Thomas F. Borgen is considered as one of the most important and competent CEO’s in the Nordics. In this lecture, he talked about the journey Danske Bank has been on since the crisis in 08′ and how it is to turn around a major institution like Danske Bank successfully. Furthermore, Thomas F. Borgen talked about what it takes to be a successful CEO in a modern bank where new technologies are continually disrupting the world of finance.
In this note, I have transcribed the most interesting points from his talk. Thanks to CBS Financelab for arranging the event.
The Fourth Industrial Revolution
The 10-year plan does not seem to apply more. The world is becoming less predictable. We cannot really plan for tomorrow anymore. We need to deliver today but prepare for tomorrow.
We are in the fourth industrial revolution. This revolution is the merger of technology, the physical and the biometrical. New definitions are being made, artificial intelligence, augmented reality and much more. Some of it is just at the starting point, but as with previous industrial revolutions, it comes with exponential growth.
Industrial revolutions have historically been a period of unpredictable change. We are witnessing significant shifts, exponential shifts. It is Moor’s law where we double everything every 18 months.
In exponential thinking, we tend to overestimate the short-term impact and underestimate the long-term implications.
MobilePay became a great success but when it launched in 2014, the best case was 300.000 users, and a fantastic case was 500.000 users. Today there are over 4 million users with 100.000 daily transactions. It is the most downloaded App in Denmark. This was a genuinely exponential adaptation.
Start small, scale fast or fail fast. To do this, you need to know when things are not working. It is not easy to fail fast. Unless you try, more of what does not work then you will never learn to fail.
Taking the history with us into the present and bringing it into the future
In a 142-year-old organization, how do we keep an organization going for the next generation? 60 years ago, the average fortune 500 company had an average age of 60 years. Today it at 15 years and falling. This is a falling statistic because we have so many new companies emerging. The average tenure of a CEO was 7.5 years back then, and now it is only four.
How do you make sure that we can bring our legacy with us into the present, and then put it into the future? We play on the strengths of what we have learned from history, but we do not live in history.
Employee -> Customer -> Shareholder
On the top of our priority list is the customer, if you cannot serve your customer, then you have no business model. It is so easy to get the customer-part wrong if you are not always thinking about what really drives value. What are your customer’s ambitions and needs?
That is what we are starting to think about in the financial sector, because how exciting is it really to take a mortgage? Our job is not to give you a mortgage, our job is to help you achieve a dream. We have to think about the customer’s ambition and goals and not about our product. So to sell into the customers’ needs and aspiration. This is not fluffy, this is a hard fact. The soft part is often the hard part.
The employees are the ones who deliver the value. Therefore, they are super important. You have to be able to recruit the best to keep a healthy bank running. You have to go into a positive spiral. Recruit the best people to create an environment, which attracts more great people.
If great employees create the best experience for our customers, then this leads to a much better value for shareholders. There is a perfect empirically correlation between customer satisfaction and shareholder value.
If we do not deliver on these three parts then we go down.
- Customer experience
- Employee engagement
- Shareholder value
The essence of Danske Bank and the importance of values
- Vision – to be recognized as the most trusted financial partner
- Customer promise: we help customers be financially confident and achieve their ambitions by making daily banking and important financial decisions easy.
- Strategic core: Know where we are going.
- Core values: expertise, integrity, value creation, agility, collaboration
In Danske Bank, there are Standard Operating Procedures (SOP), and we have about 30,000 of them. We need something to fall back on to be agiler, and most often this comes down to your values
When you go through life as individuals or as a group, you have to have values. It is not about what values you have, but about having the values that you believe in. Therefore, when you enter a company, then they must have values, which you can associate with because when everything is failing, then it’s your fundamental values you fall back on.”
You will never see a company with negative values but what you need to test is if they are really lived by and if they correspond to your values. Values alignment is one of the primary parts of interviews at Danske Bank. This is not soft, this is hard. Things are changing so fast, so we need to have values and not standard operating procedures.
Empowerment vs. Delegation
Danske Bank had to go through a cultural journey to get people to take ownership of the changing business environment. The CEO cannot make all the decision, so we had to empower our employees.
We did an experiment with two branches.
Branch 1: Can do whatever you want, take your own decisions
Branch 2: Follow the standard procedures as always.
What do you think happened with the productivity in the two departments?
The productivity surprisingly went down in the first branch. The reason is that we delegated, we did not give the department the tools to change. We did not empower them. How do you enable the organization and not just delegate?
We had to go through extended training and get people to be ready to accept mistakes. Unless you are willing to accept errors, then you will not be able to empower your organization. This sound soft but it is hard. A PowerPoint of values does not work unless you work with it in practice.
Danske Banks main focus points
Macroeconomy: Banks are like a mirror of the economy. Several studies show that you can predict a bank’s performance by comparing it to the performance of the economy. This leads to a lot of political engagement for Danske Bank. We have changed our approach in this area.
Previously we said, “What is good for Danske Bank is good for the economy.”
Now we say, “What is good for the economy is good for Danske Bank.”
Competition: We have our usual competitors, but we are starting to see more and more fintech companies emerging. Few are succeeding, and I am less worried about this because we have learned to adapt to their agility. The people we recruit are very often the same who would go and create a fintech startup. Therefore, I am not that worried about fintech, I am more interested in collaborating with them.
When we launched project X (creator of MobilePay), it was just a hub of very bright people which we kept very separated from Danske Bank. Today there are more than 300 employees. So we closed it down and merged it into the mothership because the organization became too big and now we have started all over again with a new hub.
We need to disrupt and compete with ourselves. That is one of the most challenging things and we have done it. Sometimes it works sometimes it does not. The last thing we did was June, which is a simple investments platform, where users can invest cheaply. There has been an exponential development of the platform, and if it takes off then, it is going to destroy our asset management business. However, if we do not do it, then someone else will do it. It is hard to know where we need to disrupt ourselves. The soft part is the hard part. Take the history with us into the present and bring it into the future.
Digitalization: What cannot be digitalized will be more important going forward. The winners will be the ones combining the human work with the digital work in the best way. That is the hard task.
What will it take to deliver on the strategy?
Clear vision: You have to be very specific about what you are trying to achieve.
Values: I cannot stress this enough. When you seek employment, ask yourself if you recognize the values and if you want to live by the values of the company. Be arrogant enough to check your manager’s values and ask him what his or her values are. This is very important.
Empowerment: This is a big thing, how is the new employer giving you the tools to make sure that you can deliver in your framework. We need empowerment over delegation.
Agility: This goes without saying, you need to be agile in a changing environment.
Cooperation: How do you ensure that 20.000 employees work together to solve the customer’s ambition? Cooperation is more important than ever, and it’s a challenging problem, one that we have not been able to address adequately. We are often driven by individual KPI’s and not by the team’s performance.
Simplification: If I could rewrite the CEO title then I would have changed it to Chief Simplicity Officer. How do we simplify our complex work? Think about it when you come into an organization, how can I simplify this? Complex problems need simple solutions, so most of these strategy textbooks of 500 pages are worth nothing.
Exciting times ahead – with every challenge comes an opportunity. Unless you believe in the future and believe that you can actually change something, then I do not think you will be able to succeed.