There’s huge buzz surrounding ANZ’s announcement on going little a ‘agile’, and Shayne Elliott’s carefully crafted statements and interviews we’ve been reading in the press.
To me, I think a key to understanding ANZ’s strategy is that behind Shayne is a board that can make sense of what’s happening in the world of emerging technologies (like AI and deep data) and new agile ways-of-working in taking on new oppertunities. Fundamentally this strategy is about their ability to better understand and manage risk – to the point that they can redefine their competitive landscape.
The core of the strategy is focused on one thing – a truly customised customer experience, with products, probably being built near instantaneously, for an individual customers’ unique needs. But to pull this off will require a massive shift in almost everything they know and have been doing, from management thinking, leadership, business structure, through to employee engagement.
A seismic shift on the horizon
Make no mistake, a seismic shift is on the horizon which will impact all businesses. This change will be a tsunami that will drench us all …and in a way, make the last 20 years of disruption look like we have merely wet our pants.
To understand it will require an appreciation of the technology driving it – automation through AI and the big data supporting it, and how an organization needs to be arranged to take advantage of it.
The current iteration of these new technologies (from the likes of Google, Facebook, Amazon, Adobe and IBM) is focused on enabling businesses to redefine their relationship with customers. A relationship that can now be deeply personal, drawn from individualised profiles, in data: sourced, analysed and acted upon, almost instantaneously, across many digital touch points.
In response these new technologies or rather, opportunities, perhaps ANZ’s greatest advantage is its competitive position. Where the market leaders are reacting (and will probably continue) with a traditional defensive strategy, by actively resisting and attempting to block change through lobbying and regulation …ANZ Bank can zig while they zag.
Agilities ability to build value by managing risk
Underneath the public face of ANZ’s strategy must sit a Board (and shareholders) who understand the ‘why’. Every Board knows (or should), that if they reduce risk, they correspondingly increase the company’s value (aka share price).
Until recently, the traditional method to build value has been focused on the ‘growth’ and ‘scale’ factors. Done either organically, but more often through acquisition. Offsetting the massive investment required, by gouging cost through ‘economies of scale’, and by the customer (or revenue stream acquisition) to remain a step ahead of competitors through the balance sheet, and maintaining a healthy dividend stream.
This approach is designed to manage the ‘perception’ of risk, and continuing the illusion that what has been done in the past will work in the future. However, it’s a strategy that does not directly remove risk. In many ways, it just adds layers of complexity and difficulty in understanding the business. It requires highly skilled analysts to perform valuations …which is a skill that is also being quickly replaced by AI.
In many ways, and to put it crudely, growth and scale is merely a process of shifting the numbers (on the balance sheet) used to calculate risk and subsequent valuation …so not directly focused on removal of risk. For more about traditional valuation, just google debt-to-equity ratio, NPV, IRR or FCFE.
This approach has resulted in huge unwieldy organisations held together by complex management structures and processes. Making it very difficult to move, let alone react quickly to market opportunities. In many ways, these organisations resemble patients with locked-in-syndrome. Able to see and hear, but unable to communicate or move.
To appear mobile, over the last decade these organisations have spent-up-large on transformation projects. Many driven by a need just to be seen doing something, and allay investor fears that they can remain relevant. To zag, and copy what competitors are doing. Most recently the fear has been driven by the threat of disruption, often lead by small startups from outside their industry.
However, the new tools of disruption (like AI and business agility) are designed to create disruption from within. By this I mean, these technologies are being marketed to the fast moving (and agile) competitors – from within – the industry segment.
Shifting complexity to manage uncertainty
Why is agility so important? Perhaps the essence of being agile is the ability to manage risk, which it does by moving the uncertainty factor. It allows important decisions to be made ‘after’ they are validated …often using automation to do this fast.
In comparison, the traditional model introduces risk by introducing complexity upfront – planning, analysis and design, made at the very beginning of an often lengthy and uncertain project. Where critical decisions are untested, and largely the result of the opinion of ‘experts’, assumptions, or plain old gut feeling.
Upfront investment is also required, with no real knowledge of its return. The only real lever that can be used to manage the inherent risk is often based on KPI’s, bonuses and large salaries that are awarded to planners and decision makers in, ‘getting it right’.
It’s important to recognise that complexity is not removed through agility, it has only been shifted. But shifted in a way to actively minimise risk. For instance: investment is shifted from upfront cost in analysis, planning and design; to the cost, and associated complexity, in building the automation necessary to support validation, i.e. decision making which can be based on empirical evidence.
It’s understandable that the ‘traditional ways’ of doing things should continue, given that “it’s the way it’s always been done”, and “it’s worked for us in the past”. However, given what we now know, the ‘day’ of Taylorism and waterfall ways of working …is done!.
Kudos to CEO’s like Shayne Elliott for being brave enough to step into the future.
This article is referencing the recent AFR article giving insight into CEO Shayne Elliott’s brilliant strategy for ANZ Bank.
And The Australian http://www.theaustralian.com.au/business/financial-services/anz-plans-workplace-revolution/news-story/a0bbe5a95880a783ea4eafb0fbd8283f (http://www.theaustralian.com.au/business/financial-services/anz-plans-workplace-revolution/news-story/a0bbe5a95880a783ea4eafb0fbd8283f)
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