I’ve been listening to many 4Q earnings calls in the last week. I’ve also been writing a speech entitled “Strategies for Growth and Profitability” that I’ll deliver in two weeks to a group of bank CEOs and Directors. I’m struck by the lack of any real linkage between what I hear on calls with the bank investment community and what is widely believed to be needed to drive better performance in the banking business.
The consulting community spends a lot of time talking about the need for banks to build more customer-centric business models to replace the price/volume business models that drove so much of the industry’s earnings in the past. I’m guilty of this myself. But building differentiated, more customer-centric business models takes time. If a bank is to succeed long term, it must be willing to forgo certain short term results for the benefit of long term performance. Bank CEOs need credible strategic plans designed to build new sources of earnings growth, and these plans must convince investors of their merits to take some of the pressure off short-term results.
In a recent interview with Harvard Business Review, Jeff Bezos, the CEO of Amazon (recently recognized by HBR as the second best CEO of all time in the world), said, “Some of the things that we have undertaken, I think could not be done in two to three years, and so basically if we needed to see meaningful financial results in two to three years, some of the most meaningful things we've done we would never have even started. Things like Kindle, Amazon Web Services, Amazon Prime. The list of such things is long at Amazon.”
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