Transformation as an enabler of growth
The following are excerpts from remarks made by Patrick Hylton at the PSOJ President's Forum on July 22, 2014.
JAMAICA is undergoing a transformation, as part of our economic programme, which is an important foundation for sustainable growth. All stakeholders — public and private sector and ordinary citizens — must play a role.
Today, the pervasive question is: Where is the growth? The burning platform for growth is further fuelled by the fast-changing global environment in which we operate. Technology and digitisation have lowered barriers to entry, changed the competitive landscape and raised our customers' expectations and expanded their options. It is in the interest of every firm to make the adjustments required to survive or thrive in this new norm. Jack Welch often said: "If the rate of change on the outside is greater than the change on the inside, the end is near."
It is my strong belief that the growth we seek can be unlocked with transformation.
Transformation means significant and meaningful change; change that makes people doubtful, uncomfortable and even resistant. It requires changes in both mindset and behaviour. It is the failure to transform one's mindset that often leads to failure.
It may be our natural disposition to doubt the growth possibilities given challenging circumstances:
* In 1943, Thomas Watson, president of IBM, said: "I think there is a world market for maybe five computers."
* In 1946, Darryl Zanuck, executive at 20th Century Fox said: "Television won't be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night."
* In 1977, Ken Olsen founder of Digital Equipment Corporation said: "There is no reason anyone would want a computer in their home."
Once you transform your mindset, then you also need to transform your businesses. In every recession, you find companies that grow. In the 2007/2008 US recession, Apple, Starbucks and Wal-Mart grew. Before Apple became the company we know today, it was a company with declining performance, focusing primarily on computers before it transformed the marketplace for mobile computing devices and portable entertainment. In 2003, when Apple introduced the iPod, its market capitalisation was approximately $1 billion and today Apple's market cap is in excess of $500 billion dollars.
You can also find growth in low-growth economies. Digicel received its telecommunications licence in 2000, when Jamaica's real GDP growth was 0.2 per cent. This set the stage for transformation of the telecommunications landscape in Jamaica and tremendous business growth for Digicel.
National Commercial Bank (NCB) has been on a transformation journey since 2011. We recognised that we had a model that had not changed in decades while financial services were changing dramatically globally.
We have been using a five-step transformation framework developed by McKinsey and Company.
STEP 1: ASPIRE — This answers the question What do we want to achieve?
At NCB, we set an aspiration to become one of the top five financial services institutions in the English-and Spanish-speaking Caribbean. Another aspiration was to triple our sales productivity. We heard this aspiration was not achievable because of economic and technological constraints. However, we revamped our sales methodology and tripled sales productivity in less than six months. This played a role in offsetting losses related to the Jamaica Debt Exchange and led to NCB becoming the #1 bank based on profitability for the first time in its history. In terms of our regional aspirations, we are successfully progressing toward this goal. One of the lessons learned in the aspiration-setting process is that you need to be bold. Complaints, cynicism, and resistance are good indicators that your aspiration is transformative in nature.
STEP 2: ASSESS — This is evaluating where you are today versus your aspiration. This requires honesty about your strengths and weaknesses.
In conducting our assessment, we learned:
* Look beyond your local borders when benchmarking your performance. Insularity can limit perspective and consequently your accomplishments.
* Validate "intuition" with analytics. Intuition often leads to poor decisions. Amazon's customer experience, the election of President Barack Obama, and the recent German World Cup win have come about as a result of analysing data to drive decisions and strategies.
* Leaders must look in the mirror too. Role modelling is a critical part of change language.
STEP 3: ARCHITECT — This is developing the action plan. My only caution is to avoid the phenomenon of analysis paralysis. I paraphrase Robert Burn's poem To A Mouse: "The best laid schemes of mice and men often go awry."
It is important to plan but quickly get to STEP 4: ACT.
Kodak was so synonymous with photos that the phrase "a Kodak moment" was coined. Yet, the company filed for bankruptcy in 2011. This company invented the core technology in digital cameras but failed to act and became obsolete. We often hear the phrase "justice delayed is justice denied". The same is true if we replace justice with value, because of the time value of money.
We learned it is better to pilot the action plan and then refine as you go along. This gets us to action, but mitigates the risks of limited planning.
Acting is also about courage. If you are embarking on something transformational, you will face resistance. But recall: "Smooth seas don't make for skillful sailors." So be brave and courageous in your actions.
STEP 5: ADVANCE, which answers the question "How do we improve?" Even when you have reached what you consider to be the highest heights of achievement or performance, you must continue to advance.
Apple, Samsung and Amazon are three of the best companies in the world in terms of market capitalisation, profitability, and growth. Yet, they are constantly transforming and, as a result, they are constantly growing.
At NCB, our next transformation is called "Bank of the Future". We have installed intelligent ABMs and kiosks in our branches, which allow our customers to avoid teller lines, pay reduced or no fees, transact business 24/7 in some locations, and continue to bank in the safe environs of our branches.
We look at transformation as critical to our sustainability. The public may wonder why we are making changes given how profitable we are. It is important to note that historical financial performance is no predictor of future performance. Companies that have generated billions in US dollars in profits — Lehman, Bear Stearns — have failed. Recall that three of the best performing companies in the world — Apple, Samsung, and Amazon — are still making continuous improvements.
In closing, let me re-emphasise how important it is for all citizens to play a role in Jamaica's transformation. Instead of asking "Where is the growth", recognise that the growth is within each of us. Let us commit to transitioning the dialogue from where's the growth to identifying the growth and pursuing it through transformation of our mindset and businesses.
As Daniel Burnham said: "Make no little plans. They have no magic to stir men's blood and probably themselves will not be realised. Make big plans; aim high in hope and work, remembering that a noble, logical diagram, once recorded, will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency."
Patrick Hylton is the managing director of the NCB Group.