Banking's Apollo 13 Moment
For more than a decade now, I have been trying to convince bankers that innovation is not optional, and that organizations that were not innovating were slowly dying. For too many, this idea only began to really sink in as the slow but steady rise of customer expectations driven by the rise of technology in general (mobile, broadband, smartphones, apps, etc.), and fintech in particular evolved into a digital arms race.
Many banks’ relative inability to attract and retain customers with these evolving preferences eventually began to make some of these vague concepts a little more concrete, and many stepped up their innovation recently. Still, a recurring theme in our work over the past couple of years has been our concern that record industry profits were masking the underlying need to innovate and did not create sufficient urgency to change.
Gradually, and Now Suddenly
For that reason, and others, I regularly shared one of my favorite quotes from Bill Gates: “Success is a poor teacher” to spur people to realize that what worked to get us to this point may not work to take us to the next level. I also liked to follow that up with a quote from Hemingway's “The Sun Also Rises” where a millionaire describes how he went bankrupt: “Two ways. Gradually, then suddenly” to illustrate how disruption happens in subtle ways at first.
We’ve been experiencing the ‘gradually’ phase for well over a decade, and now we are about to experience the ‘suddenly’ phase.
Changes accelerate from ‘gradually’ to ‘suddenly’ when the right catalyst is introduced to the environment. The coronavirus pandemic has already been a catalyst to suddenly turn an 11-year bull market into a painful bear market, and the longest peacetime expansionary economy into a recessionary period of contraction (and possibly even worse). As I write this in mid-late March 2020 we are still in the crisis intervention response mode. Some are perceived to be over-reacting, while others to be under-reacting. We will see in due time, but under-reacting rarely pays off in true crises.
We don’t know how long this crisis phase will last, but it will end. The world, our country, our economy, and our industry will recover. The human spirit is resilient. We always find a way.
But we will not return to the normal we had gotten used to over the past several years. There will instead be a ‘new normal’, and we don’t yet know what it will look like. ‘New normals’ are a part of life too, and we have adjusted to them after the global financial crisis, after 9/11, after the Gulf War, after the Cold War, and so on, all throughout history. The most predominant lesson we have learned from these times of great and sudden change is that those who survive and thrive are those who adapt to the new normal quickly.
“Houston, we’ve had a problem..”
All of this makes me think of another famous quote: “Houston, we’ve had a problem..” Nearly fifty years ago, on April 14, 1970, Apollo 13 command module pilot Jack Swigert uttered those now famous words. Just three days earlier Swigert, lunar module pilot Fred Haise, and mission commander Jim Lovell had blasted off from Cape Kennedy with a mission to conduct the most ambitious geologic and astrophysical exploration and research ever on the surface of the moon.
Shortly after the crew awoke on the third day of their mission, an oxygen tank onboard their spacecraft exploded and Lovell could see their precious oxygen venting into space as he looked out the window. As a result, insufficient voltage was flowing from the service module’s three power cells, and Haise found that two of them were dead. One oxygen tank had been emptied as a result of the malfunction, and another one’s pressure was slowly falling.
Suddenly, the expansive and optimistic mission goals were irrelevant, now replaced with one critical new objective: simply getting the astronauts back to earth alive. Not just for the crew, but for the entire space program, a good portion of the entire U.S. government, and many everyday citizens around the world, there was a singular focus on this new objective.
I’ll spare you most of the details on exactly how they achieved this new critical mission because you’ve probably seen the movie, and, a lot of it was, well… rocket science, and I’m no rocket scientist.
For one, they now had to find a way to adjust the spacecraft’s altered trajectory for splashdown to still occur in the Pacific Ocean, where the main recovery forces were located, and they had to make sure nothing burned up on reentry to the earth’s atmosphere. This meant that new software needed to be written for Mission Control's computers to tackle a new problem they had never anticipated. Lovell copied down the guidance system's orientation information and performed calculations by hand to transfer it to the lunar module's guidance system, which had been turned off to save power.
Up in the spacecraft, Lovell, Swigert and Haise now had enough oxygen, but that still left the problem of removing carbon dioxide from the cabin, which was absorbed by canisters of lithium hydroxide pellets. The lunar module's stock of canisters was meant to accommodate two astronauts for 45 hours on the Moon. It was not enough to support three astronauts all the way back to earth. The command module had enough canisters, but they were the wrong shape and size to work in the lunar module's equipment.
NASA engineers on the ground had to devise a way to bridge the gap, using materials that the astronauts, you know, just happened to have lying around their space capsule, like cardboard covers ripped from procedures manuals and, yes, duct tape. Then they had to find a way to explain to the astronauts how to recreate the prototype over the radio from earth, which included instructions like “you need to put something like a sock in the bottom”...
But it worked. Carbon dioxide levels began dropping immediately, and of course, the crew was able to return safely to earth. (New) mission accomplished.
Lovell later described this improvisation as "a fine example of cooperation between ground and space", and I think it’s a great example of innovating within massive constraints and of quickly pivoting an organization’s focus and limited resources on a critical new goal.
What’s Your New Mission?
Most of the core functions of financial institutions have not changed and will not change: take and hold deposits, make loans, provide liquidity, move money, provide financial advice and products. How you provide those functions in ways that meet the needs of your customers has been changing gradually for years. Now it’s changing suddenly.
Right now, you need to innovate ways to provide these critical functions in a way that also supports a critical and urgent public health need to slow the transmission of a contagious and destructive virus. Soon, we will be past that phase and you will need to innovate new ways to meet new customer needs and preferences that will emerge in the new normal.
You will continue to have constraints. You will continue to have limited time, resources, and knowledge in a world changing faster than ever before, but you don’t have to be rocket scientists to innovate new solutions. Maybe you didn’t quite complete that ambitious digital transformation, or build that AI-powered data warehouse or killer mobile app before this all hit, so you might have to reprioritize and refocus, but you can’t afford NOT to innovate now.
Don’t be afraid to pull the cardboard off of the manuals, get out the duct tape, and stuff a sock in the bottom if you have to. Your customers and your communities need you now more than ever. They too are facing new problems and new constraints, and they need your help to find their own new normals.
You can’t change the wind, but you can adjust your sails.