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Things may be tough in banking right now, but chances are your bank is in much better shape than British cycling was in 2002.
That’s when Dave Brailsford took over the program. In the 76 years before Brailsford came on board, the British track cycling team had won a grand total of one Olympic gold medal.
Just six years later, the Brits dominated track cycling at the 2008 Olympic Games in Beijing, winning seven of the 10 available gold medals. Four years later they replicated the feat in London. Meanwhile, in 2010 Brailsford undertook a similar challenge with the British professional road cycling team, Team Sky. Just two later, the team produced the first-ever British winner of the Tour de France, beginning a string of three British winners in five years.
How’d Brailsford improve British cycling from irrelevant to dominant? One percent at a time.
The Theory of Marginal Gains
When Brailsford took over British cycling, he was well aware of just how far removed the program was from reaching the top of the podium in the Olympics. To avoid being overwhelmed by the task at hand, he went back to some of the process-improvement research he’d read about while getting his MBA.
“It struck me that we should think small, not big,” Brailsford said in a Harvard Business Review interview. “Adopt a philosophy of continuous improvement through the aggregation of marginal gains. Forget about perfection; focus on progression, and compound the improvements.”
Brailsford and his team were relentless in seeking out all the ways they could make small, steady gains. They did everything from improving hand washing to avoid illnesses at events, to keeping the mechanics area at the track free of dust. Equipment, aerodynamic positioning on the bike, power needed at the start of a race – British cycling looked at all sorts of ways where they could get just a little bit better, and a little bit closer to gold.
Don’t Confuse the Peas for the Steaks
It wasn’t that straightforward, of course. The marginal gains needed to be made in the right areas – “the steak” as Brailsford put it – and not on the periphery (“the peas”). That was a mistake Brailsford admitted to making initially when he switched from running the track program to the professional road cycling team. Poor results in the first few races helped the team realize they were focused on too many bells and whistles and that they needed to shift the focus of their efforts.
Is the Gap Bridgeable?
Even if the improvements are made in the right areas, they needed to be able to add up to the desired result. For British cycling, that meant medal-winning performance. Cyclists that they felt could be improved to that level made the cut. Those whose gap between their current status and their future goal was too wide were dropped.
What’s Your Bank’s Benchmark?
So what would this look like if you tried it at your bank?
First, you’d start first with where you want your bank to go in the future.
“If you don’t know what you’re aiming for, you’re never going to get there,” Brailsford said in a 2015 talk he gave at the Investors in People Outperformance Roadshow. “Get a true understanding of what it’s going to take to get there, then come back and do an audit.”
Figuring out where you want your bank to fall on the chart to the right can be a helpful way to determine your goals. But the mark you plan to reach needs to be quantifiable. Vague platitudes like “We want faster growth and more profits,” don’t get you anywhere. Something like “We want to grow our portfolio by 15% without sacrificing margins,” gives you a much clearer goal.
“Boy is it easy to do an audit once you know what you’re benchmarking against.”
Identify the Steak
The big juicy t-bone of potential improvement at your bank isn’t cost-cutting or compliance – it’s revenue. There you’ll find numerous places – the customer experience, pricing , etc.- where you can make those marginal improvements that served British cycling so well.
A small increase of basis points on certain loans, a tiny improvement in the number of deals you win each month, a slightly shorter duration on some of your loans, a gradual streamlining of the loan decision-making process … the list can go on and on.
Those cost-cutting moves? They’re the peas. McKinsey & Co. made that point back in 2003, in their influential article, “The Power of Pricing.” In its research of S&P 1500 companies, McKinsey found that a 1% increase in pricing had an impact on profits that was ““nearly 50 percent greater than that of a 1% fall in variable costs such as materials and direct labor.”
Becoming a Positive Place
Brailsford believes that once the marginal gain process gets rolling, “it creates a contagious enthusiasm. Everyone starts looking for ways to improve … Our team became a very positive place to be.”
Banks can become that positive place. They can set ambitious goals for the future and reach them. They just need to identify the places where they can improve and then start making gains, 1% at a time.
About the Author
Jim Young, Director of Communications at PrecisionLender, is an award-winning writer with experience in a range of positions in media and marketing, from reporter to website editor to content marketer. Throughout his career has focused on the story – how to find it, how to understand it, and how best to share it with others. At PrecisionLender he manages the many ways in which the company shares its philosophy on banking and the power of relationships Jim graduated Phi Beta Kappa from Duke University and holds a masters degree in journalism from Columbia University.More Content by Jim Young