Years of consulting does develop fantastic time management skills – so being on sabbatical from consulting to work full tilt at PhD research, on accountability of the UN Security Council, still leaves time for a side trip to other aspects of my long, long standing work on decision making and governance!
For some months I have been collaborating as part of an eclectic group with common ground in the law of competition. Our project looked at the financial services industry in Australia – that project for the Centre on International Finance and Regulation culminated last week in the release of the project report.
This week, a working paper that I co-authored with project leader Rob Nicholls, entitled The Nature of Competition in Australian Retail Banking, was wrapped up as another project outcome.
Once more with feeling, the take away for me relates to the importance of both the means and the ends engaged in any decision. For example, when the Australian Government’s then-Treasurer (and later Prime Minister), Paul Keating, in the late 1990s initiated the so-called ‘pillars’ policy for financial services in Australia, his intention was to ensure separation of the four largest banks and two largest insurance providers of the day. His purpose was to maintain/engender ongoing competition in the market for financial services, and that seemed on point at the time. Two decades and a(nother) GFC on, trundling on with the same approach now has the effect of entrenching the four largest banks in a very cosy oligopoly. Even if they break no law:
- Their business models are highly homogenised and product innovation is ho-hum, which hardly augers well for the role that banking plays in enabling the overall productive effort in the economy. However, it also means that a problem in any one could easily be contagious for the other three, and the industry is so concentrated that even all the smaller players together couldn’t take up the slack if a major bank(s) had a very bad time of it. Think in terms of how much worse the Ansett collapse would have been if Virgin had not yet been fully operational and able to ramp up rapidly.
- Customers can hardly tell the difference between the ‘four pillars’ and, largely, can’t be bothered with the inconvenience of switching service providers, even in the face of very ordinary customer service. This means that it is also difficult for any other player to get a good toehold in the market despite far better products and service, so absent some policy to engender competition what we’ve got is what we’ve got.
Looks like there is plenty more policy development work there for an enquiring mind, but the lesson is also there to be had for decision making in a business. Is there a strong, evidence-based connection between the strategies adopted by your board and the outcomes that they seek for the enterprise? Answering that question factually should be the first priority for any planning effort, and no ‘strategy love in’ should go ahead without that information – plus a commitment from the board as to the ends they seek, so that the most appropriate means can be engaged.