Four Steps to Small Business Success: Part 1

Cheryl Brown

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This episode, featuring Dave Brebner from Q2 Strategic Advisory Services, is the first of a two-part series that details how financial institutions can boost their small business strategy—or any portfolio strategy—based on a proven success framework.

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Transcript

Cheryl Brown

Hello and welcome to The Purposeful Banker, the leading commercial banking podcast brought to you by Q2, where we discuss the big topics on the minds of today's best bankers. I'm Cheryl Brown. Welcome to the show.

Today, I'm talking with Dave Brebner, a strategic business advisor here at Q2. As such, he works with our financial institution customers to do things like create digital programs that align with their strategic goals and help them bring the right products and services to market, and he also acts as a mentor to their project management teams. Welcome to the show, Dave.

Dave Brebner

Thank you. Thanks for having me.

Cheryl Brown

First off, one thing I like to do on the podcast, especially when I have somebody on for the first time, is I'd just like to give us a chance to get to know you a little bit better, so tell us a little bit about your background in the banking industry and how you got to where you are today.

Dave Brebner

So, clearly, I'm not from Texas. I have traveled around the world. I’ve lived in Australia, I’ve lived in the U.K. and I've lived here, as well. I'm now getting to the point in my career where the implementations I first did 25 years ago, they're starting to look for new vendors and we're actually swapping people over. After a complete lifetime on one platform, they're now moving to the next one that I was there at the start when they first did it, and now I'm here when they're moving to the next one. It feels like, oh, well, you're getting old, clearly, but it's good to see the difference in the platforms and the technology as things have moved along. Yeah. I've been here for a while doing this type of work.

Cheryl Brown

Excellent. Well, you've seen a lot. I don't like to say that I'm getting older. I'd like to say I'm getting more experienced.

Dave Brebner

Thanks. Thank you. Yes, I'll take that.

Cheryl Brown

Late last year, you and I worked together to produce a content piece called The Small Business Scorecard, and this thing is based on the Q2 Advisory Services framework. We're going to talk a little bit more about that here in just a minute, and also, I'll post a link to it in the show notes. You can also find it online at hub.q2.com/whitepapers. Like I said, we'll talk a bit more about that in just a minute, but first, let's talk a little bit about the small business opportunity. I've read a lot of sources that say this segment is largely underserved by FIs. Why should banks and credit unions increase their strategic focus on small and medium-sized businesses?

Dave Brebner

There's so many reasons why. It's hard to know where to particularly begin or to pull things from this, because we can look at it purely as a strategic tool for reaching next year's goals or we can look at it as, well, just being able to serve the community as a community bank and being able to offer support and capabilities for small business. Whichever way you look at, it's the right thing to be doing for many FIs, so I think there's definitely a decent revenue stream to come in there. It's new opportunities for lending, new opportunities for deposits, as well, but the main thing really comes down to the people that you see every day who you probably serve them as consumers. They are looking forward to saying, "I want to use the same platforms and the same capabilities because I already like what I can see there and I want to add to that the additional services that I'm going to need for running my small business,” additional payments types, ability to have users, whatever capabilities it would be from there. What they don't particularly want to do is go and start with a brand new FI with a new set of capabilities which they're not that familiar with. They like the idea of saying, "Well, let's add it to the capabilities I have with the existing consumer-led functionality."

That just helps with that community aspect, and it helps them feel like this bank is really helping me be part of this organization and this community as I go forward. There's those kinds of softer reasons, as well as let's just count through the net interest margin that you can get from loans and things along those lines as you grow that portfolio by bringing businesses on, as well. Where you are on the spectrum of why you want to do it, I think every aspect of it has some play as to why you would want to do it from my perspective.

Cheryl Brown

Yeah, it's interesting. We so often think about these things from our own personal or at least the banks, what's in it for the bank. Why would the bank want to serve small business and what's in it for the bank? Really, what you just did is you turned it around and you said, "What's in it for society? What's in it for our communities?” That's to support small business and ensure that small businesses are able to thrive and function, and that helps all of us on a personal level. It helps me. I have small businesses that I rely on, so that's interesting.

Dave Brebner

We don't have to do it for the fun of it. There is value in there for both sides. It's not like a small business program isn’t giving back anything. There's plenty of value that can be brought to the FI and also added to the small business as well, so it's a win-win rather than helping somebody out in that sense entirely. No, you're going to win from it as well.

Cheryl Brown

All right. Let's dig into this framework a little bit. Can you just give us a primer on what the framework is, the key areas of consideration for FIs when they're building their SMB strategy?

Dave Brebner

Sure. Following on from that idea of FIs don't often think outside of what their specific needs are, one of the aspects of this model helps people, doesn't necessarily force them, but helps them think through different perspectives. When you look at it, there's really two lines to consider. There's the horizontal line that defines outside and inside, and there's the vertical line that defines planning and execution. If you're going to live in the space of planning and outside, you really can only pay attention to the aspects of that that are going to affect your program. You're looking at the market, you're looking at competitors, you're looking what customers have wanted, and you don't think at all at that point about what it is that you have and you can do or you necessarily want to get out of it. That comes later when you move from the outside to the inside.

Now, you're looking at that from that perspective of, all right, what do I have? I know what people want or what the market wants. Now I know what I have, how do I fit it together and produce the roadmap that marries both together? As you go around, it's that same idea of when you hop over the fence, you change the way you are thinking. You're moving from planning to execution. "What do I have to do to make this real?" and then you're moving from outside to inside, which is, "Well, how do I communicate if I'm talking outside of the walls of the bank or if I've brought something inside?" The communication's obviously different.

The basics of it is to help people think through what aspects there are going to be from those different angles or the different contexts, where many planning exercises don't try and do that. They start with, "What was last year's roadmap? How much have we got to spend? What have we got to make? What have we got to do strategically? What tools do we need to have? OK, now let's start thinking about it." What the customer wanted doesn't always rise to the top there. This helps make sure that that's a first-class aspect of this discussion. Does that help?

Cheryl Brown

Yeah. Yeah, absolutely. When we were putting this together, it was interesting because this is a framework that you use with customers. It's not necessarily something you just throw to them and say, "Here you go, figure it out." When we were putting together this scorecard, essentially what we were doing is we were taking that framework and then we were giving them a tool that they can use themselves to work through the framework. When we were creating the scorecard, whether an FI is just looking at beginning to start serving small businesses or if an FI is really wanting to evolve what they currently do, how did you envision that they would use this scorecard?

Dave Brebner

The idea with that, because you are in each specific segments, you can isolate what you need at each particular one of those. Think about strategic analysis of what it is that you are going to need to consider, then clearly, there's the obvious things like what is the market doing? What are the competitors doing? What information have the customers brought in, as in request, or requirements, or things like that they've brought to you? Those things are always included in every business case.

You can also look at it from ... Well, let's think about it from an account holder and their satisfaction rating. You can think, yeah, I could go and look at aspects of this information that I'm not really tracking inside myself very well, but I can include it in this context because I can isolate all the other things that I need to think about and just think about the aspects that would fit into this particular quadrant. Perhaps I'm going to go to social media, perhaps I'm going to do some sentiment analysis on what customers are saying using some of the conversations they have with my bank, or credit union, or through the messages they send, or all sorts of different aspects like that, that normally wouldn't be included but they would get glossed over. You can look at more areas from other industries. You can look at brand excellence and you can say things like, "How am I seen? Let's take a mature marketing professional perspective on what it is I look like when I'm out there. What offering am I making? What is my product when I take it out to market?" Rather than saying, "Do I have ACH and wire?" it's, "What's the offer that I'm putting out to people?" and then bring in all sorts of new capabilities, and functions, and features that you might want to add at that space.

There's no end of models that can be applied at any point, but it's hard to put them in the right place. One of my favorites that I like to include in there is, let's talk about this in terms of horizons. What do I have to do now, what do I have to do next, and what am I going to have to do later? But I need to do stuff now to be prepared for when that happens. That helps with just laying things out from a perspective that's different than just the features. It's, in five years, perhaps we'll be coming up to core replacement time, what do I have to do now to be ready for that when it happens, even though it's not going to happen for a long time? That's probably not in most people's annual roadmap planning, but this helps you force down that path from there. That's the outside perspective.

There's a scorecard there and there's some values that we put in there so that you can calculate how well you are doing against this. The score, I don't think, is particularly scientifically laid out. It's just a good indication of be honest as to where you are, where you think you are, and then come back and say, "Well, if I did a better job of this and I understood more information, now where would I be?" If you move from eight out of 20 to 12 out of 20, I don't know there's a lot in the actual quantification of eight and 12, but it does show a big leap forward because it's measurable. That's what people want to say, "How do I know you're doing the right things?" Whatever you select in here, just having that simple measure in there helps people say, "I can see the work you've done and the progress you've made," and it's the main point of that scoring.

Cheryl Brown

Yeah. It's almost like having a checklist, right? I mean, a to-do list.

Dave Brebner

Yeah.

Cheryl Brown

If you can score yourself on this checklist, it can identify the gaps, where do you need to fill in, where are you lacking, as well as, "Hey, we've got this covered, let's move forward. What's the next step?"

In this episode, I really wanted to focus on maybe the first two steps or the first two pieces of the framework, and then maybe, if you're willing to come back, we'll do another episode and we'll cover off the rest of it in another episode if you're willing.

Dave Brebner

Absolutely.

Cheryl Brown

You mentioned strategic analysis, and that's really the first step on the framework. In the strategic analysis phase, you've mentioned already what some of the key areas are that they're looking at and understanding, but have you had any experiences that you can share of customers maybe that you've worked with on the strategic analysis phase where they had maybe some a-ha moments?

Dave Brebner

Yes, there have been a number of those. I like to go into these knowing that we are going to ask questions for which there is no answer. Because that creates that kind of tension, if you like, in those discussions, where you can't just sit there and say nothing. We've got to answer the question, but there's not obviously going to be a straightforward answer. Some of the tools that we've used in the past include questions where we say, "If you think about this and say, "I want to be as digitally modern as possible," then I would do these functions, list some set of functions. If I wanted to be as traditional and as a bank-oriented, core-oriented, as possible, then I would enable these features and then just provide a scale in the middle and say, "Where would you want to be?" What always happens every time is people say, "Well, I need to be in the middle because I need both."

The answer is, you can't be in the middle unless you specifically say you are halfway between these two poles of being as digitally modern as possible and as bank-focused or as core-focused as possible. Unless there really is a quantification, then you can't just sit in that space of saying, "Well, everything's in the middle." The conversations you have when that comes out, they are fascinating. People open up. It's clear that there's no right or wrong answer, so the discussion does open up with people saying what they really think because they can't be wrong. Often, in these type of discussions, people don't like speaking up too much because they might be wrong. In this scenario, you can't be wrong. You're putting yourself on a scale of from the left to the right or whichever way you want to think of it. Across the spectrum, where are you? Those things do really come to allow people to discuss what they want to talk about.

A really good example of this was inside the FI's actual strategic statement, there was a single word that occurred three times. I said, "As part of this, let's use that word across this planning exercise because it's already written in your strategic statements" That word, believe it or not, was “thrilling.” We need to answer a lot of these questions for … take the account holder satisfaction, which of these things that you are thinking about is the most thrilling? Just that breakdown, where I don't think anyone's ever said in a bank planning meeting, putting together a roadmap, I don't think the word “thrilling” comes up very often, but because it was in that model and because nobody had thought about using it before and because you couldn't be wrong by using it, the conversations we had were fantastic, and we came out with an excellent roadmap.

It really did allow us to diverge the ideas and then converge them again around a concept that you wouldn't normally think—thrilling. Last time I did a funds transfer, I thought that was thrilling. But the whole idea of how am I going to bring that together around not just functionality, or not just accuracy, or security, all the things that we have to think about as well, but can I do anything to make transfers thrilling? That conversation, the answer is, yes, you can when you get down into it. Whether you how they get implemented and things like that, that's going to be up to you and that's going to be within your organization and your roadmap, but you can do all sorts of crazy things like that. That was one very good example of it.

Cheryl Brown

It sounds like, in the strategic analysis phase, it's really important for everyone to come to the table really open, with an open mind, come in a sense of honesty, and be ready to be honest. It can't just be like a beatdown exercise. You can't have the attitude of, "We’ve got to get through this thing," and, "They're making us do this." It won't work. You won't get anything out of it if you come in with that attitude. You really have to have an open mind, right?

Dave Brebner

Well, I won't let you. What I usually have, and for most of these scenarios, is a rolled up, somewhere between 6- and 10-foot-long set of slides printed, because you can go to places like OfficeMax and Staples, or whoever's around these days, and you can print on reasonably low-quality paper quite cheaply, but they can print endlessly. It's 48 inches wide and they can go endlessly. If we feel like there's just silence and there's no movement, what I'll do is I'll roll it out on the table. You said come to the table. I will roll this out on the table and make everyone stand up, and then we have the conversation. When you are sitting down behind your laptop or when you're standing up and you have to talk about it, it's a very different approach. People have a very different set of responses. Some people talk a lot more when they're standing up or when they're moving around.

That's the other interesting thing. A lot of people like to stand still, other people like to move around the room. Just things like that can make you think, well, we are diverging ideas and then we can bring them back in again through some converging workshop-type of model as we go along. This is not a place for you to say, "Whatever. I want to get into discussions about the detail." This is the detail. It's not the detail that's normally covered or it's perhaps not given the same amount of attention as other aspects, but it's just as important. Knowing what the market's going to do, knowing what the competitors are doing, all those things, you need to know as much detail as you can possibly get to.

Cheryl Brown

Well, one thing that the scorecard talks about is the P.E.S.T. or the PEST approach. Can you explain what that is and how it works in this framework?

Dave Brebner

Yeah. PEST is politics, economics, society, and technology. I mean, words approximated to that. You might see it's written down slightly differently, but that's essentially what it is. When you're looking at a roadmap that goes beyond what are we going to do this month, this quarter, when you're looking at it like we’ve got a three-year approach to this, all of those things are really important in planning that.

Right now, from a politics perspective, there is—this isn't going to shock anyone—significant change or a significant opportunity for change going on right at this point in time. Understanding how that would affect the longer term roadmap of a community FI, looking forward into that unknown with no real chance to offer opinions in that kind of space. I mean, I'm sure the Chases and Citibanks and people like that of the world have got some chance to put forward their ideas. But if you're a smaller community FI, you are looking at the change and the potential change, and you're saying, "Where do we think we are going to be in three years? What is on the other side of the hill? What is in the future that we don't know?" If you consider it from that politics perspective and have whatever conversation you want without getting into the details necessarily around what you think of it, it's going to come down to, well, where do we think that's going to go?

That's the politics side. The other side, the next part of it is what is that going to do to affect the economics of it. What's your position going to be? How are you going to be structured as an FI in three years? What are the consumers going to be looking for? What are the small businesses going to be looking for? What opportunities are there going to be for wealth management or larger Commercial Treasury-style offerings, but not based on the features, based on what are the economics going to be? In three years, are people going to be looking for loans? Are they going to be looking for deposits? What do you think you are going to be doing? Bringing all that down as a direct connection to what's happening in the even larger world than the world is just banking by itself. So banks do a pretty good job of understanding what they need right now, but it is that tying that economics back into that bigger picture over a longer roadmap, that's important as well.

The next one, which is approaching the same discussion but from a slightly different angle, is the view of society. What is happening in society that is going to have an effect over that three-year period? We could go and look at people like the Gen Zs of the world, what do they want? They are very clearly a different generation than anything that's come before. They're hard to judge in many ways because they look like they don't care about things, but that's not necessarily true. That's not true at all. A lot of them will have their own businesses on the side. A lot of them will be looking to do multiple layers of work, work in multiple positions, be working to control or build something in the evenings whilst they go to work during the day.

There's all sorts of aspects to that, which you say, how much is Gen Z going to ... What effect they're going to have in three years in this example, as we move forward, as the boomers have now pretty much all retired by then and that were replaced by those Gen Zs coming forward. The other aspect of it, I think they're called Gen Alpha, I think that's the deterrent for the next one, they're going to be starting to look for accounts as well. What are they going to want? Into that model, you can apply, well, what's happening on social media? What's happening with the gig economy? There's all sorts of ways you can look at it from that perspective. None of those perspectives is the wrong way of looking at it, because any of those discussions can uncover things where there's an advantage for you or some other approach you can take.

The last one, technology, where there is this looming thing called AI, which is going to, in my opinion, is going to change so much about the way we do things that you really do have to have a handle on what you want to do about it, what you think the world's going to do about it. We can't just sit there and hope it'll help us do our PowerPoints. There's way, way more to it than that. That's just one of the changes as we go along. From that perspective, PEST is a discussion that you might expect to have kind of at the board level, but you should also have at the program planning level, because your understanding and your discussions, they spark ideas of other people and that comes out with unique or interesting opportunities for you along the way.

Cheryl Brown

That's a good segue to the next level. After strategic analysis, it's program definition. It's where the blueprint really starts to take shape for what it is you're trying to do. One of those, the first thing that you start out with is by creating some value statements. These value statements, what I learned from you while we were putting together the scorecard, is that these value statements, they can really bridge the gaps between certain people within your organization and certain other people within your organization who may have significant gaps in how they perceive things, how they approach things. One specifically is senior executives and technical teams. Can you just talk just a little bit about some examples of value statements that can bridge that gap between the C-suite and the technical teams?

Dave Brebner

Yeah, exactly. If you go and ask a board member what it is they want to get from a program, the way they think about it is very different than the programmer who's improving bill pay. The idea here is how can you show that both of them are getting advantaged or both of them are moving towards where they want to get to? These value statements came from that perspective. If you can say, "What is it that one of my customers wants to” ... What they want to say when they finished a conversation, I want them to say this. What is it that I want them to say? Once you get that language, and it really is in normal human language. It's not tweaked any way for corporate speak or anything like that. It's when that person walks away from the conversation—which could be in a branch, it could be in a contact center, or you've got to think of your experience, your web experience as a conversation as well—as they walk away from that experience, there are certain things you want them to say. "This is exactly what I need," or "They understand me," or whatever it might be. That's the kind of language.

If you can get to that level, then the board member can say, "OK, if you are building things so people say that when they leave, then I'll be happy with that because that'll get towards the information that I'm looking for or the chains that I'm looking for." If I'm improving bill pay, for example, that's exactly what I need, then that's something that the developer can use as well.

Either end of the spectrum, it's really hard to communicate directly between each other, but in the middle there, there is this common language which can be applied in both ways, so try and make it as simple and as natural as possible. Use the word thrilling. If you can, use the word thrilling, because that really does drive people's minds to, "OK, there is a real point to this. What would make something thrilling?" That's what we get to from ideas like this.

The other thing is don't forget internal people. The other side of it is, can I do my job here? If I'm looking at this, if there's going to be this brand new fantastic bill pay and people are going to love it, then do I have the tools to do what I need to do as a staff member, as a marketing person inside the organization, in the contact center as a technology person? Whatever it is, can I administer, manage, control, do whatever I have to do along that space there?

Cheryl Brown

Yeah. I was going to ask you about some of the common missteps you've seen in this program definition stage. It sounds like maybe forgetting about the internal view may be one of those missteps. Are there any others that you've seen?

Dave Brebner

Where most people—I don't want to say go wrong, that's taking it too far—but I think it's don't take advantage of the opportunity that occurs regularly, is not playing enough. If you can come in with terms like what we're looking at here, like, "Wow, that was quick," for an example, that's a playful thing to say. As soon as you start people in workshops discussing things that are playful, you get different ideas. Although it looks like it might not be all that serious, there's a very serious aspect to this.

In terms of how to avoid going wrong, I would say don't forget the power of allowing people to play for a while with ideas and the idea of telling stories about that. Why did that person say, "That's exactly what I need?" Yes, it's imaginary, but when you imagine this person walking away from the conversation, they said, "That's exactly what I need," well, why? Tell me the story. Who is that person? What did they do that day? What are they going to do tomorrow? How did you help them? Just getting into those discussions really does help.

I mean, there's other tools I like to use here, like get two dice, roll them out, and you have 36 possible jobs. Whatever you scored with the two dice as whatever the number is, pick that from the list. Now, describe your experience for that person. You might be a policeman, or you might be a farmer, or you might be a chef. Your consumer experience for that chef, that person works from 5 until 2 in the morning or whatever, so they don't bank in the evenings, they bank other times of the day. It drives all sorts of conversations like that, which are very hard to pull out if you are just looking for the serious nuts and bolts of, "Give me the bullet points. Give me the dollars." It doesn't take very long either to get to this. I think have fun is the right term rather than avoid the pitfalls. The more fun you try and have, the more you'll get out of it and the better definitions you'll get.

Cheryl Brown

Yeah, because again, you don't want this to be a beatdown. You want people to bring their true, authentic selves, and frankly, you're talking with them about something that matters to them. It's their job, it's their career, their goal, what it is they're trying to do with their financial institution to serve their customers, so I can see it that it needs to be, you’ve got to have room to move around. You’ve got to have room to think, and brainstorm, and play well.

OK, well, I think that's a good place to put a bookmark in the conversation for now, and we can pick it back up on a future episode. But Dave, thank you very much for sharing your experiences. I think this has been a great conversation.

Dave Brebner

Well, thank you. It's been a pleasure. I'm looking forward to come back later on some time.

Cheryl Brown

Great. That's it for another episode of The Purposeful Banker. But listeners, before you go, I'd like to ask a favor. We're conducting some research to help ensure that we're providing the conversations and the content you find most useful, and we'd love your input. So please take our brief, 10-question survey. You can find it at q2.com/podsurvey. I'll also put a link in the show notes. We'd appreciate your feedback. As always, you can subscribe to the show wherever you listen to podcasts, including YouTube, Apple, and Spotify, and you can see our archive of podcasts at hub.q2.com/podcasts, with an “s” on the end. Until next time, this is Cheryl Brown, and you've been listening to The Purposeful Banker.