Posts Tagged ‘retail banking’

A brief history of co-creation

Tuesday, September 1st, 2009

Einstein reputedly said, “The secret to creativity is knowing how to hide your sources.” The same can be said for co-creation. The word “co-creation,” at least in its popular, limited definition, is associated with a decidedly modern view of how customers can engage differently with companies, often by building social communities mediated by some form of technology. We think of eBay, Apple, Facebook, and Twitter. But co-creation was arguably born much earlier, in the 19th century on the French countryside, to be precise.

You will have to excuse me. I’ve been in France for more than a week, and if you stay long enough, the French will try to convince you they have been first at everything, from inventing the bicycle to flying the first airplane (come on now, we all know Americans did those things). When it comes to co-creation, though, the French may have a point. The start-up of the French bank Credit Agricole at the end of the 19th century, for example, was arguably co-creation in action. A bunch of local farmers in the French provinces did not have enough of a regular cash flow to warrant the attention of banks (crops have a way of getting wiped out by weather or pests), so they decided to lend money to each other. It was an eBay of sorts, with money being the merchandise exchanged for a fee. The rating system of lenders and borrowers was a transparent one, where drinking guaranteed the farmer immediate rejection when applying for a loan. This “too much wine, no money” edict may not have been as sophisticated as the modern-day consumer credit algorithms, but it did allow all these local farmer co-ops to grow and enabled Credit Agricole to federate itself into one of the largest global banks.

The French also claim they invented mutual insurance – another instantiation of co-creation – In the 1930s. The most legendary of the mutual insurance firms in France, MAIF (French people love acronyms that puzzle foreigners), was started by high school teachers. These guys drove slowly and washed their cars every Sunday. They’d also seen those farmers organize a bank, so they figured they might as well organize an insurance company since the bank idea was already taken. MAIF had fewer losses than the other segment of French population called the non-high school teachers, and it grew rapidly. At some point, MAIF figured it could invite descendants of high school teachers to join in, on the assumption that even though they had lapsed by not becoming teachers themselves, maybe enough good genes had remained. And so the French invented co-creation, first in banks, then in insurance.

Some skeptics point out that wine growers on the banks of the Rhine in Germany were doing exactly the same thing at roughly the same time, creating a German version of Credit Agricole called Raiffeisenbank, also a very large bank today. I will refrain from mentioning more because there have been enough difficulties between those two countries already without igniting a war over co-creation (although the unabashed promoter of co-creation in me thinks it would have great marketing potential).

Since then, some of my Mexican and Brazilian friends have argued that Latin America invented co-creation long before anybody else, initiating the concept of community lending or tanda (related to the French word tontine, which the French use as etymological proof that they were there before the Latin Americans, since they gave them the word in the first place). And the popularity of micro-credit in Asia has prompted some Indian scholars to research the early appearance of group lending in rural villages in Asia, showing that it predates the appearance of co-creation on all other continents.

So maybe co-creation was not invented by the French after all. Perhaps the concept was, well, uh, “co-created.”

Co-creation in the fish tank

Thursday, July 2nd, 2009

“I’m not like them” this attractive young branch advisor tells one of her customers. “I’m much more like you than I’m like them. I invested in the same shares you did. I too have lost 40% of my assets.”

The “them” is the management of her French bank. Or any bank for that matter, for she hates them all. “They” are the ones that took excessive pay, invested in subprime and derivatives and caused the global financial crisis. That she might be lumped with these high-fliers galls her no end.

The bank has become concerned about this Stockholm syndrome for advisors. Advisors and customers are increasingly co-dependent and advisors are progressively distancing themselves from the bank. In its desire to reengage advisors and customers, the bank has decided to start with two test regions. In the North, the regional marketing manager is in charge: he’s a classically-trained person. He’s eager to offer his region as the test bed, but wants it done classic market research-style, with no management interference. He wants a well-lit aquarium and a comfortable chair from which he can observe the fish.  In the Center region, Raphael, head of the region, has decided to come to the workshops himself in order to engage directly with advisors and customers. He wants to dive in the tank and swim with the fish.

“But we want unfiltered data” the Marketing Manager of the North states, upon hearing what Raphael, the Head of the Center Region, wants to do. “If I or any of the senior managers come to the workshops, our advisors and customers will be intimidated and their responses biased. I’d rather come to one or two focus groups and observe what’s going on behind the glass. Or maybe I’ll look at the films.”

A few days later, Raphael and his team find themselves involved in a passionate discussion with advisors and customers. It’s about midnight and they’re still going. Advisors challenge him openly in front of customers about the incentive system that occasionally drives them to push products onto unsuspecting customers at campaign times. Raphael pushes back by outlining the economics of the retail banking business, the need for campaigns to create the volume effect required to maintain branches in smaller towns and villages, and the fact that these campaigns pertain to products people happen to need. So where is the conflict? Paradoxically, customers start reassuring advisors that there’s nothing wrong with what Raphael just explained. They’re cool with the fact that the bank has its own economic imperatives, as long as they’ve been made transparent.

The customers in attendance are young people who would typically never come to a bank branch. They have a cynical view of banking, no particular loyalty to any brand, and simply do not care much. There are many yawns in the early part of the conversation. When Raphael starts talking about the community he wants to build in each town, though, chins come up and SMS texting under the table mysteriously stops. He shows them a project he’s doing, restoring one of the stained glass windows of the Chartres cathedral. They deem the project “awesome”. He then lets them see how the mutualist structure of the bank could allow them to participate in its governance and promote their own community projects. Now, they’re positively enthusiastic. They start building with Raphael what the process could be like. that would draw young people to the bank’s mutualist activities.

“But you’re leading the jury” the Marketing Manager of the Northern Region utters one last protest, looking at the film of Raphael interacting with advisors and customers in Chartres. “You’re interfering with the process.”

“That’s the point” Raphael tells him. He has a broad smile on his face. You can tell he’s fully energized by the encounter. “And I’m going to get back together with these kids as soon as we have a concept of that new community process” he announces, almost giddy. Straight back to the tank, swimming with the fish.