Constantly building the bank of the future

In essence, according to ANZ’s Chief Executive Officer Shayne Elliott and Group Executive Strategy & Transformation Antony Strong, that perpetual flux underpins the bank’s strategy and business model.

“It is crucial for financial institutions to have clearly defined principles and strategies to guide actions in such a rapidly changing environment.”

Strong says the pace of change in financial services has accelerated since the 2008 financial crisis but that can be forgotten in a focus on discrete projects and fixed strategies. ANZ’s response, according to Elliott and Strong, is to build that constant flux into the fabric of the institution.

“We recognised that we were not going to be able to predict the future,” Strong says. “What we needed to do was to build agility into the organisation.”

Elliott adds success for ANZ would be built upon staff embracing a “culture of change”.

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bluenotes spoke with Elliott and Strong about how ANZ’s purpose, strategy and business model work together to build a sustainable, successful bank of the future.

ANZ’s purpose is “to shape a world where people and communities thrive”. Its strategy is to “improve the financial wellbeing and sustainability of customers through excellent services, tools and insights that engage and retain them and positively change their behaviour”.

Crucially, the bank will achieve its purpose by executing its strategy. For ANZ that means a focus on three core customer segments: housing, business, and facilitating the movement of capital and goods around ANZ’s region.

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Elliott notes the bank’s purpose has actually been evident for ANZ’s entire history but only in recent years has it been specifically articulated. Moreover, he says it is crucial for financial institutions to have clearly defined principles and strategies to guide actions in such a rapidly changing environment.

Internally, the sharper focus on what is critical for ANZ is dubbed “the Bank We’re Building”. That driving concept evolved out of work to design a bank of the future about eight years ago, focusing on a smaller number of things and trying to do them at the highest level. That has given staff a clear sense of direction as the sector evolved.

“It was really clear to us that we had to have a much tighter sense of what we were doing and how we were going to win,” Elliott says.

“We went back to basics (to articulate) purpose. What's the point? (That’s important for) the 40,000 people who come to work every day, somewhere in our organisation, who do amazing things for customers.”

Flowing out of the bank’s purpose, the strategy of improving the financial wellbeing and sustainability of customers is “the value that we're going to deliver”, Elliott expands.

“And as a result of that, we expect to win more market share, have more loyal customers so that we're able to generate fair and decent returns for our shareholders.”

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According to Strong, making that happen in a large, complex institution requires the bank being built to be as agile as possible.

“(Our strategy) is really predicated on two principles,” he says. “The first principle is the principle of value creation. Typically, we would think about that as value creation for shareholders but actually, with the work around purpose, we really brought that out to talk about the value creation for both our customers - in terms of their financial wellbeing - and our shareholders - in terms of better returns.

“And the challenge for us has always been to have that as two sides of the same coin … that's been a really important principle for us, how we think about aligning purpose and strategy.”

Strong says customers who use more services and stay with ANZ longer are more likely to improve their financial wellbeing if the bank’s services are designed appropriately. And those customers who are engaged with products and services generate higher lifetime value for shareholders.

Build agility

The second core principle is agility.

“What we needed to do was to build agility into the organisation,” Strong says, referring to both how people work and the technology and infrastructure with which they are working.

“The strategy really has been bringing together those two principles. How do we create value for our shareholders and our customers in terms of financial wellbeing at the same time as improving agility so that we can respond to the changing environment in the future?

“Together these principles have shaped our strategy and our four strategic imperatives – the purpose-led transformation, simplifying the business and focusing on doing fewer (more profitable) things better and investing in our digital capabilities.”

In practice, this focus has underpinned a simplification of ANZ with 31 business sold exited since 2015. It has also been the basis for the bank’s introduction of more modular and Cloud-based technology that underpins ANZ Plus, the move to ‘agile at scale’ and the splitting of ANZ into a regulated banking entity and a less-restricted entity which can invest in new technology companies and adjacent businesses (which don’t undertake banking).

According to Elliott and Strong, there is a logic to the business model that underpins the strategy:

• Better customer propositions, lead to
• Better financial wellbeing and sustainability, leads to
• Better reputation, leads to
• Better customer acquisition and retention, leads to
• Better financial outcomes, leads to
• Better access to talent and capital, and an ability to ‘out-invest’

Elliott says success depends staff embracing a “culture of change” and being willing to work on new and exciting things.

“That’s really about growth mindset and about the kinds of people we have and also the culture that we have that embraces change, innovation - sometimes failure. Cultural agility.”

Strong notes “the bank we’re building” is intentionally open-ended because financial services will continue to evolve, offering new challenges and new opportunities.

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Elliott understands it’s natural for people to want to know when change will “end” but “you take pleasure in those things as we're building, whether it's foundational work or whether it's some of the new customer features and functions that we're delivering out into market.”

“There'll be lots of milestones to celebrate along the way in terms of the bank we're building - but there'll always be more and more things to do.”

Strong and Elliott emphasise that while “The Bank We’re Building” program is a long term transformation, its ongoing success is constantly monitored.

“If this works, then we should be able to evidence that we are delivering and living up to our purpose and we should be able to see that more customers are choosing us, they're staying more loyal, they're more satisfied with what they receive,” Elliott says.

• Listen to the podcast for the full discussion

Andrew Cornell is Managing Editor of bluenotes