August 29, 2019 10.00AM / OpEd
Patrick Akinwuntan, MD, Ecobank Nigeria
Speech delivered by, Mr. Patrick Akinwuntan, the Managing Director/CEO of Ecobank Nigeria at a recent Chartered Institute of Bankers (CIBN) event in Lagos. In the speech Akinwuntan explains the powerful forces that are shaping competition in the local Nigerian banking sector and the responses that would be required for banks that are determined not to be sucked into the void of corporate illiquidity, insolvency and despair.
I consider it an honor and privilege to address you all at this august gathering on the topic; Repositioning for Relevance in a Competitive Environment.
When I first received the invitation letter from the Institute, I must confess that I asked myself the same question, because there are no defined patterns to achieving optimal repositioning. Put differently, the concept of repositioning lends itself to diverse interpretations with equal and valid relevance across various dimensions. This notwithstanding, I will give this a good attempt.
According to the renowned English naturalist, geologist and biologist, Charles Darwin and I quote; "it is not the strongest or the most intelligent, who will survive but those who can best manage change". Permit me to say, this is as true and relevant today as it was back in Darwin's day.
Tales of the Inflexible and the Adaptable
Let us pause a moment to examine the responses of economic agents, who (re)positioned for relevance or otherwise. Nokia, in 1998 was the best-selling phone brand in the world. Between 1995 and 1999, the company successfully grew its operating profit from $1 billion to approximately $4 billion, and in 2003 launched the best-selling phone of all times the Nokia 1100. Yet, this once successful company began recording declines, ultimately leading to its acquisition 10 years later by Microsoft in 2013. In-depth analysis would reveal the root-cause for the decline was their inability to respond appropriately to the inferiority of Nokia's operating system (Symbian OS) compared to Apple's iOS; the arrogance among top-level managers and their lack of vison put the final nail in Nokia's coffin.
I would like to say that their inability to respond was due to fear - the fear of senior managers to confront the brutal facts - facts about the precarious state of the business, the external environment and fear of losing investors, suppliers and customers. Additionally, middle management staff were also fearful of presenting the realities at the time to senior managers. These fears brewed a toxic mix that stifled innovation and dulled the company's ability to effectively respond to a fast changing and innovative competitor.
Conversely, consider the repositioning efforts at Apple, which started out with product introductions in computing such as the Apple I to III, Macintosh etc, and how it challenged dominant and established companies such as IBM, to present clear and attractive alternatives to the market. Even more important, was how Apple moved from a position of bankruptcy, having received a lifeline from Microsoft in 1997, to become the first publicly traded U.S company to attain a $1 trillion market capitalization by 2018. This phenomenal and sustained growth was driven primarily by Apple's innovative offerings such as the iPod, iTunes, iPad, and iPhone but even more importantly by its ability to reposition itself for relevance in a competitive environment. Visioning, Courage to dare, Dynamism, Belief, Integrity, Diligence.
From an individual perspective, I am reminded of Tara Westover, an American memoirist, essayist and historian who did not have a birth certificate until she was age nine, never visited a hospital and was homeschooled, the first time she ever stepped into a classroom was when she was aged 17. Yet, in spite of the "hard hand dealt", through personal conviction and discipline earned a Master's degree and PhD from Cambridge University, became a visiting fellow at Harvard University and has over 20 awards and recognition from reputable institutions such as The Economist, The New York Post, The Financial Times, The Washington Post etc. for her book titled "Educated", which was named one of the best books in 2019. In 2019, she was voted Time Magazine's 100 most influential people.
When Success is More than Hope
On the Nigerian front, I would talk about Adebanke Olayiwola - the first female black pilot to fly a 747-dream liner. It is interesting to point out that her first degree was in Health Education, with a Master's degree in International Globalization from the University of Leicester. Her exposure as an aviation health trainer with Etihad Airlines (during her Master's degree programme), curiosity and persistence led her to enroll for aviation introductory classes. Today, she is a co-pilot with Delta Connect, a subsidiary of Delta Airlines, having worked with Arik and Dana Air; inspiring millions of people around the World. She recognized an opportunity, believed in herself and took full advantage of her repositioning. It gives me much pleasure to also inform you that Adebanke is a former colleague of mine at Ecobank and we as a bank are part of her journey to success and acclaim today. Visioning, Courage to dare, Dynamism, Belief, Integrity, Diligence.
When we talk of repositioning we must talk about China. China's president Xi Jinping in 2013 announced an initiative that would set the course for much of China's foreign policy toward its Eurasian neighbours. Consisting of two parts-an overland "belt" connecting China with Central Asia, Russia, South Asia, and Europe and a maritime "road" linking Chinese ports with those in Southeast Asia, South Asia, Africa, the Middle East, and Europe-the 'Belt and Road Initiative' (BRI) envisions a vast network of railways, highways, ports, pipelines, and communication infrastructure spanning the Eurasian continent and facilitating trade, investment, and people-to-people exchange. The initiative is China's attempt to curtail the U.S' pivot to Asia, alongside economic and geopolitical motivations. Through this initiative, new markets are being opened for its consumer and industrial goods and services.
Bear in mind that this bold new repositioning initiative is coming against a backdrop of a China that was economically poorly developed, poverty-ridden with little to show for but a huge population. However in the last 40 years China, through its economic repositioning efforts has been able to grow its per capita GDP by over 70% from 2010 to 2018. This is simply phenomenal growth over such a short period of time, but can be traced back to the Chinese efforts at repositioning their economy through the programme of economic reforms termed "Socialism with Chinese characteristics" and "socialist market economy" in the People's Republic of China (PRC) which reformists within the Communist Party of China-led by Deng Xiaoping-started in December 1978. Visioning, Courage to dare, Dynamism, Belief, Integrity, Diligence.
Nigeria, introduced its Economic Growth and Recovery Plan (ERGP) in 2017, with the aim of diversifying the economy from oil dependency, while also building critical infrastructure, which are critical enablers to economic development in the areas of power, road etc. With its implementation, the government aims to achieve three (3) objectives namely;
The recent signing of ACFTA is expected to lead to trade facilitation, productive capacity building, trade related infrastructure development, trade finance information and factor market integration. Hence, increasing Intra-Africa trade by 52% (2020) which according to the United Nations Conference on Trade and Development (UNCTAD 2018) amounted to $73.64 billion (rest of world; $408.85 billion), through the cutting of tariffs by 90% and harmonizing trade rules at the regional and continental levels.
The U.S has economy has recorded similar repositioning stance, particularly if one considers how its economy has evolved. In the early 20s and 30s, history records the rise and dominance of the manufacturing sector, utility sector and banking sector. Since the 90s, we seen a "new economy" with the introduction of the internet.
This shift in the balance of power has been most prominently in the profile of most highly capitalized stocks on the New York Stock Exchange (NYSE). In 2004 the Top-5 most capitalized companies on the NYSE were General Electric ($319bn), Exxon ($283bn), Microsoft ($282bn), Pfizer ($270bn) and Citibank ($240bn). In 2019 this Top-5 are Microsoft ($1,050bn), Amazon ($943bn), Apple ($920bn), Alphabet ($778bn) and Facebook ($546bn). As you would have noticed these Top-5 companies are exclusively technology firms and signal a power shift that was delivered by firms that have executed their strategic repositioning much better.
Making these highlights, you will truly appreciate the importance and need for continuous improvement, innovation, agile systems and the confrontation of realities.
Let us now turn to the twin question; why repositioning is relevant in a competitive environment and how to reposition in a competitive environment.
Repositioning in A Competitive Environment
Our world is constantly in a state of flux and businesses are not any different, this results from dynamic consumer behavior and preferences - changes in lifestyle, entrance of new competitors, regulatory policies and conditions in the macro-economic environment. Porter's five forces have been used to determine competitiveness of an industry. These are threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products and rivalry amongst firms have been used severally particularly in the industrial era.
A vivid and more locally
relevant example, is the regulatory-induced changes to the minimum capital
requirements of Deposit Money Banks from
N2 billion to N25
billion and the consolidation of Deposit Money Banks (DMBs) from 89 banks to 25
highly capitalized banks in 2005, which then ranked amongst the top 1,000 banks
in the world and have now become active agents of economic growth and
development in Nigeria today. One significant evidence of this is their
increased ability to extend credit and lending facilities to critical sectors
of the economy - in a scale not witnessed prior to the consolidation.
Today, financial institutions like in most other industries are faced with growing technological changes and have had to respond through the adoption of and adaptation to potentially disruptive technologies in their business models and in their broad corporate strategies. This is all in a bid to remain relevant, increase convenience and productivity and make banking simple for individuals and businesses alike.
Looking at the other side of the spectrum, we have also witnessed business leaders and organizations, who downplayed the changes facing their industries at the time. From my experiences and which some members of this audience sitting here will allude to: "it takes great effort and discipline to regain lost ground, particularly when the market or competition moves against you, albeit not impossible". The question I now pose to you is "why do companies resist the inevitable change?"
For inspiration on this, I turn to one of the world's exemplars of hope, Sir Winston Churchill, who said, "To improve is to change.. to be perfect is to change often". Therefore, I say to you today, disciplined change is to be welcomed, it is to be embraced; we lose nothing in response to change, rather we transcend beyond current limitations and realities and in the process create the future. I emphasize the word 'disciplined' because we have also seen instances where responses to change have been disruptive to businesses particularly in the acquisition of unrelated businesses or forays into industries where the acquiring company has no competences and therefore no business playing in.
The Coming Banking Sector Disruption and The Dynamics of Change
The banking sector has undergone some changes, but I have news for you, it will undergo added disruption. Yesterday, we had nothing like the digital apps in use today, tomorrow we are certain of further disruption underlined by artificial intelligence, machine learning, robotics, big data analytics etc. Yet I remain confident and excited, given the on-going transformations and adjustments being made by the Ecobank Group alongside other financial institutions.
So how can one reposition in a competitive environment? To reposition in a competitive environment, you must evaluate and understand the trends that would impact the industry now and into the future. Are these trends positive or otherwise? Are the impacting trends long or short term? Are they irreversible or not? Additionally, one must also be clear on what is relevant to the market, be clear on market outcomes and constantly evaluate these outcomes. We note that repositioning decisions hold positive or negative outcomes with regards to personal and vocational value.
You are being inducted today as chartered bankers, but the reality you must all face is that not all of you will work in banks and even for those who do, you may not work there your entire careers. The question is, besides banking and financial services, in what other areas of professional and industry relevance can we reposition ourselves to ensure that we sustain and grow our relevance and demand for our expertise? Thankfully there are vast opportunities opening up in Nigeria for you to make a difference and the doors to these opportunities are being opened up on the back of unprecedented innovations cutting across several industry segments, for example;
Personal and professional repositioning requires vision, unflinching self-belief, courage, diligence and the willingness to dare. You are the next wave of professionals set to redefine Nigeria and its economic landscape, you must rise to the occasion of fulfilling that promise.
Bringing this home, Ecobank Nigeria, a member of the Ecobank Group (the pan African bank) which is present in 40 countries, 36 of which are in Africa continues to innovate in the delivery of relevant, simple, convenient and affordable digital offerings to customers. In 2004 we launched the first international credit card in West Africa, the Ecobank Mastercard in Lagos, Nigeria.
We later pioneered instant cards issuance in branches, which is now commonplace in the industry and we also pioneered QR (Quick Response) code scan-and-pay. Our Ecobank mobile *326# was in the first batch of mobile banking solutions in the market in Nigeria. Given our Pan African coverage, we launched "Rapidtransfer" - a service which facilitates the transfer of money by Africans in diaspora and intra-Africa transfer for global access and use. The Pan African nature of Ecobank is in itself, an innovation borne out of the drive of the founders to position for relevance in a competitive environment that was dominated by western-owned banks.
Competition is repositioning for relevance in the remittances and transfers market through innovative offerings. For instance, you might have learnt of the recent partnership between Alipay and Flutterwave. The Western Unions are being chased by the Moneygrams, RIAs, Rapidtransfers to mention a few. We expect to see many more partnerships, particularly, with the rise of fintechs in Nigeria and across Africa.
There will be continued redefinition of the professional landscape in Nigeria and the world. The question is, how prepared are professional bankers, considering the constantly altering definitions of who a banker is, what a banker should know and the context within which a professional banker practices his or her vocation?
Today, we have our knowledge of who a banker is and what the banker does, but do we possess an equally clear identity of who the banker (and indeed bank) of tomorrow will be? Increasingly, banking is what you do and not where you go. This is why some are of the opinion that banking is needed, but are bankers needed? The customer level, is being redefined around account based customer and transaction based customer.
Channels of delivery have changed significantly, thanks to the internet and mobile phones, atms, pos and QR codes. Indeed block-chain, robots, robotics, artificial intelligence, virtual reality etc are gradually taking their place in financial services post the industrial era.
New themes such as partnerships and alliances, agency, collaboration, shared services, have combined to significantly redefine the barriers of entry.
We cannot be adequately prepared for the known unknowns, therefore acquiring that knowledge, deepening an innovative DNA and core values of ethics and professionalism should be the primary preoccupation of the professional banking community, lest we fail to adequately respond and risk losing our relevance.
In conclusion, for survival, there is every need for repositioning to meet the challenges of a fast-changing competitive environment and marketplace. The core values of integrity, courage, diligence, ethics and professionalism must be accompanied by execution discipline in order to make a sustained positive impact. These are enablers of any enduring profession, as it responds to competitive threats or the changing business environment.
Ladies and gentlemen, once again on behalf of my family and Ecobank, I thank the President and Chairman of Council, the Registrar/Chief Executive and the entire Council members for the opportunity to be part of your journey of making a positive difference as a chartered banker. I wish you every success as you set out to transform the world positively. The world awaits you. Make the difference.