Anuradha Sengupta: To harness the power of mental models effectively, the middle path may be the best route to take. An eclectic approach that lets you retain old models while simultaneously sourcing news ones combined with seeing a new way of seeing may be the mantra for success. On Lessons in Excellence today we talk about how paradigm shifts needs to be a two way street.
Jerry Wind is here and with him the man who heads the second largest bank in India and has masterminded one of the biggest paradigm shifts in Indian banking, please welcome K.V. Kamath, MD & CEO of ICICI bank. Jerry, KV, thank you both for being here. Jerry I am going to start with you. This paradigm shift necessarily being a two way street, how often have you seen people seeing it as a one way street? What does experience suggest? Why do they do that? How frequently do they do that?
Jerry Wind: Very often and the reason for this very often is that it is very difficult to introduce change into an organization. And if you are a leader and you have a new vision of a model, a new approach, a new business paradigm that you want to introduce, you have to sell it through the organization. It is very easy than to come up with a radical new way and try to rally the troops around it. There is also some virtue in simplicity and coming up with a single simple idea it is easier to sell it and that is the reason we get it. It is also in society.
If you look at the dot com revolution, during the dot com revolution basically most of the proponent of the dot com were that people are going to shift completely to Internet buying. To use only the internet. The old way of doing things is going to be dead and they ignored completely the fact that some consumers actually enjoy shopping and it is not a either / or…
Anuradha Sengupta: So it is not a common - it is a very very common mistake that occurs, that is made
Jerry Wind: Absolutely. Pushing the one model is the new truth, the only way -
Anuradha Sengupta: But fanatic zeal of the new convert
Jerry Wind: Correct.
Anuradha Sengupta: Ok, let me get you in here. The ICICI bank the second largest bank in the country today, you've seen a paradigm shift up close. You have actually orchestrated it, if I may use the word. Was it very difficult, while creating the new model of a private retail bank which is all about universal banking and a financial institution which had a 30 year old history, or more than 30 years.
K V Kamath: Indeed, I would agree with Jerry to start with, change is the key and mindsets are the blocks and unless you are going to unlock these you are not going to succeed. If you need a paradigm change in the business and every business needs it from time to time, you need to think - How do I effect change? When you introspect you may find that you have a very competent organization but on a scale of 10, the ability of the organization is below 5. You are stumped. You need to address that as a priority and that is what we did.
Anuradha Sengupta: But when you did that you were confronted with the new model or the new mindset that you would need to adopt to deal with the new entity and personality of the bank but you were also left with the ICICI institutional finance company.
K V Kamath: We had three difficulties at three levels actually. The first one was the people who were steeped in the old, the old culture of ICICI bank. The second one was that people though they were in banking as we know it, was not used to technology and third one was the customer. Would the customer accept change and we had to address all three simultaneously.
The way we went about it that we created a brand first because we said, that is how we need to get identified by the customer. Then we tried to articulate what the brand stands for and we knew that we could not compete with - against those days with 100 branches with large banking giants. So we had to provide technology as a differentiator. So we provided technology to the customer, initially through the ATM then through the internet and thirdly we slowly started reassessing our organizational structure because you cannot effect change with changing organizational structure.
Anuradha Sengupta: Right, so there is the old and the new but did you throw away the old completely? You didn't. You had to pick up things from there and adapt to the new way of doing things.
K V Kamath: Absolutely not. We had to adopt the old because that is where in the banking business a phrase was coined - click and bricks. So you had to live with the bricks. You could have a lean structure on the bricks but you could not throw it away. And the click complemented the brick or the brick complemented the click.
Anuradha Sengupta: What are the dues that you have to pay when you have to make the old and the new co-exist to be successful which is the whole concept of the old mental model and the new mental model?
K V Kamath: Actually Anuradha, I feel that we did not have to pay any dues. They are actually in a way symbiotic, they are in a way complementary and we make a mistake if we believe that it is a one way street. Honestly. Let us see in the heyday of the dot com boom, people thought that internet banks were the way to go but clearly no internet bank has succeeded by itself. They have not been able to scale up beyond a point. This clearly proves that you need to think of it as a two way street.
Anuradha Sengupta: But how are you going to communicate this to the people who are going to drive this and who have to first believe in themselves because there must have been resistance, you had like a sea of issue.
K V Kamath: Again, you know, more than convincing people, it is the ability to believe that this will work. At that point of time if you take a decision you are not sure. On hindsight you can say that this worked and this was the best model but when you take a decision you do not have the benefit of that hindsight. So again that leads to something I read, saw in Jerry's book - the power of intuition. After all data has been analyzed, decisions have to be intuitive. Decisions have to be taken. So there is always a bias for not taking decisions and going by saying that I have inadequate data or the data that I have leads to me to a decisions which is what I would quote in court as safe. You have to break out of that mould.
Anuradha Sengupta: Jerry, how important is intuition? How much importance does corporate leaders give to intuition when they are changing from one mental model to another?
Jerry Wind: Intuition is extremely important. Before the intuition let me come back to something that KV said because there is an interesting distinction here. What KV did was a hybrid model. What he did was a convergence model. He came up with what we call in the States a cold click or visit model because the consumer can approach the bank in any way whether it is through the ATM or it will be calling or by internet or by visiting the branch. That is not the extreme - lets say wingspan. There was a bank that was - it was a purely internet bank. This was the extreme of the one approach only as opposed to a new vision which was a hybrid, a convergence one.
This convergence is really critical to understand because what you have is, you have increasingly amount of data - the consumers don't always go - buy one approach. Consumers - a recent study shows that 75% of the consumers who buy in stores - before they go to the stores, they do some shopping and information search on the internet. So what we are dealing with , you are dealing with the hybrid phenomenon. Some people first search on the internet then they go to the stores. Some do the shopping, the information gathering at the store and buy on the internet and you have a full convergence of the two and the strength of the ICICI model is this convergence which I think is wonderful.
Now back to the intuition - Intuition is critically important. The problem is that institutionally we try to downgrade intuition. We don't appreciate it much and there are lot of examples that a lot of the real insight and a lot of the really good great decisions are based on intuition. I will give you two quick examples. One is Firefighters. It is know that firefighters who have deep experience in their area, they can sense a danger. They could not articulate it, they could not explain why but they consensus that there is a danger, tell the other firemen around - get out of here and a minute later the whole ceiling collapses.
There is no substitute to these kinds intuition in emergency cases. What these people are dealing with is deep experiences and in the business area, the big decisions, a lot of the big innovative decisions comes out of intuition and so is the same with science. Scientific discoveries come as a result of intuitions. I will try something else, not necessarily something that was given to me.
Anuradha Sengupta: But can we - it is not very fashionable to say that intuition is very crucial, is it?
K V Kamath: I am not ashamed to say that at all because we have a lot of debates within the organization when we have a choice and I find that lot of times the bias is to take no action at all. That is a comfort zone and when you brake out of that comfort zone, all you have is a gut feel and an intuition. Because you have analysed that facts. It is not a decision taken without the benefit of facts but with the benefit of facts you are not able to reach a decision and then you have to tell the organization that this is the way we will go and this is what we intuitively feel and we have now come to a stage where everyone in our bank accepts that this is the way to finally go after all analysis is done. If the analysis takes you to a straightforward decision, indeed that is taken. But you come to a fork and that point if you are still not able to decide then we would still take a decision.
Anuradha Sengupta: You mentioned that besides the employees you had to communicate this new paradigm, this paradigm shift, you also had to talk to a whole lot of consumers out there. What do you think was the most crucial in communicating the new approach, the new mental model that you believed in as an organization to people who had to buy that idea and quite literally buy the idea?
K V Kamath: I think people brought into the idea because essentially of the convenience factor that I mentioned. ATM's, when we started rolling out ATM's there were just 30 or 40 ATM's in the country. We rolled out about a 1000 a year and people initially explored what this machine was. They had no idea what it was and then saw the convenience, the power of the machine because you are hardly dealing with your bank which is now a machine for 30 seconds and getting your transactions done so I think the speed attracted them, the convenience attracted them. So in a way -
Anuradha Sengupta: Technology, the investment that you made in technology is you are saying is something that helped communicate the mental model what you brand and your mental model is?
K V Kamath: Indeed.
Anuradha Sengupta: Jerry, any parallels to this case study?
Jerry Wind: Well, there is a fascinating bank in Philadelphia, the Philadelphia commerce bank that was started on a very similar underlying idea. They defined it a little different. The founder of the bank, he says I am not a banker, I am a retailer. Just happen to retail banking products and services. And the slight difference in the framing from a banker - a traditional banker - the 9 - 5 or whatever the banking hours and the rigidity does not exist anymore when I say that I am a retailer. Then you say - ok, what are the retail hours? Well retail is open 7 days a week. I am open 24 hours a day and providing the convenience. I am trying to design the service, the appearance and everything to a way to appeal to the consumer. So I find enormous similarity in what KV is doing here and what commerce bank is doing - trying to break the traditional paradigm of the banker into more retailer establishment -
Anuradha Sengupta: And where the consumer is actually - I think we have started looking at banks not as a road blocks but as you said a service that is there at your beck and call. You have talked very passionately about the role of intuition and you have talked about the paradigm shift that - the role intuition plays in making the paradigm shift a reality and that is one thing that - Jerry I must tell you about ICICI bank and some of its subsidiaries is the role that women have in this organization and at senior levels leading the entire organization. Now this is not a happy chance, it is definitely a philosophy, it is definitely a mental model isn't it, KV?
K V Kamath: Yes, it is a mental model and I summarize it one word - merit. If you truly run a meritocracy right from the stage of recruitment and then at every stage of the process of growth, you will have gender balance because the law of nature has to work out even in the corporate world. And when we say we run on gender balance, we say that we run the organization on clear equality. Let me give an example.
If a team has to work late, ladies do not think this being a problem or so but in a country like India these are social problems. A girl married or unmarried working late, the mother or the mother - in - law will not like the situation. But ladies who work for us are independent. It is clear that if they have to work late, the job demands it and they will do it and they defend themselves. They don't need the organization to defend them. If you are in a great comfort zone and if you are running a business, if you are a table, you are taking decisions without gender coming in at all. Every decision we take is on that basis. Whether it is workload, whether it is late work, whether it is challenging assignments.
Anuradha Sengupta: And you have mentioned that this philosophy continues because these women who are in these positions are obviously going to adopt the same philosophy.
K V Kamath: Yes. Absolutely and out of the way we have 8 leadership positions in the organization at the board level, five are women and at the next layer is also building up nicely and the recruitment stage, the same think endures.
Anuradha Sengupta: And Jerry, that is unusual not only in India, it is unusual everywhere in the world isn't it?
Jerry Wind: The problems that many organizations face, financial services and others in the States is that we have equal number of men and women entering MBA - after graduation for MBA programs and after a few years they find out that there are very few women in top management compared to men and to some extent a wonderful example, they are basically changing the mental model concerning women, the role of women in corporations because if people don't have a vision of a women running a organization, it would be very difficult for women to be in this position, it would be very difficult for men to accept it.
What they have done is that they have created another role model and hopefully this role model will go to other organizations where people will say - wow, the women can be very successful at the board level and in running the organization and the like. So I think in this respect it is very important for the society in general to look at these examples.
Anuradha Sengupta: What about society. I mean this is an organization and when you push it out to - this whole idea of the power of impossible thinking is to effect transformation from individual to organization and ultimately to society which is where we live. Now how do you see what you have done and what ICICI bank is doing as being able to - how can this model be communicated to society?
K V Kamath: I believe that communication takes place through observing. People around you observe you, businesses observe you. In our case even global organizations are observing us in this context. At times it is very difficult for us to tell them that there is nothing other than merit in this. There is a truly neutral attitude towards the whole process. I think it is becoming a very interesting model for people to look at. Introspect, are we doing anything wrong - can we build on this? Why? Again the end object is not to get gender neutrality. From an organizational context get the best talent in. I think that should be the challenge people look for and I think people have started looking at that. Are have been missing out on half competent set that is out there in what is otherwise a very competitive marketplace.
Anuradha Sengupta: Do you think that women are more intuitive or do you think that is again a old fashioned gender biased statement to make?
Jerry Wind: I don't think we can make that statement at least from our experience. Men and women can be equally intuitive in the way we do business. Once you have a data that allows you to reach a particular point then I think it is the ability of the bias to act which leads to intuition.
Anuradha Sengupta: ICICI bank was the first bank to outsource certain processes and then at some point turned that unit for taking on business from other banks. Now that was also something that was pretty different, isn't it?
K V Kamath: Well, just to correct it slightly, when we went into consumer credit, we used a different model from what other banks in the country were doing. We did not branch out. We used direct selling agents, we used a whole variety of reach or outreach to connect to the customer. Back ended it with call centers and technology channels. This in terms created different models in getting customers into the bank and getting products sold to the customers. That is point number one. Within what we did was we back ended all our processes into hubs so they became centers of excellence in terms of process capabilities.
Now when we looked at this and we said there is an opportunity particularly when we were going global to set up business versus outsourcing for financial type of transactions as an activity, we set up a vehicle at that point of time and that vehicle of course today is an arms length. It is an organizations which is run on arms length. We don't own 100% in it, we have diluted our stake in it. And that does work for a variety of businesses primarily in financial services. So indeed yes, sometimes -
Anuradha Sengupta: It is a new way of looking at things, Jerry, isn't it. I don't think there is a precedent to it.
K V Kamath: Sometimes internal competencies can be leveraged for external benefits or product benefit.
Jerry Wind: In the States there are a lot of examples that come this way, that once you decide that you want to outsource a function, you create an independent group that provides the services both to you and leverages the competencies by selling it to other organizations as well creating it into a profit center. The convergence of unit which is basically a cost center into a profit center , that is a fundamental change in the mental model.
Anuradha Sengupta: As the leader, as the person who is trying to communicate this concept of the new mental model, what is the role that a leader must adopt? What are the attributes, what are the things that you need to look out for?
K V Kamath: The key here is to keep an open mind, keep an open mind on everything that you do. Be aware of things happening around you not necessarily in your business. That is again I thought I found exciting in the book.
Anuradha Sengupta: Yes, looking at -
K V Kamath: Everything that we had done, we looked outside the banking business and retrofitted it -
Anuradha Sengupta: Give us an example KV
K V Kamath: A very simple example. Jerry mentioned a commerce bank. It is a bank which we admire and we respect. Looks at itself as a retailing institution. So we look at ourselves as a technology institution running a banking business. That changes that perspective of the bank entirely.
Anuradha Sengupta: Would you elaborate that a little bit?
K V Kamath: Let me elaborate on that. We run technology like a technology company would. We take decisions as a technology company would. One very simple example. We have something called the 90 day rule. A 90-day rule is something that came into the vogue during the dot com heyday that was the time taken for a garage startup somewhere in Silicon Valley to go from concept to beta testing to market and we have implemented almost all our technology models on the 90 day rule. Where did I hear about it. I heard about it in a technology seminar I was attending in New York and we were at point of time e-enabling lot of processes.
We were building a lot of new engines and on new engine which everyone in India knows today is the online trading platform that we are building. We are building it in-house and it is today probably the third busiest engine in the world built in-house by a team from within and built in 90 days. That was 6-7 years back and it is still running. So basically we do technology as a technology company does in the sense we built things ourselves. So I'd say that this spirit came from the mindset of a technology company. That I think epitomizes one character set of ICICI bank.
Anuradha Sengupta: On that example of how paradigm shifts can be implemented and communicated successfully to everybody who needs to know about it, we'll have to end this show, Lessons In Excellence. Thank you very much for being with us here in this show and thank you very much for watching.
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