It was some time ago that BBVA perceived the risks and opportunities inherent in the massive technological changes the world is going through. For several years, we have worked towards reinventing ourselves and moving on from analog banking—however efficient and profitable it might have been by the standards of the 20th century—toward a knowledge-driven digital business of the 21st century.
This transformation is increasingly urgent for two powerful reasons. First, customers are changing rapidly. A whole generation of customers has grown up with the Internet; they deal with their banks exclusively online and they would be happy to pay for banking products and services provided by nonbanking companies. Secondly, new competitors are stepping onto the stage, including telecommunications operators, technology and Internet providers, online retailers. These new entrants can be far more efficient and agile than banks, because they are not burdened by obsolete technologies or expensive distribution networks. However, banks do enjoy a key competitive advantage: the huge mass of information they already have about their customers. The challenge is to turn that information into knowledge, and use the knowledge to give customers what they want.
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To face these changes, banks must develop a new knowledge-based business model for the digital world. I like to explain the construction of this new model by the analogy of building a house. The technology platform is the foundation, while internal processes, organizational structures, and corporate culture are the various floors, including the installations (insulation, electricity, heating, plumbing, and so on). Finally, the channels by which customers interact with the bank are the roof of the house. All these elements together make the house comfortable and safe. They let us offer the customer a good product and a satisfying experience.
For many banks, the technology platform is a nearly insurmountable challenge. Most bank platforms were designed and built in the 1960s and ’70s. Peter Weill, senior research scientist and chair of the Center for Information Systems Research (CISR) at the MIT Sloan School of Management, calls them “spaghetti platforms” because of the complexity resulting from several decades of add-ons, tweaks, and repairs. These obsolete platforms will be unable to handle the increased volume and sophistication of online banking because the improvement of content and customer experience will call for systematic use of vast volume of data.
Banks must take the lead in big data techniques if they are to make use of the competitive edge granted by their incumbent status. At BBVA, we started seven years ago to construct a new technology platform that is already fully operational, capable of supporting the data capture, storage and processing requirements of digital banking, which are far more demanding than those seen in conventional banking. Our platform now places us clearly ahead of our peers.
The upgrading of technology, however necessary, is not the toughest challenge to which banks must rise. Technology is only a tool in the hands of our people to help them build a better experience for customers. To succeed in the new digital world we need to reinvent operations and processes, redefine organizational structures, undertake a revolution in our approach to working, and rethink the skills and talent we need our people to display. This must signify a radical transformation of our corporate culture or, following our earlier analogy, the way in which we build the “floors” of our digital “house.”
At BBVA, we have comprehensively re-engineered our processes in step with our technological overhaul. In addition, we have promoted a change of culture. Our principal objective has been to shape an organization that nurtures change and innovation—not as ends in themselves, but as a means to deliver the best possible customer experience.
Over these past few years, BBVA’s transformation drive has already garnered significant results. The Group’s active digital customers in December 2011 numbered 5 million; by mid-2014, that figure had climbed to 8.4 million. Active customers using mobile technologies grew from 0.3 million to 3.6 million. We have reconfigured our branch network, too. We have also set in motion a highly ambitious big data project. We have taken steps to encourage the emergence of an open innovation platform and community. We have launched exciting new products designed and produced specially for the digital world, and BBVA Ventures helps us stay on top of what is happening in the realm of digital banking.
Moreover, the recent launch of the Digital Banking Area has marked a turning point. The driving concept is that the Area will, in addition to enhancing BBVA’s digital business and presence, work as a catalyst to transform the entire Group. The Area’s mission has four key angles: a new, enhanced customer experience; knowledge-driven personalization using the best data analysis technologies; communication in clear, concise language; and access to products and services at any time and from any place.
We have come far, and are now in a position to lead the process of transformation of the banking industry and so become the first—and best—knowledge-based bank, fully in alignment with the digital ecosystem. But we are aware that there is still a long road ahead. Our transformation, as we now envision it, is in progress and far from complete. Far more important, technological change continues apace, and society is changing with it. We are witnessing the dawn of Big Data technology. The Internet of Things is only just taking off, but is set to grow exponentially.
So we are running a race which, for as long as the present stage of scientific and technological progress accelerates, has no discernible finish line. If we are not to lose our way, we must modify people’s attitude to change—we must not merely accept, but embrace and promote change. This calls for strong and cohesive leadership throughout the organization. Our leaders must advocate change, encourage change by example, recognize those who support change, and take steps to remove the practices and structures that stand in the way of change.
This has surely been the key to BBVA’s successful transformation so far. And this is the kind of leadership we need in future if we are to achieve our goal of BBVA becoming the foremost figure in transforming the best of analog banking into the best of knowledge-based banking for the twenty-first century.
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