Not long ago, I listened to Mark Sievewright of Fiserv tell customer banks that they would be facing a wave of consolidation in the banking industry.  That this was inevitable for the US.  A few years ago, he may have been right.

Not today, in fact, the Obama administration will be hand-tying those “too big to fail” banks for the foreseeable future.  This presents opportunity for small and mid-size banks to seize the day or take the field! 

As with the Japanese after WWII that couldn’t compete with the US in scale, neither can the small banks.  But like the Japanese the opportunity lies not in economies of scale, but in economies of flow.  You will not achieve economies of flow with the prevailing thinking about the design and management of banks.

The current view of banking is such that spending on technology will make small banks more competitive.  Specifically, that automation is what is needed . . . and nothing could be further from the truth.  Most technology is filled with best practices and standardized processes to sell a “solution” to small banks.

This assumption that surrounds technology is not only wrong, but is wasteful.  Technology organizations are selling solutions without ever understanding the problem.  If small banks are to compete using the economies of flow philosophy, they will need to think differently.

Starting with the design of the work, small banks need a redesign.  This redesign must be based on getting knowledge about customer demand, outside-in and offering end-to-end flows that serve the customer.  This means the front, middle and back office designs enabled (or entrapped) by technology have got to be reviewed.

This doesn’t mean more automation via the latest fad like BPM or CRM.  In fact, most likely this will mean less automation as small banks build the design of the systems around customer demand and not technology solutions. 

Like most service organizations, banks have a variety of customer demand that can not be absorbed by technology.  Technology firms do not understand that the promotion of best practices and standardized processes inhibits this absorption.  I might add that it is in their best interest not to understand, as the “solution” becomes more expensive.

Further, small banks are in need of making the work flow better not only from a customer perspective, but also to help enable the front-line worker that has to absorb the variety of demand.  This can be achieved through not only customer purpose, but customer measures derived from this purpose.  Front-line employees that are armed with knowledge of purpose and customer measures can help small banks achieve innovation leadership.  Humans are able to absorb variety, technology is not.

There are many other concepts that can help small banks, but the first step is a different leadership strategy that requires different thinking about the design and management of work.  Carpe diem small banks!

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Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at or LinkedIn at