The FinanSer

Chris Skinner's Book on Banking Provokes

Chris Skinner, who has established a global reputation as a banking provocateur, is in good form with his new book, “The Future of Banking in a Globalised World.” (John Wiley & Sons, 196 pages, £34.99) In it, he points out many of the more obvious problems in retail banking – such as a focus on cost-cutting rather than revenue growth, and the dispiriting habits bankers have of all taking the same path while claiming they will grow faster than the market. Oops, that would require taking customers away from the competition, but why would customers bother to leave if most banks offer pretty much the same range of products and a similar lack of services? Banks are holding onto their customers because the customers just don’t care enough to move, or they don’t see any attractive alternative.

Meanwhile bankers are focused on technology like customer relationship management (CRM) systems that reinforces customers’ arms-length distance from the branch, when it isn’t actively screwing up operations and making customers angry. Skinner points out that banks are losing their relationships with customers.

Although he often takes BAI attendees from

Europe

to visit the latest style in bank branches, Skinner isn’t fooled by appearances – he says branches are dying, they are just taking a long time about it. Instead of focusing on better banking Web sites, bankers are pouring flash into branches and letting their Web efforts languish on old technology. That’s a sure-fire recipe for disaster with next gen clients.

Although bankers are pretty complacent, he thinks imaginative use of new technology, especially video but also PayPal, mobile phone payments and biometrics for better security will transform the business and leave the tech laggards in the dust. Will those laggards be banks? Will the winners be telcoms or supermarkets like Tesco?

And he tells some of his own stories of frustration with banks that don’t have decision makers on over bank holidays, when clients need cash, or don’t provide an international number for travel insurance clients. Most banks still clearly keep banker hours. Even if the hours are somewhat longer than 20 years ago, the mentality is a far cry from 24 x 7.

This is a fast-paced provocative book by an industry expert who has observed closely from the outside and has no vested interests to protect.

Best place to work in Finance and IT if you're gay?

Stonewall have just released their annual ranking of the best employers for gay people in Britain. 

Interesting to see who's who in our community.  For example, of the Top 100, we have quite a few nominations of good gay places in Retail and Investment Banking (position in Top 100 given first):

• 6   Lloyds TSB 92% 
• 17 Barclays 86% 
• 17 Credit Suisse 86% 
• 29 The Co-operative 83% 
• 38 Goldman Sachs 81% 
• 43 HBOS 80% 
• 43 JPMorgan 80% 
• 43 Lehman Brothers 80% 
• 43 Merrill Lynch 80% 
• 59 Citi 78% 
• 74 Morgan Stanley 76% 
• 92 Nationwide Building Society 73%
• 97 American Express 71% 
• 97 UBS 71%

and in consultancy:

• 9   PricewaterhouseCoopers 91% 
• 17 Accenture 86% 
• 29 KPMG 83% 
• 78 Ernst & Young 75%

But what happened in IT?  Only two IT firms in the Top100:

• 5   IBM 93% 
• 11 BT 90%

What happened to Intel, Microsoft, Sun, Google, eBay, PayPal ... makes me think that Sexism in the City might not be half as bad as Sexism in IT?

Trust Your Bank? An FT Writer Has Doubts About JPMC

Gary Silverman, the FT's US news editor, wrote a column about his surprise to find he and his wife each had a $119.99 charge from TLG Hotline on their JP Morgan Chase credit cards.

"We pay our cards automatically, and I don't always examine the bill, but this time I did and noticed something strange. My wife and I had been charged $119.99 each by something called TLG Hotline."

"I called the phone number next to the charge and was told by an operator that we paid the money to enroll in an identify theft and credit-card protection plan run by an outfit called Affinion. She said we had opted in by cashing a $9.25 cheque mailed to us "on behalf" of Chase. An Affinion spokesman said it developed marketing programmes for Chase and other banks."

Silverman suspects they piled the cheques up with some small rewards cheques from Chase and then deposited them.

"Only in this case, I suspect the credit card cheques set us up for what felt like a sucker punch. We didn't read the disclosures that came with the $9.25 cheque - I admit it..." and wound up with a $119.99 charge.

"I told the operator I wanted my money back and although it was returned, the experience left a mark. When I'm in Giuseppe's, I feel like I'm with family. When I'm at Chase, I feel like I have to watch my back - and I can't imagine that's a good thing for shareholders of the bank."

He contrasted the bank experience with Giuseppe's, a great local Italian restaurant in northern NJ whose true name he won't reveal. But, as a resident of that area, it is my goal to find out.

Meanwhile, you have to wonder how many banks are screwing up their reputations with these short-term profit pitches. When I get home and call an 800 number to get my new Bank of America ATM card registered (see below for my poor experience with BoA) they will tell me I have to stay on the phone while the call is processed, while in reality they are just using the occasion to pitch me on overpriced card insurance.

In small ways and large, banks are contradicting their marketing with their behaviour.

ING – Doing Some Thing(s) Very Well

Probably it’s just a coincidence that ING has two longish stories in the 4 January FT – one an innovative management framework from Bain that helps the bank keep its international operations in synch and another on how the bank is quietly extending its global reach, - an interview with Dick Harryvan, the board member responsible for ING Direct which now has 20 million customers. It even made Time Magazine's list of the top 50 Web sites for 2007.

Anything in common? Perhaps it is focus and clarity. The framework (known as TPE for Towards Performance Excellence – Lucy Kellaway, where are you?) aims to align (wasn’t that term officially buried in 2007?) strategy, structure and process aims to connect the dots, in the words of Jacques Kemp, who found the approach valuable in the Asia-Pacific region where 24 local businesses were conducting business in their own distinct ways. Significantly, Kemp thinks that a key part of his job is also understanding at least some of the details – his analogies range from architect to plumber. By grouping functions into units with clear goals and responsibilities, the framework helps improve communications – who does what, and why – in the bank’s Japanese operations. TPE is being rolled out to other parts of the bank – with luck it will acquire a new moniker along the way.

            ING Direct is quietly expanding from Internet/call center savings into 10-20 additional products, including checking, mortgages, and investments. This stealth approach could be a big winner, according to a KBW analyst.

            “Perhaps if you’re HSBC you say, ‘Why do I need to bother?’,” says Chris Hitchings, an analyst at KBW. “[But] if we look back in five, 10 years’ time and discover that deposit-taking is only 20 per cent of ING Direct’s profits and it’s making stackloads of money doing share trading, mutual fund supermarketing, payment accounts, mortgage accounts and so on, then it may well be that the HSBCs and Citi Corps of the world will kick themselves.”

            Harryvan notes that retail banks offer about 300 products across the range he is targeting, even though they know that only about 10 products account for 80 percent of their earnings.

            My own favorite was BankOne which bragged that it offered 1,800 different types of credit cards. Assuming these weren’t just five different plans and 1,795 university football and basketball team affiliate cards, what possible purpose could this have served? And who at the bank could ever explain the differences? Poor BankOne boss, Jamie Dimon, failed up to CEO of JPMC. Shows what I know. Guess credit cards weren’t so important, and he has kept the bank largely unscathed in the credit crunch. Probably easier to watch derivatives without worrying about 1,800 credit cards.

            Through focus on online banking, ING Direct has a 100 basis points advantage over the competition, whose attention is scattered across branches and other channels.

            As more and more bank customers become familiar with Internet transactions, how long can more traditional banks figure out how to provide high-cost branch channels and high-return and low-cost products through Internet-only channels?

And what did Time say? Easy to set up in eight minutes and paying 4 percent on checking, it beats Citi's .8 percent.

A Brilliant New Concept for Banks -- Think About Customers

Way back in mid-December Chris Skinner did a review of retail banking. Here's an idea he may have overlooked -- think about how customers actually use your bank, and for American banks, offer some support for people who work internationally.

My personal example, if you will be so kind as to overlook special pleading...         

As a freelance writer specializing in financial technology, my work, or at least my payments, fall at the small end of the small business spectrum. Even so, my recent experiences with Bank of America suggest international awareness and service is a huge unfilled opportunity.

            A few weeks ago I took a check for approximately £600 to my local Bank of America branch in Paterson, NJ. The teller stared at it, then looked for help. A more experienced teller took over and informed me it would take six to eight weeks for the money to hit my account. Then she began filling out a one-page paper form.

            Now I know Bank of America can do better. In fact, the check I was depositing was payment for a story about the international banking services Bank of America provides to Sun Microsystems.

            Bradley Vollmer, assistant treasurer at Sun, had been effusive in his praise for the bank. After a sigma project,(I guess they still talk Sigma somewhere) Sun treasury realized they needed electronic and central visibility of its cash positions and the ability to move money around electronically. Sun has left most of the details to the bank and is pleased with the results.

            “Bank of America is doing the heavy lifting,” adds Vollmer. “They are really good at it.” As a result, Sun can now see 98 to 99 percent of its cash.

            So why does it take four to six weeks for an English check drawn on Barclays to clear? This hasn’t improved at all over the last 10 years, even while Check 21 provides next-day funds in the US.

            Surely I am not the only Bank of America customer in the U.S. who receives checks from overseas. Is this an opportunity?

            My second view of the bank’s parochial view of the world came after I lost my Bank of America debit card in a Barclays (again) ATM in Moorgate. Around 7:30 p.m. on a Friday evening I had finished a coffee-heavy interview with Intel and was heading to a journalists’ party. In dim light I used an older Wincor Nixdorf ATM at what Barclays dubs “Hole in the Wall.” Clever marketing for an ATM until it takes a card. Then the name seems all too accurate. Not noticing the keys alongside the aged display, I thought I was trying to work a non-existtent touch-screen when the machine took my card and suggested I contact my bank.

            Friday night in London with £10 in my wallet, not a good feeling.

            When I got back to my friend’s flat I checked the Bank of America Web site. No international number. I sent an email to customer service, which said a response would come in 12 hours. My reduced dialing plan didn’t allow 800 numbers, so I made a full-price call.

“Welcome to Bank of America .” Information about my checking account followed by the standard warning about increased call volume and the wait was three minutes.

Then the sales pitches began, starting with online banking. It occurs to me that if it takes you 12 hours to answer an email, promoting online banking during the call hold might not be playing to your strength.

Next was a promotion for deposit ATMs. That was followed by a message urging customers to use their ATM debit cards for travel. Yeah, sure, but carry another card for backup.

Customer service finally arrived to tell me I could have a card sent to my New Jersey address. Not so useful since I wasn't heading home for another three weeks. Next they said they would need approval from another department to see if they could send a card abroad. It took him a minute or two to find the number for emergency services.

That took a minute and a half to answer, while playing a message about caring for customers. They promised a call back in 15-20 minutes. They never did.

Barclays customer service number from their Web site apologized for the inconvenience and said to call Bank of America, because Barclays routinely destroys captured cards. Visa International referred me back to the issuing bank.

On Saturday morning I checked with my local Barclays in Amersham. If it had been their ATM, said the manager, he could have retrieved the card, but the Moorgate branch was closed Saturdays and he expected the card would be destroyed.

Saturday morning I tried Bank of America’s emergency number again, around 4:30 a.m. in Charlotte, North Carolina. They must have the smart people on the overnight shift because I spoke to a young man who talked to his supervisor. A card was going to my Paterson address, he told me, and checked with his supervisor.  They passed the request to Visa International and within a few minutes I had a polite Indian man on the phone. He arranged for UPS to deliver the card on Monday. Just after 11 a.m Monday my new Visa International card arrived.

Shortly after talking to Visa and arranging for a new card, II received Barclays' response to my email Friday night. It said I could retrieve my ATM card with two forms of identification.

How many years have banks been promising their channels would present consistent information to customers?

How long should it take to respond to a customer email? By the time I received the answer from Barclays I had already committed to whatever it costs to get overnight delivery of a new card, which did indeed arrive Monday morning. Nice work by Visa International!

The ATM-swallowing problem is not so rare – the Barclays spokeswoman said a Nationwide ATM had recently swallowed her card during a power outage, but she was able to retrieve it from the bank.

My conclusion? Barclays won’t be inconvenienced for the sake of customers. Bank systems' customer support systems are poorly integrated – two different answers from customer support at Barclays.

Barclays just doesn't give a damn. How many people from outside London use its ATM machines? How often do the ATMs confiscate cards? Do any regulators bother to track this?

Just how difficult is it to secure cards until the branch re-opens? What's the big risk, don't banks still have vaults? How difficult is it to lock up a debit card and release it with proper identification? 

Bank of America’s service was less than stellar, and it clearly isn’t an international bank. (Well, except for the investment bank which has a headquarters at Canary Wharf. But I suspected they would look at me oddly if I appeared to ask for a fresh ATM card.) For me the bank is convenient domestically, because it has ATMs up and down the East Coast. And branches in Florida provided good service during an extended trip there a year ago.

But in the future, I won’t leave home without my American Express card. Take a look at the American Express home page for what an international presence looks like. I certainly don’t want to go back to travelers checks. In the future I will carry either a second ATM card or a PIN for a credit card.

Surely some bank in the US can do better than Bank of America. And can't Barclays show some modicum of respect for users of its ATMs?

            

Mint Takes on Microsoft Money and Intuit’s Quicken

Plus it's free, and Web-based.

Mint allows users to automatically track and analyze their financial transactions, set budgets, and even send balance updates in text messages to cell phones.

From the Forbes interview with its 26-year old founder, Aaron Patzer:

“The average user, when they log in, can find $1,000 worth of savings within five minutes.”

They plan to make money from referral fees.

The brand promise of Mint is that the ads or offers you see are individually calculated to save or make you money. On Mint, ads are features. On our "Ways to Save" page, where we offer these savings features, we've found that the click-through rate [the number of times a link is clicked for every time it appears] is between 8% and 10%. That's much higher than the industry standard for online ads.

One thing that's unique about our model is that we're not trying to make users spend more time on the site. In fact, because of the text message and e-mail features, users don't have to log in for more than five or 10 minutes a week.

Patzer is on to the fact that most users of personal financial software don't want to use up a lot of their all too limited free time filling in information -- Mint uses Yodlee for that. I have tried Quicken once, and Money a couple of times, but they assume I am far more dedicated  -- and rational -- about my financial planning than is the case. Like so much software, the design doesn't take much notice of the way users live and work. Patzer says his realization came when a new job made updating his information impossible because it required so much time.

Automatic deduction savings plans are one way around this -- Bank of America's Keep the Change, which rounds debit card purchases up a dollar and then deposits the change in a savings account, is the best example I have seen of a program that has a sense of how people save in real life. They could make it even better by letter you set the amount to sweep to savings to change plus $1 or $5 -- so heavy spenders would save even more. They probably need to.

Microsoft in 2008 -- The Predictions

            Despite Chris Skinner’s prediction, in an intelligently provocative recent piece, that 2007 was the year that Microsoft committed suicide, even he didn’t say the process would be quick – he predicted the company’s first lost to appear in 2012.

            Meanwhile Microsoft continues to play a big role in banking and insurance, while its importance in capital markets beyond Excel on the trading desk is significant, but just how significant is subject to some debate.

            Still, there’s no question the company’s plans are important to financial services firms, so I read through reports from a few leading predictors with interest.

            Bink.nu from the

Netherlands

is one of the leading Microsoft watching sites. It is ""Watching Microsoft Like a Hawk, in its phrase. Its predictions consist of a list of product releases including IE 8 beta in the second half of 2008, perhaps a new host and integration server, and R2 of Commerce Server 2007?

            Steve Bink’s site carries comments and links to other sites, such as Wictor Wilén, who comments on Microsoft and other topics of interest. He who expects IE 8 to be out by next Christmas.

Mary Jo Foley’s “All About Microsoft,” which appears on ZDNet is much more conversational with a list of 10 predictions, explained in a couple of paragraphs, based on inside sources. A few samples:

Windows 2007 is underway but nothing will be released in 2008

Business Intelligence will be available in some versions of Office

A Zune Phone

And she thinks that Bruce Chizen, Adobe's CEO who abruptly resigned in 2007, will join Microsoft to run the Expression team in the new year.

“As Microsoft watchers know, Adobe and Microsoft are competing head-to-head in the design-tool space. If the sources are right (and there are no non-competes in the way), Chizen may have a new roost to rule soon.”

She also has a long string of interesting comments coming off her blog. Steven Bink and Mary Jo Foley are definitely worth bookmarking if you want to keep up on Microsoft.

http://blogs.zdnet.com/microsoft/?p=1054

FT Business Book of Next Year?

I know we aren't quite to 2008, but I wanted to get a jump on the FT's nominating committee with "Options, the secret life of Steve Jobs." Written by Fake Steve Jobs, who produces the wonderful Fake Steve blog and by day uses the name of Daniel Lyons and is allegedly a senior editor at Forbes. But you can't be sure.

He's hilarious with his depiction of the Steve Jobs ego, and his accounts of Steve sitting around gettting stoned with Oracle's Larry Ellison, and his accounts of venture capitalists ring true as well. At least they do to someone who has read about them.

A conversation with Virgin's Richard Branson:

Richard Branson

            
"We’re going to create a new section on Virgin Atlantic, right behind Upper Class, and call it iPod Class. The walls, the seat backs the seat cushions, the carpet, the bathrooms, everything in bloody shiny white, like you’re sitting smack inside an iPod. We throw in some fake Champagne and cheap sushi and bang up the fare prices by thirty percent…”

            “Richard, I don’t get it. What’s the iPod connection?”

            “Hrm, well, uh, yah, whatever, who knows, but it’s marketing, innit?”

On Bono

“He’s the only person I know who’s more self-absorbed than I am….But give Bono credit. He figured out something that I didn’t. One word: Africa. The place is like a miracle worker shrine, a whole continent filled with absolution. Touch it, and you’re healed.”

On Hollywood -- film and music.

“These aren’t engineers or inventors. They don’t create anything. They don’t build anything. All they do is make deal. They’re criminals, basically…These guys are like a cross between Tony Soprano, Bill Gates and the monster from Alien. Even when you catch them cheating they don’t apologize, they just move onto the next swindle. And they’re really good at it because they’ve bee doing it for so long. They’ve spent decades practicing on recording artists and actors and screenwriters…They’re like guys who steal purses from old ladies. It’s not that hard to do, but kind of person does it?”

It's a fun read, a pretty good plot, but it's the sections on a crusading prosecutor who wants to become governor, on Hilllary doing a fund-raising visit, on Al Gore trying to squirm his way off the board, that make the book so provocative and weirdly informative. Well, maybe just provocative.

The Future of Finanical Crises -Merton and Scholes at IAFE NYC

The International Association of Financial Engineers is bringing in two heavy hitters to discuss the future of financial crises -- Robert C. Merton and Myron S. Scholes (If you have to ask, this probably isn't for you), but:
Robert C. Merton is the John and Natty McArthur University Professor, Harvard Business School & IAFE Senior Fellow  and Myron S. Scholes is Chairman, Platinum Grove Asset Management L.P. & IAFE Senior Fellow.
Perspectives on the Current Financial Crises – Will This Keep Happening?
Monday October 29th, 2007, 5 - 6:45 pm

5:00 Registration, 5:30 Event, 6:45 Reception

Sponsored by International Securities Exchange

McGraw Hill Auditorium, 1221 6th Avenue (Entrance on 49th Street)

Free for IAFE Members and $100 for non-members.

Click <a href="http://www.iafe.org/member.html" title="here">here</a> to become an IAFE member.

Space is limited and is on a first come first serve basis – with priority going to IAFE Members.

Financial Insights - Top 10 Trends in Banking -- The Teaser

And the top three:

Information lifecycle management rather than just information management

Technology refresh, or Dynamic IT, which involves wrapping new technology around old legacy systems. Sounds like a new name for Saas. It also seems to me that wrapping legacy systems by itself, without a larger strategy for moving forward, risks getting stuck with high maintenance costs and significant opportunity cost. I have done a dozen stories in the last year or two about companies that have seen huge savings and huge improvements in speed by dumping their mainframes for much faster Wintel-based systems that cost far less. Whether you call it Saas or a new term like Dynamic IT, this could be a strategy of developing competitive DIS-sadvantage.

Data security concerns continue. And they won't go away, especially when staff and consultants download sensitive information to laptops which they leave in their cars, cloakrooms and restaurants.

The other 7 come out at the conference in Boston.

Tom Peters, Jim Collins -- Fairy Tales About Business -- IMD's Phil Rosenzweig

The Halo Effect Takes the glow off some of the most popular business books of the last two decades with an intelligently critical view of methodology.

            Two weeks ago I pulled “Good to Great” by Jim Collins off my shelf and began reading. An inspiring book about companies that had chugged along for years and then taken off on a hockey stick curve that led them to outperform the market by a substantial margin for 15 years, it included just 11 which made the grade, including Circuit City, Fannie Mae, Gillette, Nucor, Walgreen’s and Wells Fargo.

            The university research team Collins worked with found certain common features – Level 5 Leadership – CEOs who were ambitious for the company but personally modest; getting the right people on board and, equally important, getting the wrong people off the bus. Focusing narrowly – the hedgehog rather than the fox in Isaiah Berlin’s terms, a culture of discipline largely resulting from having the right people who can be counted on to do the right things, and using technology as an accelerator rather then being led by it.

            All very good until I picked up The Halo Effect, Phil Rosenzweig’s somewhat gimmicky term for a very real problem in heroic business books – the tendency to find winning companies and then collect the stories from participants and the business press to look back and explain the factors of success. A professor at IMD in

Lausanne

,

Switzerland

and a former employee at HP, he ruthlessly picks apart the results of some of the best selling business books over the last two decades.

            Although Collins and a team of researchers spent 5 years gathering information such as interviews with managers and loads of press clippings once they had identified the 11 public companies which met their cut, Rozenzweig contends the materials, such as business press articles, suffered from The Halo Effect – once a company is anointed a winner, all its history is written to explain its success. (As for Collin’s descriptions of the filing cabinets full of materials, the 6,000 press clippings, etc. it reminds me of what Charles Peters, founding editor of The Washington Monthly, says about bureaucrats who brag about the hours they work – when you can’t measure output, measure input.)

            Rozenweig sets his foundation with Chapter 2 about Cisco, lionized by the business press in the run-up to the 2000 bubble peak when for two weeks it had the largest market cap in the world, and then roundly criticized by the same publications, such as Business Week and Fortune just a year later, often on the same grounds such as its aggressive acquisitions and customer relationships that they had praised earlier. In just months, valuable strengths had morphed into obvious failure, as if Karl Rove had taken up business journalism.

            It’s enough to make you cancel your subscriptions. Especially since the business publications for the most part failed to understand the shortcomings of the research when they reviewed these books

            The best sellers, from “In Search of Excellence,” which Business Week debunked a year or two after its publication when it reviewed the performance of highly praised companies that had since tanked, to Built to Last or the Evergreen Project, directed by a McKinsey’ partner with William Joyce at Dartmouth’s Tuck School of Business and Nitnin Nohria at Harvard Business School, books supposedly cutting to the core of what makes a business successful suffer from pseudo scientific methodology masked by inspiring story-telling. Of the Excellent companies, only 12 managed to grow faster than the overall market in the 10 years after the book was published, and 23 failed to keep up.

            The late James Meindel at SUNY Buffalo conducted a series of careful studies that concluded we have no satisfactory theory of effective leadership that is independent of performance, Rosenzweig says.

            “So many of the things that we commonly think contribute to performance are often attributions based on performance.”

            He does find some studies that are rigorous, but they don’t make great stories. Marianne Betrand at the University of

Chicago

and Antoinette Schoar at MIT studied the impact of individual CEOs and concluded that they explain about 4 percent of the variance of company performance.

            “That’s a statistically significant finding, but it’s hardly a seductive story.”

            Nick Bloom at the London School of Economics and Stephen Dorgan at McKinsey tested specific management practices against results in a survey of 700 companies in a cross sectional, rather than retrospective survey and hid their aims by telling people the survey was about practices, not performance. They concluded best practices contributed about 10 percent to superior performance. While Tom Peters and Jim Collins can command around $100,000 for an appearance, Rosenzweig doubts that these academic researchers will get anything like that with their cautionary conclusions.

            What’s the alternative to business self-help books? He thinks success comes down to strategy and execution. Both require extensive, continual and critical thinking – not the mainstays of self-help books whether in dieting or business.

            But, he notes “You wouldn’t appreciate the risk nature of strategic choice if you read most business books.”

            He cites the Evergreen Project which said, “Whatever your strategy, whether it is low prices or innovative products, it will work if it is sharply defined, clearly communicated and well understood by employees, customers, partners and investors.”

            Sheer nonsense, comments Rosenzweig. “Good to Great” has nothing about strategic choice, competitors, positioning or risk. In fact, its index doesn’t list even strategy.

            “Neither or these books recognized a central fact: Strategy always involves risk because we don’t know for sure how our choices will turn out.” Competitors and technological change are also sources of risk. He mentions Clayton Christansen’s ground-breaking “The Innovator’s Dilemma” which showed through numerous case studies that listening to customers and refining existing products can lead a company straight to ruin, even while it seems to be doing everything right. For execution, he turns to Larry Bossidy of Honeywell who laid out specific areas of focus – accelerating new product development, improving the order-fill rates, superior inventory management, and better working capital management.

            So what is to be done, as Lenin so famously quoted Nicholai Chernyshevsky?

            First, contends Rosenzweig, give up the idea that you can manage to greatness with a couple of simplistic ideas. He prefers Andy Grove, former CEO of Intel, whose approach was explained in the title of his book, “Only the Paranoid Survive.” “…a thoughtful primer on strategic inflection points – moments of extreme risk when the company’s life is at stake.”

            The pop business books probably won’t do you any harm, unless you take them too seriously. However, before you settle down with the next one, read through “The Halo Effect” to sharpen your critical faculties. Success doesn’t come through managing by fairy tale.

            

NYC Quantitative Modeling & Financial Market Dynamics

World renowned experts will be speaking at Quantitative Modeling & Financial Market Dynamics , to be held from 4-8 pm Oct. 31 at 7city Learning, 55 Broad Street. This first annual QuantDay event will be hosted by Numerical Algorithms Group (NAG), in conjunction with Wilmott magazine, 7city Learning and Quantstar.

Speakers at the QuantDay event include: Dr. Robert Tong – "Numerical Software, Market Data and Extreme Events."

Dr. Mike Giles (Risk Magazine’s Quant of the Year 2007 – “Multilevel Monte Carlo Path Simulation”

Dr. John Birge – “Dynamic Portfolio Optimization Using Decomposition and Finite-Element Methods”

Financial quantitative analysts and other financial industry managers can find more details on QuantDay seminars and/or register to attend this QuantDay event at http://www.nag.com/market/quantday2007.asp or by contacting Kurt Peckman, kpeckman@nag.com, 630-598-5216.

QuantDay is the first public Numerical Algorithms Group event for financial quantitative analysts to be hosted in North America, and is modeled after the popular NAG series for financial quantitative analysts in The City area of London.

Tom

A Bank is a Bank Is a Bank, Except....

When it's not, Geoffrey Moore says. The author of Dealing with Darwin, Inside the Tornado, Crossing the Chasm explained to Teradata users why analytics is such fast-growing tool in mature businesses, like banking.

"You walk into some banks and say it’s cool. Or you like a Web site or a loyalty card at a supermarket. We have a window of seconds to up-sell or make an offer so we are forcing the data out of the warehouse to the front line….so analytics does from being the aftermath of transaction processing to the fabric of transaction processing.”

In mature businesses, innovation comes around the edges, not at the center, and that requires constant innovation, experimentation, killing the losing ideas and putting resources into the winners...launch, analyze and then conduct triage.

Moore

says the perimeter philosophy is about engaging more deeply, more frequently, gaining more share of wallet in service dollars (fees) as well as product dollars through high value low cost extensions to the existing infrastructure.

            “This is the money machine behind analytics.”

Lloyds TSB must agree – it has dual Teradata data warehouses in production for improved performance and disaster recovery. Denise Cook, information domain architect at the bank, said a review of continuity planning showed it could take a month to recover production data. The bank has deployed what Teradata calls Dual Active at two geographically separated sites for high availability, better performance on increasingly complex queries and disaster recovery.

Strong prevention can cost more than it is worth, so it is important to understand your data, determine how fast is fast enough in recovery and design a system that won’t cut too much into the firm’s capital.

“Data warehouses have problems because they are often a shared environment and it is often unclear who pays. The business value is often not well understood or well documented.”

Fortunately, sort of, in a Teradata upgrade they had an unplanned outage which focused bankers attention on the importance of the data warehouse. Cook did not explicitly recommend this as a way to obtain funding, but still…

“Teradata suggested we start small but we ignored them and put in two systems about the same size.” They are both used in production all the time during the workday.

Teradata and SAS Launch Partnership, No Worries About SAP and Biz Objects

SAS and Teradata execs took time out from announcing their partnership today to say they expected to continue working with both SAP and Business Objects.

"We have partnerships with everyone," said Bob Fair, EVP for global field operations at Teradata. "For us, when one company acquires another company with a revenue stream and a customer base, they work hard to keep thier other partnerships open. We have partnerships with both SAP and Business Objects and expect that to continue." SAS focuses on enterprise intelligence -- business intelligence is just one component of that , he added.

"There are very few business intelligence vendors left, becasue they provide just a component of what people want. Customers are looking for industry-focused solutions."

Both SAS and Teradata have strong vertical business practices in retail and in financial services, which is one reason they have joined forces in the first time Teradata has endorsed a specific hardware vendor. The two companies plan to move SAS analytics into Teradata so customers won';t have to extract data to run the SAS analytics.  One customer, Warner Home Video, reported that as a result of integrating SAS and Teradata technologies it reduced processing time from 36 hours to one hour and 15 minutes.

When Norwich Union planned to launch pay-as-you-drive insurance in the UK, it tested a number of databases and selected Teradata as the only one that could manage all the information, while Bank of Shanghai chose Teradata over HP Neoview for Teradata's price performance and expertise in financial markets. (HP sales folks at Sibos said that HP Neoview concisntely beats Teradata in both pure performance and price.)

Westpac Improves Sales Leads with Teradata-Siebel Combo

Who says competitors can't work together? It just takes a littel pressure from the customer, in this case Westpac.

Super-empower marketing with a CRM system that draws on a data warehouse from Teradata and analytics from Siebel running off transactions on Oracle, says Maree Lipscombe, senior manager of Westpac Leads, the marketing effort that has driven 4 million new leads at the Australian bank. The bank brokered a cooperative deal between Teradata and Siebel, which is now owned by the database rival Oracle, she said during a presentation at Teradata’s User Group conference in

Las Vegas

.

Now bankers can talk to customers about their needs, rather then leading off the conversation with a description of bank products. The data warehouse is populated by information generated in bank conversations with customers, and from in-bound service calls, which the banks treats as a marketing opportunity, in no small part because the Teradata information makes the CSRs smarter since the bank can aggregate customer information from legacy systems for a comprehensive and real-time customer view.

Because the bank is building on best-of-breed packages, it is not stuck in a legacy world and has created scalable solutions.

Information from CRM, which Westpac calls Relationship Builder, gets passed to Westpac Leads and then goes to bankers, which is sometimes the weak link.

"The aim is to transform 9,000 staff from order takers to a sales force that can act on customer needs anytime, anywhere."

The bank started small to make sure its technology would enable staff rather than frustrate them, but has now rolled it out from an initial pilot of 12 to all 9,000.

"We have moved from compliance-driven customer contact to capturing future customer needs through conversations. Then the information is captured electronically in a single source that can be shared by all the bankers. Customers don't need to repeat information and any banker can get the information and continue the conversation [on a subsequent call].

And the leads can be tracked, delays spotted and acted upon, and sales staff can see their own performance, and managers can see team performance.

Microsoft Ships BizTalk Update with SWIFT Support

I'm confused. Microsoft is shipping a new version of BizTalk Server 2006 late in 2007? How retro.

Microsoft did not change any features in the shipping release since the last beta, says Steve Martin, the company's director of connected systems product management. "We hardened some of the functionality. The last major version of the product was feature complete," Martin said. Redmond Developer">Redmond Developer</a> reported it.

Greenspan Blasts Bush and Republicans

The WSJ got hold of a copy of Greenspan’s new book, due out Monday. Sounds a little mixed. The Ayn Rand devotee who played a partisan game in supporting skewed tax cuts by Bush, criticizes the Republicans for losing their one-time small government focus. One interesting point from being close to presidents – it seems that no normal person would run for the job – the most normal was Gerald Ford, who got into the White House through Nixon’s resignation.

It does sound more interesting than the usual political memoir. Hope it’s better than Alistair Campbell’s.

Brilliant Hed: Customer Service in Best Interest for Banks – WSJ

Whew. Knew there was some reason I pay good money for my Journal subscription. Or subscriptions. When I called to complain about getting two copies a day they took action. Today I got three.

 

Anyway, some secret shoppers from Sandler O’Neill & Partners came up with exciting finds, like a BoA sales rep making disparaging comments about JP Morgan Chase. Ok, is that news? First

Manhattan

reported on its secret shopping at BAI a couple of years ago – it found sales reps disparaging the bank they worked for and suggesting the customer go to the competition! Now that’s a little more interesting.

 

First

Manhattan

also found that few sales folks could explain all the different checking accounts a bank offered.

 

The Sandler O’Neill survey is about as exciting as the headline.

Speed Without Disruption - HPC On Wall Street Monday

High Performance Computing on Wall Street has been running for a couple of years now, but interest seems at an all-time high this year. Today I have talked to IBM, Cisco and, on a related matter, Platform Computing. One common theme, which I will elaborate on Monday since some of this is embargoed, is that companies want improved performance without ripping out their exiting infrastructures, and vendors are responding with solutions that can be dropped into the existing environment. (How the IT people who actually make this stuff work must hate that sort of casual terminology -- sort of like describing 500 pound bombs as surgical air strikes).

Pete Harris of the A-Team Group organized the content bit of the show, and has a good interview at GridToday.

Pete: It’s certainly been a hot year for this subject, and so I’m very pleased with what we’ve been able to do. I think the area that’s become very hot this year is the area of “low latency,” and quite a lot of the conference is about that. It’s about different aspects of that, whether it be multi-core processing helping to achieve [low latency], or software engineering in terms of software stacks helping to achieve [low latency], or high-performance networking like InfiniBand helping to achieve [low latency.]

Gt: Are there any sessions or panels that you’re looking forward to seeing, or that you think will be particularly interesting?

HARRIS: There are a couple of them, actually. There is one on hardware acceleration (“Focus on: Hardware Acceleration, FPGA Technologies, Low Latency Ticker Plants Implementing Hardware Accelerated Applications For Market Data and Financial Computations”), which is [an] emerging [area]. We actually ran the hardware acceleration panel last year, and it was a pretty new area then, and we were surprised to see it was totally packed, so we moved it to a big room this year and got lots of participants. We’ve got Intel and AMD on the same panel, which is going to be interesting, and we’ve got someone from UBS [Invesment Bank], so I think that one’s going to be a blast.

Also, IBM is actually giving a wide-ranging presentation about what it’s doing. One of the things it is doing is something called “System S,” which is a very scalable supercomputer, which they’re looking at for stream-processing applications, processing many messages per second. IBM’s research people are researching it; it’s not something you can buy right now. That’s kind of interesting.

Come back next week for more details.

Microsoft Legacy Modernization Program

The Mainframe Migration Alliance (MMA) and the Midrange Alliance Program (MAP) will host a meeting on legacy modernization at the Fira Palace Hotel in Barcelona from 1:00 – 4:00 pm on 9 October.

The meeting will provide an opportunity to learn more about Microsoft’s plans regarding legacy modernization and offer an opportunity for attendees to suggest how the alliances should focus their efforts for the coming year.

If you’d like to attend please email mickey.pierce@microsoft.com

FSA Fall Short on Investor Protection -- WSJ

The FSA’s principle-based approach to regulation has won it a lot of favorable attention in the US. Leave it to the Wall Street Journal to weigh in with criticism for its failure to protect individual shareholders in the UK. The Journal sees the FSA as trying to protect the London marketplace rather than the individual investor and quotes Jim Cousins, a member of Parliament, saying the SEC would have been tougher in cases like the split-capital investment trusts.

The Journal story leaves a lot to be desired, focusing on one or two cases and quoting Cousins and a Harvard business prof—its comparison of the number of FSA staff at 2,700 while the US has 15 times as many in financial services doesn’t mention that includes 50 separate state insurance regulatory bodies, many of dubious value.

Nor does it look at the way the SEC in the past has chased after kids while ignoring the huge conflicts of interest in major Wall Street firms that Elliot Spitzer uncovered as New York’s Attorney General.

The differences between American and British regulation are getting a lot of attention as many in the US including Treasury Secretary Hank Paulsen argue for lighter regulation to keep New York competitive with London. See my blog review of commentary by Michael Bloomberg, Sen. Charles Schumer and skeptic Ben Stein—an economics writer perhaps better known for his role as the teacher in Ferris Bueller’s Day Off.

A lot of complex issues here and they deserve better treatment than the Journal’s story.

Tom Groenfeldt

Futures and Options Report from Chicago FIA F&O Expo 2006 featuring Tom Groenfeldt

View the video from The Banking Channel: here.