During this interview at BankOnPurpose 2019, 11:FS chief of staff Leda Glyptis talks about how banks should balance the need to innovate with the need to minimize risks. She points out where banks have fallen short in their innovation efforts, but also where there's hope for the future.
Helpful Links
All's Fair in Love and Innovation (BankNxt)
You Can't Always Get What You Want: Digital Misconceptions and Alapacas (Fintech Futures)
Podcast Transcription
Jim Young: Hi, and welcome to The Purposeful Banker, the podcast brought to you by PrecisionLender, where we discuss the big topics on the minds of today's best bankers. I'm your host, Jim Young, Director of Content for PrecisionLender, and we're recording this episode at Bank on Purpose, where our guest will soon be giving a talk titled Banking Transformation 2.0: Time to Get Real.
She is Dr. Leda Glyptis, and she is the CEO of 11:FS Foundry, and Chief of Staff for 11:FS. And she is a prolific author about all topics banking, and transformation, and innovation. I highly recommend you read her stuff, and we'll have links to several of her pieces in the show notes. Leda, thanks so much for coming on the show.
Leda Glyptis: It's my pleasure.
Jim Young: Before we get your thoughts on digital transformation, whether banks are up to the task, I first wanted to talk to you about your job titles. You've got two, right? You're a CEO and a Chief of Staff?
Leda Glyptis: That's right.
Jim Young: Can you explain what each job encompasses?
Leda Glyptis: And why one job was not enough?
We like to think of 11:FS as a group of companies united by purpose. And that purpose is to help our customers, who are mostly financial service institutions, solve the problems that the avalanche of technical and business challenges is presenting them with. Most of us are ex-bankers reforming, or recovering bankers, and we are bringing to the table the problems we had when we were doing the job.
A lot of them were around capability building; a lot of them were around design; a lot of them were around the right way of thinking about the problem. Some were around the accelerated learning you need to do in order to actually even start asking the right questions, let alone answering them.
So, 11:FS is going about creating capabilities to solve those problems. We set them up as separate service lines. As Chief of Staff, I'm responsible for all of the revenue-generating service lines ... our consulting business; media-marketing business; Pulse, which is a benchmarking tool, our research capability that goes with it; and Foundry.
As CEO of Foundry, I report into myself. I'm a great boss, let me tell you. Amazing one-to-ones: "You do great." "You do great, too."
Foundry's a core banking platform. It's a set of capabilities we're building, and have been building over the last few months. We're extremely excited about what it can do for the future of the industry. And as it grows, obviously that role will take up more and more and more of my time. But for now it makes perfect sense for everything to come together under a person who is responsible for the business side of the business.
And our CEO, David Brear, is still running the growth-and-vision side of the business. And the two work hand in hand, which is why he and I are developing a shared brain at the moment, and completing each other's sentences.
But it's an amazing, amazing challenge. And for someone like me, with my personality, having to learn so much every day at work is a gift.
Jim Young: That's a great approach to it. You mentioned challenge. And you've written that, "Innovation is about doing things for the first time," which I think is a really elegant, simple way of putting it. But inherent in doing anything the first time is risk. And we're talking about banks. We're talking about minimizing risks.
So how do you innovate in an environment that's designed to avoid things that sometimes go hand-in-hand with innovation?
Leda Glyptis: It's a very, very good question. And you won't be surprised to hear that I'm not into banker-bashing. I think it's very facile to dismiss banks as being, frankly, terrible at this or not committed enough. It's facile and I see why people do it. And to be fair, when it comes to certain banks and certain people, it's probably true. But overall, it isn't. And realistically when you think about it outside the industry... as someone who has a mortgage, as someone who's saving for a young child's education, as someone who has an elderly parent with a pension... you don't want the banks to play silly buggers. You don't want them to take unnecessary risks, because the downside affects your life in the most immediate way. But you do want them to learn, and you want them to move with the times. So how do you do that?
I think there are several ways to do it, but certain inevitable things that have to be tackled. And the first is that you have to change the way you think about risk. Quite a lot of them, the risk mentality of banks, has been to scale down the checklists that were very tightly paired to what the regulator looked for. Either when particular pieces of legislature came through, or when certain people failed or were fined or reprimanded publicly, what came out was an actionable set of points that then the risk department can deploy.
Makes sense, but It's not suitable for the future. It's not suitable for the type of regulation we're seeing. It's definitely not suitable for the type of business we can now run.
So transforming the risk function is actually at the heart of this, because you still want to be risk-aware. You still want to not take unnecessary risks. But at the same time, the risk of things not happening is huge, and the way you measure risk is not applicable. So that's huge and difficult, and most banks try to leave that question for later. But actually what we've realized over the past few years, where a lot of innovation experiments never left the labs, was that you can't do that later.
The second thing that is inevitable is that the technology that has landed, and the regulator is really excited about, is going to change the way you make money. It's going to change the way you think about services, the way you deploy them, the way you price them. It will also allow you to do things you've never done before, so there is an option for new money. But it will not allow you to charge for things you used to do. A lot of things that were extremely labor-intensive, a lot of accounting, is now done seamlessly, automatically. The expectation, from the client's perspective, is that will be reflected in the price. And again, that was a question that was pushed down the line. But it can't be.
The third big piece is talent, not just on the technology side but also on the product, on the design side, on the business side. We need to do new things. And the way we need to do them is new. So not only do you need people who know stuff that 10 years ago wasn't needed, you also need them to think differently.
You pair those three things together, and actually you create a different set of what "good" looks like. So you don't just throw a few smart people in an innovation lab and go, "Just do stuff." If you do those three things, you articulate a vision. And your innovation people, your product people, your tech people, are now delivering to that vision.
And the vision boils down to: What kind of organization do I want to be when I grow up in this new culture? And that's a hard question for a, say, 250-year-old man to ask himself. Like, "I am grown up. What are you on about?" But you're not. You have to come of age again, because the world had changed.
Jim Young: Right. When you were just describing that, I was thinking, "If I'm a publicly-traded bank"... and talking about this sort of risk, and talking about what's pushing things down the line ... I can sort of understand that mentality of, "There's an iceberg ahead, but if I'm not moving this ship fast enough right now, I get fired before I ever get to the iceberg and have to worry about it."
So it seems, it is maybe about articulating that risk to people, so they understand what you're doing?
Leda Glyptis: Again, a very good way of asking the question. I think when we started this journey 10 years ago, 15 years ago, the risk of being fired for getting the experimentation wrong seemed higher than the risk of being fired for inaction. And what you've described is actually very much the case now, that the fear of inaction is now very real. So that change of balance has become empowering. The regulator changing the way they perceive new technology is extremely empowering.
Less so in the U.S., but it seems to be a global trend with Europe leading; and Asia following, very fast on its heels; Australia moving in that direction as well, with the regulators actively ... not mandating specific technologies, but essentially saying, "We know what's possible so, chop-chop."
So within that context, particularly for people who come into this younger... I was asked once... I've said this before... by a CEO, "Do I need to learn this before I retire?", which I found extremely humbling and honest. Unhelpful also, but honest.
Jim Young: Honest, right.
Leda Glyptis: The generation that is at the helms now has to learn this stuff before they retire, that's sobering. Getting it wrong is now actually equally dangerous with doing nothing. There is risk in the choices you make, in the types of deployments you make.
And because some of these things are being done for the first time, you really have to hone your business acumen; you have to really get better at figuring out what the market opportunity is, what the client appetite is, and how your proposition serves that.
From a practitioner perspective, I can tell you that's really stressful. From a customer perspective, I'm okay with the pressure being higher. These are high value - and I don't just mean monetary value, I mean high-societal and high-monetary value - outputs, and the people doing them should be up to the task. And yeah, it's gotten harder, for all of us. But that's okay. Nobody said life would stay easy, right?
Jim Young: Right. Well, actually I want to pause and just let our... I highly encourage our listeners to check out Leda's writing about digital transformation, innovation, banking. She comes at issues from a unique perspective. I think your latest piece involved alpacas and shearing.
Leda Glyptis: That's right. I take requests. The alpacas started as a joke. One of my colleagues was like, "Can you write a piece around how alpacas actually like shearing?" I said, "Sure." And she was like, "It was a joke. Are you really doing it?" I was like, "Challenge accepted. Here it comes."
Jim Young: So you wrote a piece back in early 2018, that really got passed around digitally at PrecisionLender when we read it, called: All's Fair in Love and Innovation. And to me it read like a motivational speech for people trying to change at banks. I read it originally as someone in the middle levels trying to stir things up, and trying to get past the upper levels.
But I'm wondering if it's applicable to higher-level people, and running into intransigents below them? And I'll pepper that also with the question of: Generally, when you see banks that get it, is it a "top-down gets-it", or is it a "bottom-up gets it?"
Leda Glyptis: Again, a very good question. I remember writing that piece.
Jim Young: Were you writing to yourself too? I always wondered.
Leda Glyptis: I was very much writing to myself at the time. I was still working inside banking at the time, and I remember I emerged from a conversation with my team. And I'm a very hands-off manager. You hire good people and you let them get on with the work you hired them for. If people you hire are not better at you, for the thing you hired them, you hired wrong.
So a lot of my guys would go out into the business, and fight the good fight. And they would come back, sometimes, really deflated. And deflated is worse than angry. Angry has a fuel to it. It makes you feel a bit like a caged animal. You're looking for a way out, you'll find a road. But deflated and disappointed is a horrible, horrible way to feel at work anyway, particularly for someone who's meant to be a change agent.
But as I've said in both this piece and other pieces, big banks tend to hire their innovation teams to resist them. So you have to have mechanisms for dealing with it. So that piece was written thinking about my team, who are sort of mid-to-high level. When you're at a higher level, some of those frustrations are there because you're trying to move the entire organization. And organizations are like mountain ranges, even those who are more mature are not cohesively more mature.
So you'll have some businesses that, either by nature of what they do, the competition they face, or the people who run those businesses, get it and move really fast; and businesses that resist, because the people running them just don't buy into it, or the particular markets they operate in are not moving in that direction as fast as you would think. So even in an organization that's moving in the right direction, the tensions in trying to get things started and things moving, is always there.
Because no matter where you sit, the pot of money, the amount of time in the day, and the mind share, is given. And what you're doing is adding to the workload, the cost and the pressure of people who are already busy. So actually, no matter what, those tensions will be there. So how do you actually make it easier for the people who need to say yes, to say yes? That's what makes for a successful innovation initiative, no matter where you sit.
Now if you sit really high ... So in my last banking job, I had a committee I presented things to to get fast approvals that was, essentially, the exco and all the revenue line owners. So you had the CEO, CFO ... everyone. Every other week. The ability to accelerate to a decision, even if that is no, was amazing.
Jim Young: Wow.
Leda Glyptis: But the process of getting them to see the value of doing yet another thing is the same. What becomes a little easier when you're higher up the organization, and you have the support higher up the organization, is that you will get to yes or no faster. But the tensions of executing those things... which is where it's at... I'm sure you've heard the 11:FS slogan? We'll send you a T-shirt: "Execution's everything." So it gets a little bit easier to get those decisions, but the execution still hurts. And then you have the problems of people having to learn new tricks; people not having the technical capabilities, not having the infrastructure they need.
We were doing this robotics process automation exercise, years ago, and the first sticking point was that we couldn't access external software from the floor that had been dedicated for this experiment. Took about a month, to solve that. Because, banking.
And then we found that the way that the original system was set up, the system that we had to plug into with this RPA implementation, needed a name. It couldn't generate users for the robots. So we had this surreal afternoon of naming the robots. And it sounds funny, and at the same time it was not painful, it was actually fun, but it's so unnecessary.
And there are a million stories that are not as fun, that hold back the execution and make people who are actually working towards the same end, to provide for the customers and make the company successful profitable and stable... We're all trying to do the same thing, we're just trying to do it doing different things. The clashes are monumental.
So, yes, I was writing to myself, I was writing to my team, as a reminder of why we do this.
Jim Young: Yeah. I could go on with a whole lot more questions. But we're recording this at BankOnPurpose, and Leda's going to be taking the stage soon, to talk about digital transformation. And I suspect talk about some of the things where banks are not doing it well, I would imagine?
Leda Glyptis: There'll be a bit of the banks following the wrong bright light. Not so much failures, but the distractions that quite a lot of the time can make dealing with digital transformation overwhelming. Because if you have to understand 8 million things, and develop 700 of them, where do you even begin? So a lot of what I'll be talking about is how easy it is to be distracted by the wrong things, and what do you need to do focus on the right things. And the right things are not the same for everybody. They need to be allowed to your purpose, and to your business viability, and figuring those things out is a hard exercise in self-reflection.
But, so we can end it on a high, what I am seeing particularly with the work I do with 11:FS - and the 11:FS's character and identity plays into that a lot, because we are different; we are all about execution; we are all about getting, not PowerPoint, but really working software in the hands of people - the people who come to us, the banks who come to us and say, "Okay, let's do this together," have gone through the exercise... and that sort of goes back towards answering your earlier question as well... they've gone through the exercise of trying to do a light-touch, low-commitment innovation exercise. And they realize it doesn't actually bring the benefit that you would expect, at the cost.
So the people who come to us have gone through the hard exercise of either trying to do as little as possible and realizing that doesn't get you far; or doing certain things that didn't work, have learned a lot in the process, and they are really ready to do it in earnest. And we're seeing a lot of that.
So the industry is changing. And although what we've seen over the past few years has at times been disappointing, in terms of it speed, commitment, engagement, or seriousness, I am definitely seeing a gear change with banks coming to the table and saying, "We've learned from the exercise so far, and here we go."
Jim Young: Great. That was a very good mix of tough love and a little bit of motivation. Leda, thank you so much for coming on the show.
Leda Glyptis: It's a pleasure. Thank you for having me.
Jim Young: And that'll to do it for this week's show. Again, reminder that we will have links to the articles that we mentioned in this piece that Leda has written, that we highly recommend that you take a look at it.
And now for a few other reminders: If you want to listen to more podcasts, or check out more of our content, you can visit our resource page at PrecisionLender.com. Or you can just head over to our homepage to learn more about the company behind this content. Finally, if you like what you've been hearing, make sure to subscribe to the feed in iTunes, SoundCloud, Google Play, or Stitcher. We love to get ratings and feedback on any of those platforms.
Until next time, this has been Jim Young, for Leda Glyptis, and you've been listening to The Purposeful Banker.
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