Addressing Disruptions in the Banking Sector: Creating a ...€¦ · Airlines lease airplanes, personnel, reservation systems, food services, and maintenance staff, which enables

Addressing Disruptions in the Banking Sector: Creating a Liquid Organization

Banks must create value while addressing dramatically increasing competitive attacks and disruptions. To effectively implement offensive and defensive strategies, banks must increase their liquidity—their speed, flexibility, and scalability. For banks to increase liquidity they must move towards team structures, focusing on value-added products and services, and improve their adaptability through transformation, improving the liquidity of their delivery, their infrastructure and their people. This is a blueprint for increasing liquidity to better create and address disruption through the implementation of the three “R”s: restructure, reskill and rescale.

January 2020

The Accelerating Impact of Disruptions 2

Defining a Liquid Organization 5

The Liquidity of Banks 9

- GardaWorld Case Study 11

Increasing the Liquidity of Your Organization 12

Conclusion 15

About the Author 16

The GardaWorld Difference 17

Table of Contents

The Accelerating Impact of Disruptions

While industries have always faced disruptions, their speed and intensity have increased as dramatic opportunities and threats are created by today’s powerful digital technologies. Digital transformation emerges from technology—social, mobile, analytics, blockchain, machine learning and artificial intelligence, the cloud, and the “internet of things.” The confluence of these technologies produces both opportunities for growth and disruption to existing businesses as it shifts the way in which firms conduct business and accommodate digital disruption.

Understanding the Impact of Emerging Disruption: The Market Matrix

On the vertical axis, we detail access to assets that can be deployed for a strategy. Typical types of assets that a firm deploys are monetary, personnel, infrastructure, systems, and processes. The horizontal axis is the speed of asset deployment, that is, how quickly a firm can deploy assets to implement a strategy. The two-by-two matrix defines four cells that can be used to study inter-industry or intra-industry; our focus is on intra-industry.

Traditional MarketsSmall banks typically have few deployable assets, though they have higher speed or velocity. In contrast, midscale banks have limited deployable assets, but, due to structures, are also slower in deploying their assets. Large banks have scale and therefore more substantial deployable assets—monetary or personnel, for example—but internal culture and processes reduce the speed of asset deployment. One of the fundamental aspects of speed is that firm speed declines with size. The primary drivers for reduced speed are processes and controls; inertia; entry costs; and exit costs, due to scale.

The growth path in traditional banks was quite simple and predictable. Since speed requirements were low, the focus was on scale. As the focus was on developing scale, banks traditionally moved in a predictable manner: Small banks bulked up to become midsize banks, which bulked up to become large banks. Large banks that could deploy assets faster than their competitors became high-performing banks.

Page 2© Arun Sharma - 2020

LARGE FIRMS

ACCESS TO DEPLOYABLE ASSETS

HIGH

HIGH

LOW

LOW

MIDSCALE FIRMS

HIGH PERFORMING FIRMS / MARKET

DISRUPTORS

SMALL / NICHE FIRMS

SPEED OF DEPLOYMENT

Resource Deployment in Traditional Markets

SIZE OF FIRM

SP

EE

D

DE

PL

OY

AB

LE

AS

SE

TS

Speed Deployable Assets

The speed and intensity of disruptions in the banking sector has increased dramatically.

Addressing Disruptions in the Banking Sector

For example, The Goldman Sachs Group, Chase, and BBVA have created online-only banking, using their scale to deploy assets.

Traditional Growth Matrix

Emerging MarketsDisruptions in the banking marketplace have become more prominent due to the emergence of “everything-as-a-service.” Note how many firms provide infrastructure, systems, and processes as a service. The most dominant examples of everything-as-a-service are in the information technology area, where firms can acquire hardware (e.g., Microsoft Azure), software (e.g., Fiserv), and people (e.g., Accenture) as a service. Firms can also source distribution (e.g., Amazon.com), delivery (e.g., UPS), product design (e.g., Red Clay Consulting), or sales. Thus, both speed and scalability are becoming less of an issue. Monetary resources traditionally would have been a barrier, but with the rise of venture capital and private equity, firms can more easily obtain financial support based on their growth prospects. This has changed the resource deployment matrix.

Emerging Growth Matrix


LARGE FIRMS


HIGH

HIGH

LOW

LOW

MIDSCALE FIRMS


DISRUPTORS

SMALL / NICHE FIRMS

SPEED OF DEPLOYMENT

LARGE FIRMS


HIGH

HIGH

LOW

LOW

MIDSCALE FIRMS


DISRUPTORS

SMALL / NICHE FIRMS

SPEED OF DEPLOYMENT

Resource Deployment in Emerging Markets

SIZE OF FIRM

SP

EE

D

DE

PL

OY

AB

LE

AS

SE

TS

Speed Traditional Deployable AssetsEmerging Deployable Assets


As smaller banks combine access to deployable assets with their traditional advantage of speed, they acquire the ability to attack industries. This has led to the emergence of digital disruptors in most industries.

Speed has become critical in the emerging business era, with firms seeking to enhance their speed. Smaller financial firms have the highest speed and, with easier access to financing, they are most likely to be disruptors. The speed of small financial firms is increasing, due to the everything-as-a-service trend. Midsize firms are bulking down to increase speed, a critical element in the emerging era of competition.

Disruption has not come to every industry. In industries that have high entry barriers with long time horizons, disruptions are slower to emerge. An example is the cruise industry, where all new ship deliveries for the next six years have been set, and no additional capacity currently exists. Here, the industry can see what competition is on its way a few years in advance. The second category in which disruption comes slowly is comprised of industries that are heavily regulated, such as defense, and electric utilities, to name a few. Regulations and licensing requirements reduce the level of disruption in this category.

Emerging Banking Industry Disruption

The banking industry, although somewhat regulated, has been attacked by new firms that act as disruptors. Banks are facing increased disruption fromboth existing competitors and new-to-market firms. They face disruptions that are knowledge-based, network-based, and convenience-based which are increasingly fueled by digital technologies. As banks face disruptions, they must become more liquid to address emerging market needs.


As banks face disruptions, they must become more liquid.

NATIONAL BANKS

(BANK OF AMERICA)


HIGH

HIGH

LOW

LOW

LOCAL / REGIONAL BANKS

(COCONUT GROVE BANK)

MARKET DISRUPTORS

(PAYPAL)

FINTECH(SOFI)

SPEED OF DEPLOYMENT


Although industries have always faced disruptions, their speed and intensity have increased as dramatic opportunities and threats are created by today’s powerful digital technologies. Effectively addressing these environments requires firms to increase their speed: faster decision-making, faster delivery, faster product development and launch, and flexibility.

THE CONSEQUENCES OF SPECIALIZATION

The traditional strategy to address environmental complexity is to hire specialists and super-specialists with expertise in very narrow areas (e.g., compliance). Contrary to the goal of this strategy, however, firms become slower and less flexible as the number of specialists increase.

Organizations become more complex, as specialists often serve more people, and firms must manage more organizational relationships. In sum, specialists need to work with a large number of people. This implies that specialization leads to more organizationally dispersed partners; this means that specialists may delay or ignore the request of a single person. Specialization also increases coordination costs. As more people are involved, more handoffs are needed, and more steps are required for any change, consuming time and organizational resources. As specialists wait to hear from other specialists, speed and flexibility decline (organizing a meeting of specialists also takes time). Finally, specialists are hired for their skills and stay in their lane (remain experts in narrow areas) and do not look for new learnings or increasing innovation in processes.

UNDERSTANDING ORGANIZATIONAL FORMS: TRADITIONAL VS. LIQUID

A (Solid) Traditional OrganizationLike molecules, people and functions bond together to form rigid structures and processes, which decrease the speed of delivery. As a result, a traditional organization is generally solid with interlocking horizontal and vertical functions. These functions generally have different goals (e.g., the sales function is revenue driven, and the legal function focuses on risk reduction) and the incompatibility of these goals increases negotiations, which reduces speed and flexibility. Like solids, changing the shape (structure and processes) of solid firms requires significant energy in terms of people, time, and resources. People in solid organizations have structure but little autonomy thereby reducing innovation.

A (Gaseous) Unstructured OrganizationIn contrast to the solid organization, gaseous organizations can fill any space but have no structure. Like gas molecules, people can form any shape, move autonomously, and define their own roles. In this unstructured organizational form individuals define the role they play. There are no managerial structures in gaseous organizations, and individuals self-evaluate their performance. Also, there is no coordination of strategy or purpose, and therefore, people in gaseous organizations have no structure but have complete autonomy.


Defining a Liquid Organization

A (Gaseous) UnstructuredOrganization

Effectively addressing disruptions requires firms to increase their speed and flexibility.

A (Solid) Traditional OrganizationH

OR

IZO

NTA

L C

OO

RD

INA

TIO

N(F

UN

CT

ION

AL

AR

EA

S)

VERTICAL COORDINATION (CUSTOMER GROUPS)

ProductManagement

Finance

Sales

Group Manager

CustomerGroup 1

CustomerGroup 3

Sales

ProductManagement

Finance

CustomerGroup 2

Sales

ProductManagement

Finance


A Liquid Organization To increase strategic speed and flexibility, firms need to create a liquid organization. Like molecules in liquids, people can move around in a liquid organization, forming work relationships based on the needs of the firm. Liquid organizations have autonomous, self-managed team-based structures, and the leadership provides direction and coordination.

The focus of liquid organizations is on speed and flexibility, as they can change shape or move in a specific direction by changing their effort. Therefore, employees have limited structure and increased autonomy, both features of a high-speed, flexible, and innovative organization.

CHARACTERISTICS OF A LIQUID ORGANIZATION: EVERYTHING-AS-A-SERVICE

Because speed has become a key differentiator, traditional firms are seeking higher speed to better compete in emerging environments. The primary strategy for increasing speed is to design a liquid organization. Liquidity is a financial measure that examines the assets (typically cash) a firm can access and at what speed. From the financial market perspective, liquidity is how quickly one can get in and out of an investment. In an organizational or strategic sense, it is measured as both the amount of assets a firm can deploy and the speed at which the firm can deploy those assets.

The organizational strategic philosophy of liquidity is centered around “everything-as-a-service.” In this philosophy, all functions are services, and organizations either insource or outsource them to be flexible and scalable, based on demand.

CASE STUDYThe Small-Scale Electric Tram Industry vs. the Large-Scale Airline Industry

The electric tram industry runs on specific tracks, requires a dedicated infrastructure, and has employees that focus on a single firm (most cities have only one tram service), and is thus considered solid. In contrast, the airline industry is a good representative of one that is liquid. Airlines lease airplanes, personnel, reservation systems, food services, and maintenance staff, which enables them to easily and rapidly start and stop services in a city.

A change in effort in a liquid organization can change the direction of the firm. By changing the number of flexible teams working in an area, a firm can have an existing business focus, a balanced focus, or a new business focus. Managerial emphasis also changes as the number of teams move in a specific direction. The number of teams working in an area can also be changed every 3–4 months, or quicker based on strategic needs.


A Liquid Organization

Teams are Self-organizing and Accountable(Color of Circles within Teams Refer to Expertise)

Leadership Provides Strategic Direction andCoordinates Team Activities


A liquid organization is built for speed; therefore, liquidity in a large organization allows it to match the speed of smaller firms.

With access to deployable assets, larger firms can more effectively compete in disruptive environments, and attack disrupters. By becoming faster, more flexible, and scalable, larger firms become more competitive.

The four core elements of a liquid organization are delivery, infrastructure, people, and geography.

LIQUIDITY INDEXThe Characteristics of a Liquid Organization

Liquid Delivery Faster development and deployment of resources and technology— increasing the quality, speed, and innovativeness of delivery across the organization

Liquid Infrastructure On-demand resources such as external expertise, which increases or decreases in scale based on needs

Liquid People A workforce designed for flexibility in size, ability, and movement across functional boundaries. Dynamic learning, cross-training, and staff augmentation are strategies to enhance the liquidity of people

Liquid Geography The ability of employees, suppliers, and customers to work from any location (place and time)


Resource Deployment: Increasing Speed

SIZE OF FIRM

SP

EE

D

DE

PL

OY

AB

LE

AS

SE

TS

Emerging Deployable AssetsTraditional SpeedEmerging Speed

Liquid infrastructure, including access to on-demand external expertise and resources, is key to the success of an organization.


LIQUIDITY IN FINANCIAL SERVICES

Market Strategy Associates has developed a proprietary methodology to determine organizational liquidity across the four key elements: delivery, infrastructure, people and geography. Using surveys and published data, we calculate liquidity on a scale of 1–10, where 1 suggests no liquidity and 10 suggests full liquidity. As an example, we present 2018 liquidity scores for a sector of the financial services industry:

Liquidity Score for Financial Services Firms - 2017

Type of Firm Liquidity Liquid Liquid Liquid Liquid Score Delivery Infrastructure People Geography

Market Leader 5.2 6 5 4 7

Other Large Firms 3.6 3 4 3 6

Smaller Firms 6.2 7 8 4 5

Disruptor 7.8 9 9 6 6

Interestingly, the disruptor’s liquidity scores were dramatically higher than those of the industry, including the market-leading firm. In contrast, as expected, large firms that did not lead the market were non-liquid and vulnerable.

STRATEGIC PERSPECTIVES

There has been a call to make firms more ambidextrous. Ambidextrous firms can simultaneously combine exploitation (more revenues from current customers and offerings) with exploration (seeking new customers and industries with new offerings). Ambidexterity is particularly important for firms that want to pursue multiple strategies under the same organizational form. For instance, a firm may wish to “run the business,” in which they attempt to increase revenue by predominantly selling current products to current customers and, at the same time, “grow the business,” by seeking new customers through creating new variants of existing products and services. Finally, firms may want to “transform the business,” by developing new processes and procedures, as well as new business models and organizational forms.

Increased liquidity is required to transition from a “run the business” mindset to a “grow the business” or “transform the business” strategy.


The liquidity index is a proprietary methodology to determine organizational liquidity.

Three Strategic Choices

RE

VE

NU

E IM

PL

ICA

TIO

NS

Focus on Core

Hyper Lean.Enhanced Service Levels.

Speed, Flexibility, Scalability.Data Driven: Analytics, Digital Marketing, Multi-Channel, Personalization.Asset Rationalization.

Horizon Scanning.External Relevance: Customer/ Consumer, Financial Markets. Network Effects.New Business/ Organizational Models.New Technology.

Focus on Adjacencies Focus on New Business

No Growth Linear Growth Exponential Growth

RUN THE BUSINESS

GROWTHE BUSINESS

TRANSFORM THE BUSINESS

FOCUS

GROWTH


The Liquidity of Banks

SAMPLE AND DATA COLLECTION

Data on the liquidity of banks was collected from 100 executives at U.S. retail banks. The executives were randomly chosen from a panel of banking executives, and the survey was administered in June 2019. The distribution of surveyed banks in terms of deposits is: 20% have less than $1 billion in deposits, 42% have between $1 and $10 billion in deposits, 21% have between $10 and $100 billion in deposits, and 17% have above $100 billion in deposits.

The survey consisted of 40 questions aimed at measuring liquidity. The liquidity data gathered was supplemented with data on the performance of banks from FDIC, and the data was collected for March 2017 and March 2019. One of the traditional methods of understanding the effect of liquidity is to examine the profitability of organizations. Unfortunately, in banking, as Kristen Regehr and Rajdeep Sengupta at the Federal Reserve Bank of Kansas City have demonstrated, the size of the bank (in terms of deposits) positively affects profitability. Therefore, other measures of performance were used. We surveyed banking executives who suggested that we use annual growth in deposits and annual growth of income as indicators of performance. For the banks in the survey, the average annual growth in deposits was 6.91% with a range of -22.08% to 62.43%; and average annual growth in income was 28.50% with a range of -43.13% to 155.84%.

LIQUIDITY OF BANKS

In general, we found that banks were not liquid. On a ten-point scale, the liquidity scores of the banks we studied ranged from 1.95 to 5.66, with a mean of 3.74. The liquidity is lower compared to other industries, including financial sectors such as credit cards. The regulatory framework of the banking industry may be the reason for lower liquidity. The liquidity scores of the dimensions are: liquid delivery (mean=1.74); liquid infrastructure (mean=3.72); liquid people (mean=5.18); and, liquid geography (mean=5.48).

As expected, smaller banks are more liquid than larger banks. The gap was large, and the average liquidity score of a bank with less than $1 billion in assets was 4, compared to an average liquidity score of 3.34 for banks with assets above $100 billion.


The liquidity of banks is lower compared to other industries, including financial sectors such as credit cards.

Distribution of U.S. Retail Bank Size by Liquidity

BANK SIZE (DEPOSITS)

LIQ

UID

ITY

<1 Billion $

4.50

4.00

3.50

3.00

1-10 Billion $ Mean 10-100 Billion $ >100 Billion $

4.003.87

3.743.58

3.34

Distribution of U.S. Retail Bank Size by Liquidity

LIQUIDITY SCORE (OUT OF 10)

PE

RC

EN

TAG

E O

F B

AN

KS

<3

60%

50%

20%

0%

3-4 4-5 >5

40%

30%

10%

15%

48%

36%

1%


LIQUIDITY AND BANK PERFORMANCE

Annual Deposit Growth RateLiquidity positively affects annual deposit growth, and the correlation is 0.44, which is large and statistically significant. In examining the liquidity of bank groups, we found deposit growth rates increase with liquidity. The results are dramatic. A bank with a liquidity score of 2 has a negative annual deposit growth rate (-1.6%), compared to a bank with a liquidity score of 5 whose annual deposit growth rate is 13.55%.

Annual Income Growth RateLiquidity positively affects annual income growth, and the correlation is 0.33, which is statistically significant. In examining the liquidity of bank groups, we found income growth rates increase with liquidity. We projected annual income growth rates associated with liquidity, and the results are also very positive.

In general, we found that banks were not liquid but that higher levels of liquidity were associated with higher annual deposit and income growth rates. We also found that liquid people was the most important dimension, followed by liquid delivery and liquid infrastructure.


Liquidity positively affects annual deposit growth and annual income growth.

U.S. Retail Bank Liquidity Groups and Annual Deposit Growth


GR

OW

TH

RA

TE

(DE

PO

SIT

S)

<3

14%

12%

4%

0%

3-4 Mean 4+

8%

6%

2% 0.73%

5.34%6.91%

11.50%

10%

U.S. Retail Bank Liquidity Groups and Annual Income Growth


GR

OW

TH

RA

TE

(IN

CO

ME

)

<3

40%

35%

15%

5%

3-4 Mean 4+

25%

20%

10%

16.06%

27.69% 28.50%

34.22%

30%

Liquidity Score and Projected Income Growth Rates


GR

OW

TH

RA

TE

(IN

CO

ME

)

2

40%

35%

15%

5%

3 4 5

25%

20%

10%10.26%

21.23%

30.22%

36.39%

30%

Liquidity Score and Projected Deposit Growth Rates


GR

OW

TH

RA

TE

(DE

PO

SIT

S)

2

16%

12%

0%

-4%

3 4 5

8%

6%

-2%

-1.73%

2.78%

10%

14%

4%

2%

7.73%

13.55%


Page 11

National banks must take bold steps to increase their liquidity, including the outsourcing of what were once considered core banking functions.

GARDAWORLD CASE STUDYIncreasing Liquidity Through the Outsourcing of Non-core Functions

In the face of disruption, organizations must become more liquid to increase their speed and flexibility, and to focus on value-added products and services. Some banks have increased their flexibility through the outsourcing of certain services. A prime example of this is the gradual outsourcing of cash transportation and vault services by national banks to third-party providers.

Traditionally, the handling of currency and the management of customer transactions has been a core function of a bank. As a result, banks made major investments in the infrastructure, systems, processes, and resources required to manage the full cash-handling chain of custody. But consumer habits have since evolved, and cash and cheque transactions have decreased dramatically. Banks have come to a crossroads: continue to invest in a declining (but necessary) business while also confronting major industry disruptions, or refocus assets and activities to capitalize on disruption and create value.

Bank of America divested its U.S. cash vault network and transferred the accompanying workforce to GardaWorld in 2014. Other banks in the U.S. and Canada have taken similar steps in recent years, outsourcing cash processing and handling functions. With the dramatic increase in competitive attacks and disruptions in the banking industry, the move towards the outsourcing of such non-core functions has accelerated, enabling banks to increase their liquidity and refocus their assets and activities on more value-added functions.

Cash Services Value ChainC

AS

HR

EP

LEN

ISH

ME

NT

DE

PO

SIT

PIC

K-U

PS

(NO

TE

S A

ND

C

HE

CK

S)

CASH REPLENISHMENT

FIRST-LINE MAINTENANCE

DEPOSIT PULLS

CASH & COIN PROCESSING

RECONCILIATION

SECURE STORAGE

CHECK IMAGING

INVENTORY COUNTS

CASH FORECASTING

ARMORED TRANSPORTATION

ARMORED TRANSPORTATION OF

CASH AND COINS

PUBLICCONSUMERS

ARMORED TRANSPORTATION OF

CASH AND COINSUNFIT NOTES

CENTRALBANK

FINANCIAL INSTITUTIONS

ATMs

RETAILERSCASH VAULT

CASH SERVICES

CASH SERVICES CASH SERVICES

CASH SERVICES


Increasing the Liquidity of Your Organization

Banks can increase their liquidity through the three “R” strategy—restructure, reskill, and rescale. Restructuring involves changing traditional organizations into team-based structures to increase liquid delivery; reskilling focuses on increasing the dynamic learning capability of banks and its people to increase liquid people; and rescaling aims to transform the bank to become more adaptable to increase liquid infrastructure.

The “Three R” Strategy

RESTRUCTURE

To increase liquidity, banks need to move from a functional-focused organization to a multi-functional organization, which involves teams. Teams are small, autonomous, self-managed, multidisciplinary groups with end-to-end control of business tasks. Rather than individual employees being responsible for a sub-process, the entire team is responsible for the whole process. Teams are formed of experts in different sub-processes, and employees are encouraged to develop expertise in multiple areas. People move between teams to reduce entrenchment. The bank organization is also flattened, as teams report to a smaller management group. In this structure, leaders take the role of general managers who focus on outputs rather than processes or functions. Managers are orchestrators of flexible and dynamic interactive teams that achieve the bank’s goals.

Shifts in Organizational Structure and Processes

Traditional Liquid

Hierarchical Structure Team Structure

Hire for Skills Hire for Attitude, Train for Skills

Management Control of Employees Autonomous and Self Organizing Teams

Focus on Existing Products/Processes Continuous Innovation

Evaluation Focused on Process Evaluation Focused on Outcomes, Innovation, Learning, and Contribution

Focus on Management of People Focus on Coordination of Teams


By implementing the three “R” strategy, banks can move from a traditional to a more liquid organization.

RESTRUCTURETo Increase

Speed

RESKILLTo IncreaseKnowledge

RESCALETo Increase Adaptability


The introduction of self-managed teams has led to great results in other industries. Bernstein and his colleagues, in a 2016 article that appeared in Harvard Business Review, state that with self-managed teams, a Volvo plant in Kalmar, Sweden, reduced defects by 90%; FedEx cut service errors by 13%; C&S Wholesale Grocers gained a 60% cost advantage over competitors; and General Mills increased productivity by up to 40% in its plants.

RESKILL

To increase liquidity, banks and their employees need to focus on dynamic learning. This includes learning new things, learning how to do new things, and leveraging new technology.

Changes in Employee ExpertiseThe shift from a functional organization to a team organization requires a change in employee expertise from I-skills to broad T-skills. Bank employees with deep knowledge in one area need to develop knowledge of adjacent areas. As an example, to enhance customer experience, salespeople may develop expertise in customer service and even in risk management. In looking at the future and the need for innovation, as well as the powerful impact of digitization, employee skills will need to include knowledge of technology and an ability to innovate. We expect bank employee skills to evolve to broad T-skills.

Reskilling Bank Employees

Banks will need to develop a dynamic learning orientation in terms of facilitating and rewarding learning. Banks will also need to select employees who are open to developing broad T-shaped expertise and have a learning orientation. This requirement typically favors younger employees, who tend to have a higher learning orientation. In response to reskilling imperatives, JPMorgan has started programs to assess and reskill employees.


To increase liquidity, employee skills need to include knowledge of technology and an ability to innovate.

EVOLUTION OF EXPERTISE

Expertise in Innovation

Expertise in Technologies

Expertise in Adjacencies


Expertise in an Area

EXTENDED T-SKILLS




T-SKILLS


I-SKILLS


RESCALE

To increase liquidity, banks need to rescale to foster adaptability. Rescaling is centered around “everything-as-a-service,” based on demand, which is aimed to make the organization flexible and scalable. A liquid infrastructure can be enhanced when the bank continuously performs make-or-buy analyses, based not only on financial outcomes but also on intellectual property, speed, flexibility, and scalability considerations. Rescaling strategy insources industry expertise and generalists, and outsources basic processes and functional specialists. In addition, rescaling strives to provide employees time to enhance their banks’ strategic and innovative capacity.

The major shift in banks rescaling to become liquid is seen in the allocation of time that people spend on tasks. We divide tasks into three categories. In traditional banks, people spend the majority of time performing routine tasks requiring low-level thinking. Liquid banks improve these processes or outsource them to increase time for tasks that require medium-level thinking and tasks requiring high-level thinking such as improving processes, providing innovative solutions, and strategizing. This shift allows employees to be more flexible, innovative, and strategic, while providing high-quality deliverables at higher speeds. They can focus on value-added tasks while other functions can be outsourced.

Another significant shift in banks with high liquidity is in the budgeting process. Typically, banks use 75–80% of their budget to run the business and 20% to grow the business. High liquidity banks have moved toward the 50/35/15 rule: 50% of the budget is focused on running the business, 35% on growing the business, and 15% is flexible and can, therefore, be allocated to experimentation—or transforming the business. The significant shift is in reducing the “run the business” budget from 80% to 50% through enhanced efficiencies and using “everything-as-a-service” providers. Projects stemming from the 15% budget are few and typically last 6–12 months.


Rescaling strategy insources industry expertise and generalists, and outsources basic processes and functional specialists.

Liquid Delivery Liquid Infrastructure

Liquid People Liquid Geography


Liquid organizations allow banks to address disruptions better. While disruptive forces continue to batter industries, banks need to understand market disruptions, and find ways to address them. To achieve this, banks must evolve toward a higher form of organization, i.e., a liquid organization. In this white paper, we provide a deeper description of markets and the need for speed in banks as well as the characteristics of a liquid organization, and strategies to attain this organizational form.

A liquid organization has higher speed, flexibility, scalability and, acceleration; it is ambidextrous in that it can effectively address the needs of both current and emerging customers. We demonstrated that U.S. bank liquidity dramatically affects annual bank deposit and income growth, and we provide strategies to increase liquidity. The choice of strategy, people, and organizational forms can increase liquidity. Through the implementation the three “R”s—restructure, reskill and rescale—banks can successfully increase liquidity to better create and address disruption.


Conclusion


About the Author

Dr. Arun Sharma is a professor at Miami Business School, University of Miami. He has also served as the School’s vice dean of graduate business programs and executive education, and as chairman of the Department of Marketing.

Sharma’s research interests are in disruption, liquid organizations, global market trends, market structures, and market strategy. Extensively published, his research and teaching have been recognized through multiple awards for excellence. Sharma has considerable industry experience in the areas of disruption, liquidity, customer and industry trends, enhancing access, addressing heterogeneous markets, market movements, developing innovation-driven firms, and country strategies. Sharma has served as a consultant to a broad range of major corporations, including American Express, AT&T, Coca-Cola, Exxon, Goodyear, MasterCard, MoneyGram, Visa, Walmart, and Western Union.

Sharma received his Ph.D. in marketing from the University of Illinois at Urbana-Champaign, an MBA from the Indian Institute of Management, Calcutta, and a bachelor of science in engineering.

Professor Arun SharmaMiami Business SchoolUniversity of MiamiTel: (305) 284 1770Email: [email protected]



United States

Canada

Haiti

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Germany

Italy

UK

Belgium

Libya

Mali

Singapore

Niger

Nigeria

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DR Congo

Angola

Mozambique

Malawi

Kenya

TanzaniaBurundiUganda Rwanda

Egypt Kuwait

UAE

Republic ofYemen

Afghanistan

Somalia

France

Management officesField operations

Zambia

Japan

Brazil

Turkey

Chad

Sudan

Colombia

Algeria

India

Jordan Lebanon

Madagascar

Iraq

Saudi Arabia

Syria

Chili

VenezuelaPanama

Nicaragua

Ecuador

Guayana

Honduras

Uruguay

The GardaWorld Difference

45+ countriesWith operations and infrastructure

US$3.5BRun-rate revenues

500+Locations worldwide

35,000+Clients worldwide

92,000+Security professionals

GardaWorld is the world’s largest privately owned security services company, offering cash services, physical and specialized security solutions and, with Crisis24, the dissemination of vetted international security information. Our operations take us from our global headquarters in Canada to oil fields in Iraq and embassies in Africa, from providing security in Canadian airports to cash services for major North American financial institutions.

We work in a variety of sectors, such as financial services, infrastructure, natural resources and retail. We are a partner of choice for the private sector, governments, humanitarian organizations, and multinationals, with operations and personnel all over the world.

In a complex world, our reputation is based on the quality of our services, and the commitment and integrity of our people. By mitigating risks and allowing our clients to conduct business in complete security, we strengthen the trust our clients place in us to protect their staff, assets and operations.

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Documents

Addressing Disruptions in the Banking Sector: Creating a ...€¦ · Airlines lease airplanes, personnel, reservation systems, food services, and maintenance staff, which enables