‘Large companies must relinquish control’

Source: Financieele Dagblad (12 November 2016); Text: Franka Rolvink Couzy

Steve Muylle, one of the research leaders for Transformers 200, is impressed by the digital strategy of Chinese companies - and Eneco’s success with Toon.

Sooner or later, every boardroom will have to contend with the following issue: how do you stop a young tech company from almost instantly stealing your clients? Everyone - even the CEOs of leading companies and institutions such as Apple or ABN Amro - is struggling with the same problem. People can feel the digital newcomers breathing down their necks, certainly as clients are increasingly stating their desire for innovation. The question for all these board members is therefore the same: how should they tackle this problem?

The answer is complicated, says Steve Muylle. He is a partner and professor of Marketing and Digital Strategy at Vlerick Business School — with campuses in Belgium, Peking and Saint Petersburg — as well as a strategic adviser to companies and institutions such as BNP Paribas, Accenture and Procter & Gamble. Muylle’s succinct answer is that there are three options: take over the new tech company, give your own company a radical overhaul or set up a new company to cannibalise the old one. The only thing is that little research has been carried out to establish which option is most successful. Muylle himself would opt for the third, most radical approach: ‘It’s better to shoot yourself in the foot than to be shot in the head’.

Easier said than done. So how do you make sure you don’t shoot yourself in the head?

‘By putting clients centre stage. Reality has proven that, although companies might want to achieve this, they aren’t actually doing it. Take a bank, for example. They put their clients in the middle. Around them, they arrange the call centre, the website, the mobile app, social media, agents who sell their banking products etc. But that’s not putting clients centre stage, that’s surrounding the clients. Putting clients centre stage means putting the clients in the middle and surrounding them with everything your bank has to offer, but also the competing banks, Apple Pay, PayPal, Google, credit card companies, telecom firms: everyone who can satisfy the financial needs of the clients. This creates an ecosystem in which the bank wonders how it can collaborate with all these different players. The bank needs to relinquish control.’

So how can you keep clients from switching to your competitors?

‘In 2013, the BNP Paribas group launched the mobile bank Hello bank! Their aim was to appeal to a new generation of clients and to stop clients leaving them. The new bank is blue and the conventional bank is green. The green bank continues to work in the conventional way. It is undergoing a transformation, however: the office network is gradually being reduced, it is more advice and experience-oriented, that kind of thing. But Hello bank! works on the basis of the officeless world and uses data to gauge the wishes of the client. It’s more of a data company. If some of its clients are more suited to the profile of the blue bank, the green bank will suggest that they should switch to the blue bank. Another start-up wouldn’t have that advantage.’

Surely the employees of the green bank would never go along with that?

‘To achieve this, you need a leader who is convinced that he needs the blue bank in order to rescue the green one. He will do so by taking advantage of the benefits offered by the conventional green bank, because these certainly exist. So he wouldn’t throw every aspect of the green bank overboard. After all, these clients were already looking for more digital services and, without the blue bank, they would have left. Now the clients are staying within the group.’

But won’t the green bank go under in the end?

‘The leader of the green bank won’t sabotage the blue bank. He is doing this for the client and in order to gain market share. While he is reinventing the old model, he will also be building the new model.’

You mention the use of data. ING also said that it wanted to use its clients’ data two years ago. The world was too small.

‘BNP Paribas didn’t announce it, it just did it. And of course the green bank’s risk and compliance department will make sure that everything takes place in accordance with the law.’

Like Google does, but with an illegible form on your small screen?

‘Not necessarily. They are looking at a model in which clients can be paid for sharing their data. Some people just don’t want to do that, but there are also people who realise that the bank already has access to so much of their personal data. In exchange for this data, they may be able to enjoy free banking for life or receive good offers for products that they wanted to buy anyway. That’s not the same as Google’s approach. Of course, the banks could also put all the data under lock and key, but then the start-ups would seize on this opportunity. And then the corporates would enter into collaboration with the start-ups anyway. They would be better off doing it themselves.’

“The bank doesn’t put clients centre stage, it surrounds them with sites, apps and agents.”

Is the BNP Paribas approach the best way to survive?

‘It is one of the most pioneering approaches. You are planting all the seeds for the successful model of the future, while simultaneously looking for the model of the future from within your own conventional model. Another classic model is transforming from within your organisation. In Belgium, KBC Bank is doing this. It has started working in multidisciplinary teams and collaborating with accelerators (coaching programmes for starters, ed.) and start-ups to breathe in the atmosphere of innovation. Then they come back to the bank with various different projects. By around 2020, some 250 projects will have radically changed the bank.’

With 250 projects, isn’t there a risk they will just end up surrounding the client?

‘They are trying to avoid this by means of the culture change. And by removing the people concerned from their jobs and putting them in different environments which all have a customer-first approach. They are proud that they have now launched KBC Touch: banking on your tablet. And to have created an app that allows you to take money out of the hole in the wall without a bank card.’

This approach doesn’t seem a big success.

‘In fact, you might well wonder how radical these innovations are. What you see is that the people in the offices who have to sell these applications to the clients end up saying: “this just isn’t what the clients are asking for”. This is a delaying factor.’

How successful is acquisition in terms of achieving digital transformation?

‘Google acquired Nest Labs for $3.2 billion. In 2010, Eneco started experimenting with the small start-up Home Automation Europe and in 2012 it came up with Toon, the Dutch digital thermostat. In the Netherlands, Toon is much bigger than Nest. It didn’t pay billions for it. The only difference is that Eneco doesn’t have the same attitude as a traditional energy supplier who says: “I’m big and you’re small, so you’re going to listen to me”. Eneco uses the data by showing its clients how much they are consuming, so they can benchmark with their neighbours. The client takes centre stage.’

“iPhone sales are falling. At Apple, they are wondering: what’s next?”

Facebook buys up competitors to make sure it doesn’t get overtaken. That’s another way to keep the competition off your back.

‘Facebook bought WhatsApp for $22 billion. The Chinese made a copy and called it WeChat. It turns out that the Chinese aren’t just good at copying, they are also extremely good at improving and commercialising things. They positioned the platform really well. All the local retailers, airlines and pizza vendors etc. are in the app. They all sell their products through WeChat. The irony is that Mark Zuckerberg’s wife is actually Chinese and he even speaks Mandarin Chinese. He is visiting China to see how they are expanding WeChat. Then they will copy it in turn, for Facebook Messenger and WhatsApp.’

Conclusion: always stay on your guard. After all, even Facebook has to keep its eyes open.

‘Yes, because now Amazon is coming along and saying: you really don’t need that. What you need is Alexa, the personal assistant that controls Echo (among others). Echo is a popular product in the States and has recently also been introduced in Germany and the UK. It’s a loudspeaker that you can put on the table and ask questions about the news. It can also order gifts and put your photos in the cloud, as Amazon is everywhere. All you need to do is talk to a device. And that device isn’t an iPhone! Not without good reason, iPhone sales are falling for the first time. At Apple, they are also wondering: what’s next?’

So there’s a chance that even Apple might not survive the next battle?

‘Look at Kodak. They were the first company to launch a digital camera, in 1975. They even had a consumer digital business from the mid-90s until 2003. They did everything by the book, but they just didn’t make it. The reason is very simple: the digital camera had no future. It’s all in smartphones these days. After all, why couldn’t smartphones soon be replaced by Amazon’s Alexa or a chip in your arm, too? If the technology that you are offering is replaced with something else, you can innovate as much as you like. It won’t help.’

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