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This Blog is inspired by a lecture on bad habits by London Business School professor Freek Vermeulen at the Executive Education Alumni Gathering, July 1st 2017.
Bad Habits

The Story of the Best Bank in the World.

This would be the story of CAPITEC. Capitec is a South-African Bank that started only 15 years ago. You might know that it is difficult to start a bank as there are many barriers to entry. But capitec did it and it grew into the third biggest bank in the country. Even more, Lafferty called them the best bank in the world. They are the only bank with a 5 star rating.

What makes them the best bank?

This is what Lafferty has to say:
It’s focused. That’s the first thing. It’s clearly run to a high ethical and business standard, I would say. It has the concept of the one product, which is the essence of its relationship with its customers.
And they do all that very well and consistent. They answer the strategic questions of who, what and how very well. They focus on retail customers (who), have chosen an extreme customer oriented strategy (what) and have executed that rigorously and consistently (how).

Breaking Bad Habits …

But surely, they are not the only bank who focuses? That’s right. Lafferty states that many South-African banks play in the premier league. But Capitec excels because they decided to break the industry’s bad habits, says Freek Vermeulen.

What are Bad Habits in Business?

Bad Practices are practices that have no clear added value. They often started for a good reason. But nobody changed the practices when the context changes. There’s a corporate or collective inertia. We continue with the bad habits because they are culturally transferred. We learn them through social interactions.
Changing bad practices takes energy. People have to unlearn habits and have to take on new habits. So that’s also a reason why they remain.
You can detect bad practices when people cannot clearly say why these practices are in use. But by taking the easy road and not questioning these habits, we deprive ourselves from valuable learning experiences.

What did Capitec do?

Capitec changed how the industry dealt with customers.

  • All banks close at 15h30.
    Capitol is open until 6pm and even on Sunday.
  • All banks charged a % fee for transactions. The more money involved, the higher the fee.
    Capitec charges a standard fee.
  • All banks inquired for income of the customer and adapted their offer according to the income.
    Capitol does not adapt the cost to the income.
  • All banks had a queuing system.
    Capitec has a comfortable sitting area and measures service and waiting time.

There motto is “better banking. better living“. And they focus on making that come true. Check out their value proposition in their latest commercial.

What can we learn?

So, what can we learn from the CAPITEC case?

  1. The Capitec Example shows that getting rid of bad practices can be a source of innovation. It’s one of the cheapest ways of innovation because it usually does not require high investments.
  2. We should not replace bad habits by other bad habits. In this case customer experience was the source of inspiration and it lead to installing simple and consistent practices that create value for the customers: clarity, hospitality, empathy, ….
  3. Looking for bad practices is something everyone can do. But people who have been long in the company have a kind of myopia. That’s why we should listen both to people who are new to the company and to the major stakeholders. Don’t ask new people to adapt to our (potentially bad) practices. Ask them to stay critical and to ask naïve questions.
  4. If the answer to these questions is “I don’t know”, “We have always done it like that” or “We cannot change that”, dig deeper. There might be a bad practice around.
  5. Capitec has a clear and consistent customer strategy that yields fantastic results. Their advantage was that they did not have any legacy. The started from scratch in a saturated and regulated market.

Freek Vermeulen on Bad Habits

Freek Vermeulen’s insights on bad habits are straightforward. Everybody immediately understands what’s at stake. He has written a book about it. It will be available as of November 2017.
Bad Habits
In the meantime, enjoy this lecture by Freek Vermeulen.

David Ducheyne is the founder of Otolith. As a former HR and business leader he focuses now on humanising strategy execution.

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