Chief Transformation Officer,
Arvest Bank – Part 2
WITH TECHNOLOGY DEVELOPING at such a rapid pace, businesses of all sizes and in all industries are having to constantly adapt to keep up with increased competition. But short-term, incremental changes are usually outdated by the time they’re implemented. That’s why such forward-thinking companies as Ford, Pepsi, Alcatel-Lucent, AT&T, and Arvest have turned to transformation guru Laura Merling to lead them in a unified, long-range reimagining of their business. “Transformation encompasses people, process, and technology,” Merling says. “It’s your whole business.” In last month’s newsletter, Merling told us how she got into this field in the first place. This month, she explains the “five-pillar program” of transformation that she applies to her client companies.
What have you learned about companies—not just the business aspects of them, but also the cultural aspects related to their need for change?
I’ve learned that if you don’t show results fairly quickly, people question transformation. That’s why you hear me talk about “quick wins” all the time. Everybody questions transformation: “What is it? Show me how I’m going to measure it. How am I going to see it? How am I going to feel it?” So we’ve been very focused since day one on identifying quick wins, things that we could show value to the business, and you’d get results right away, like within 90 days. For example, at Arvest we did a vulnerability study. We looked at how at-risk we were with our customer base.
Another thing I’ve learned is, you don’t join a company if they’ve already finished their budget for the next year. Don’t join in January. You have to join in September, because then you’re part of the budget process. Because I joined AT&T in December, there was no budget, but they wanted me to go create a new product aimed at their bank customers anyway. So instead of starting from scratch, I went to see the Bell Labs team and found a product that we could adapt, and in about 120 days we had something new on the market, with customers willing to buy. That was the quick win at AT&T—a product for banks allowing mobile call recording, because if you do a transaction on mobile, you have to be able to record it. At the time, that technology didn’t exist.
All of these experiences with companies prompted you to formalize a “five-pillar” program for accomplishing significant transformation. Tell me about the five pillars.
The first pillar is knowing the answer to the question “What’s your business problem that you’re solving?” You’ve got to know where you’re going, and why. You need to know what transformation means to you, and you need to understand the scope of it. Usually, we’re talking a five-year horizon. You might even want to think 10 years out, but to do it realistically, it’s probably five. So Pillar Number One is knowing, Where am I going? What do I want to be when I grow up?
Pillar Number Two is knowing your customer. Do you understand your customer base? Most folks will say they know their customer, but they don’t. They can’t get down to the metric of who those customers are, why those customers are buying their product, what those customers really care about. They might know general demographics, but they don’t know the pain point.
I have a slide I use that demonstrates this. It’s a slide that I created when I was at Ford, and it’s about a package-delivery company and its customers. On one side is the internal view—the viewpoint of the company itself. On the other side is the external view—that of the customer view. If you’re a package-moving company, your internal thinking goes like this: “I want to move a good,” and you ask, “Is it perishable or durable?” Because you need to know if you need a refrigerated truck or not. Another question you ask is, “Am I going to a business, or am I going to a consumer?” And then, “Is it long haul or local?”
So you have all these parts of the decision tree, but if you’re a customer who bought goods to be delivered, your questions are: “Am I home or am I away?” “Do I want it now or do I want it later?” The internal view of how companies think about the problems they solve and the customers they serve is very different from the customer view, and most companies start with the internal view. A big part of transformation is getting people to flip their mindset to think from the outside in, not from the inside out. That’s a main aspect of all this—businesses thinking they know their customers, but they really don’t.
We know our customer pretty well at Arvest. A large portion of our customer base is comprised of consumers. But what we’ve learned is that those same customers are also small business customers. Fully 80 percent of our customers overlap. You’ve got to know things like that.
So what’s Pillar Number Three?
The third pillar is technology alignment. Technology is a work stream, and business process and business change is a work stream. And they all need to be very directly aligned in terms of timing, process, what you do first over another. So it’s very important that you know what your current technology stack looks like. Then you have to figure out what you need to change first in order to align the business.
At Arvest, one of the first things we wanted to address was to create a singular view of our customer. Because previously, every product—wealth management, deposits, loans—had all the customer data stored within each of those products. So we said, “We’re going to start with our data platform, because building out a data platform lets us have a single view of a customer.” So that’s why you need to know what problems you’re working to solve, and that should be the foundation of where you start your technology alignment.
Pillar Number Four is metrics and measure. Are you measuring your business outcomes? Do you know what you’re measuring and how to measure it? Then Pillar Number Five is governance—which really means communication. Are you tracking the outcomes? Are you communicating the goals? Does everybody know your priorities? Do you have a method for adjusting priorities as things come up?
Sounds like technology is integral to your program.
It’s a means to an end. Transformation encompasses people, process, and technology. It’s your whole business. People usually start with modernizing infrastructure because it’s the foundation for transformation, and because of how fast the world is changing. The reality is that you’re trying to change your business, and you’re trying to change your culture, which drives innovation. You want a culture of innovation because the world is moving so fast. Your culture has to emphasize speed and agility, and the other part of a culture is digital. Digital knowhow, a growth mindset, and data. I start every talk with a quote from Canadian Prime Minister Justin Trudeau: “The pace of change has never been this fast, yet it’ll never be this slow again.” I love that quote.
So really the technology is the means to the end. What you’re normally trying to do is change your business because the world has changed around you, or you can see it changing, so you have to be able to keep up with those demands.
What does transformation look like in a small- to medium-size company compared to some of the giant companies you’ve worked with?
You know what? I don’t know if it’s the size of company that matters versus whether a company is public or private. In a privately held company, you have a little more time and leeway to show results than you do in a public company. You still have to show results to the internal folks, but you don’t have the public markets declaring, “I want to see outcomes!”
I would say the bigger difference is, at a smaller company it’s easier to communicate the changes. I mean, it’s easier to have that conversation with Arvest’s 6,500 people than it is as a company of 50,000 people. It gets exponentially harder based on geographic coverage and size. Is it international? I mean, the things that were a problem in the U.S. when I worked at Ford were not a problem in China. They were also not a problem for us in India. Each group had different problems. Oddly enough, they were all trying to build the same platform to address all the problems, so we got them down to one, but they were looking at the problem from different perspectives. If you’re doing self-driving cars in China, you had to pay a fee to manage a part of the city, whereas Uber in the U.S. can go anywhere.
Who do you work the most with inside a company undergoing transformation—at Arvest, for example?
My team includes the CIO and the CTO, and then we have a chief product officer, head of security, leader for innovation and user experience, and a head of bank operations. We meet virtually as a team every week, even though we’re scattered across the country. We meet face-to-face every month for at least two days. We also bring in the bank representatives and customers once a quarter. We host a cross-functional team from across the bank, and it changes every quarter. We spend two days together sharing information and gathering feedback about our transformation. We’re building a new loan origination platform, so we’re spending a lot of time with the commercial lenders. We had 90 commercial lenders on a call
the other day showing them the new product, doing a demo for them and getting their feedback. Then we did that demo for the executive committee—that’s the CEO, and the CFO, and the chairman, and the head of the bank markets, for their feedback. A lot of what we do is communicate, but it’s a lot of internal and external conversations. Customers also need to provide feedback about the problem we’re trying to solve.
Does it feel new and different in different companies, or do you feel like, “I’ve been here before. I know what I’m doing”?
The five-pillars methodology works regardless of industry. I think where the challenge comes into play is the culture. What’s the culture like for the company?
At Arvest, for example, everybody is really nice, so people are hesitant to tell you if something is broken. Early on, I had to ask for the feedback: “No, no, I need you to tell me if it’s broken!” At other companies, folks will be very direct. “No,” they’ll say, “that’s broken.” And I say, “Okay, you can’t just tell me it’s broken. I want you to tell me what’s wrong with it.”
Companies come at it from different angles culturally. I think the only other thing that’s different is about the level of commitment from the executive team. Commitment from the executive team is what will drive the success. At AT&T, my sponsor was John Donovan, the CTO who later became CEO. He was the person who drove it and ensured that we had the support we needed. No matter who rained on our parade, he made sure we had the support. Randall Stevenson, the CEO, would come down, and John Donovan would walk him through my whole floor, introduce him to the team members. We’d sit with the developers, and they’d show the CEO what they were coding. Kevin Sabin, Arvest’s CEO, is very much like that. Kevin is the support structure for all of our changes. He drives the willingness of the rest of the team to have that change.
How long does it generally take you to complete the transformation process? I assume it’s an ongoing thing a company deals with long after you’re working with someone else.
Yes, it’s ongoing. That’s why transformation is all about a mindset and an understanding. It’s a cultural shift because what you’re trying to do is set people up for the long haul and not just for right now. How they approach their business, how they approach solving problems, how they approach the customer, and solving problems for the customer.
Sometimes you can only take a transformation so far, and then you hit a roadblock. That roadblock could be, “Hey, we’re not in that business anymore.” At a certain point, Alcatel-Lucent wasn’t in the software business anymore. At Ford, they got to the point that they had to make a very large multi-year production manufacturing change to finish doing the work that we had set out to do.
So it’s really that each company hits a different point of when they might have to pause transformation, or they have a hurdle that they need to get over before continuing to move forward. Sometimes it makes sense for the transformation person to stay, and sometimes it doesn’t. It just depends on where the company is, and what the next chapter is.