cost-Cutting Hero”. The underlying idea behind this paper is the current financial crisis and the resulting consequences, i.e. in terms of cost cutting: “The economic downturn has IT executives scrambling to defend budgets, avoid cutbacks, and help the business survive”. Taking this aspect into consideration it might be good to identify approaches to achieve “cost cutting quick wins” asap. And that is exactly that what the paper wants to achieve since it presents “….simple savvy savings that prove that you don’t need to look hard to find fast payback projects to deliver significant annual cost savings”. For this purpose the paper outlines 9 easy and quick payback ideas and approaches (IT related) to deliver on these savings.

On this website you have free access to the white paper (pdf format file).

A few days ago I did participate in a discussion concerning the transfer of existing print mail campaigns to new e-mail-campaigns. An issue within this discussion was, whether and to what extent content and structure should be changed.

The basic answer can be summarized as follows: E-Mail campaigns are quite different in comparison to print mail campaigns. Different reading habits when reading “online” require different structures and concepts for e-mail campaigns. Due to research results we know the following reading habits:

• An e-mail text is more browsed than read in detail.
• The attention to read the entire text needs to be attracted with anchor words or even buzz words.
• Only the first 10 rows will be absorbed in total.
• The reading rates online is lower than offline.
• Customers expect that the sender gets to the point as soon as possible.
• Customers will not follow all arguments to the bottom line.

Taking these reading and abortion styles into considering the following rules and recommendations can be derived:

• Write to your readers what is most important right at the beginning.
• The entire text of your mail should not excess the half of the letters text.
• The line of arguments should have a maximum of three layers.
• Your e-mail should be clearly arranged. Hence your mail needs more paragraphs compared to a letter.
• Each paragraph should contain only one core message.
• Avoid nested sentences.
• The salutatory address should include the sir name.

Continue reading ‘Basic rules for e-mail campaigns’