Chair of National Australia Bank Phil Chronican tells Professor Misiek Piskorski how digital transformation has brought the bank closer to consumers – and why a company’s ESG ambitions should always be aligned...
National Australia Bank is in the middle of what Phil Chronican describes as “the second generation of digital transformation” and is earning new revenue thanks to its enhanced digital capability.
The first generation of the bank’s digital transformation involved digitizing some of its customer-facing processes. However, lying under that digital façade were reams of paper-based and batch processes which delayed progress on its overall transformation.
“You can only digitize the front end to the extent that the back end supports that,” Chronican told Misiek Piskorski, Professor of Digital Strategy, Analytics and Innovation and Dean of Asia and Oceania at IMD. “What we’re now seeing is a much deeper thinking through of how to digitize end-to-end.”
Banks initially started digitizing their operations as a cost reduction strategy, then saw they could also offer customers more convenience. Now, they view digitization as an opportunity to deepen their relationship with customers, Chronican said.
“We’re having a lot of opportunities now to go end-to-end and utilize the data that we have around customers to really generate a better experience,” he said. “So, we’re right in the middle of what I would call the second generation of digital transformation.”
The bank also is using data to understand the triggers that lead customers to make their next purchase decision.
NAB, which has antecedents dating back to 1858, overcame the challenge of legacy technology by relying on cloud computing instead of traditional IT infrastructure and APIs, small applications which allow two different programs to communicate with each other and work together.
One of Australia’s “Big Four” banks, NAB has a market capitalization of around AUD$87 billion and has recently started on another transformation focusing on sustainability. In doing so, Chronican said, he wanted the bank’s actions on the broad sustainability agenda to avoid any element of tokenism or greenwashing. Instead, the bank’s board considered sustainability in relation to what would drive long-term success for the business and worked back from that.
It's important that you have alignment throughout the organization on what you are trying to achieve. Because big organizations are like big ships – they don't maneuver well, but they make great progress when you point them in the right direction- Phil Chronican
On environmental issues, particularly on carbon emissions, the bank considers what sort of industries and businesses it would want to lend to in a net zero world, and what sort of industries and businesses it would want to lend to in the intermediate steps to Net Zero, he said. “This means growing the areas that we know will grow, and scaling down those areas that will inevitably reduce. It’s not that we’re taking an altruistic view, it’s that we’re looking at the reality of what our business would need to look like.”
The bank takes a similarly pragmatic approach when it comes to social issues. Banks are asked to get involved in a range of common problems – but before it commits, Chronican explained, NAB asks how meaningful the issue is for the bank. Is it meaningful for its customer base? Is it meaningful for colleagues in the business? And is it meaningful for its reputation?
“If you again take that long-term sustainable view about the business, we want to attract talent, we want to attract the best people,” he said. “Therefore, we should have a workplace that’s inclusive and inviting to the best talent that’s available on the marketplace. So that gives legitimacy to us having a view on those issues.”
The bank joined several other prominent Australian companies in signing an open letter in support of same-sex marriage ahead of a plebiscite on the issue in late 2017. More recently, it added its support to altering Australia’s constitution to officially acknowledge the country’s First Nations people. The Government has planned a referendum on the issue this year.
These issues fit into the broader environmental, social, and governance agenda, which, in Australia, are not always in harmony as there can be a tension between environmental and social. For example, transitioning away from coal and into renewable energy sources will help Australia reduce its emissions footprint but it will also displace large numbers of workers and communities in coal mining regions. Chronican says the bank should be vocal about ensuring those communities continue to receive support. “The economic benefits and social benefits are such that it’s right that society helps those transitions to occur,” he said.
ESG issues also related to the third transformation NAB is undergoing – talent. In a tight and aging labor market, promising young talent is hard to come by, so the bank tries to ensure its stance on sustainability issues will help to attract staff. The current generation of workers wants meaning and purpose in their work and wants to associate their personal brand with a corporation that shares similar values.
- Australia and New Zealand Banking Group
- Commonwealth Bank
- National Australia Bank
- Westpac
Underscoring the interplay between the three transformations, Chronican said that digital also played an important role in attracting and retaining staff. “We’ve also been thinking about how they become effective from a digital transformation viewpoint. To that end, it’s been about building skills,” he said.
With this in mind, the bank has several initiatives to upgrade the technical skills of its staff to ensure it provides development opportunities that make the people more productive and help the business.
When he considers the three transformations the bank is undergoing, Chronican says he always starts with the end in mind.
“You must have a vision of where you’re headed in the long run, and then work back from that,” he said. “This provides a more sustainable guide to how to run your business. If you have a vision for what your business should look like in five or 10 years, then you can start to put intermediate steps out there to announce to the investment community, for example, that this is what that path will look like.”
Business leaders also need to ensure that their brands are aligned, so the brand they put to the external market is the same brand that is used internally to ensure consistency.
“Never make a promise that you don’t know that you’re going to be able to keep – and always take a skeptical look at things like aspirational goals or the desire to make an impression in the moment, because these things will be remembered and you will be judged by them,” Chronican said.
“It’s important that you have alignment throughout the organization on what you are trying to achieve. Because big organizations are like big ships – they don’t maneuver well, but they make great progress when you point them in the right direction.”
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