PEST remains relevant as a strategic analysis tool for digital banks, provided it evolves to capture the nuances of the digital age. By focusing on how external factors specifically impact digital operations, PEST can help digital banks navigate the complexities of a rapidly transforming industry.

1️⃣ Political Factors

📌 Regulation & Compliance: AML, KYC, GDRP, DORA, …

📌 Licensing Requirements: which licenses are required?

📌 Government Initiatives: are there beneficial programs or restrictions?

📌 Cross-border Regulations: are there compliance requirements?

2️⃣ Economic Factors

📌 Interest Rate Environment: influence on profitability?

📌 Economic Downturns: appropriate risk management in place?

📌 Cost of Capital: funding secured? 

📌 Consumer Spending and Saving Trends: impact on demand for digital financial products.

3️⃣ Social Factors

📌 Consumer Preferences: the growing demand for digital financial services.

📌 Trust & Security Concerns: how to deal with concerns about data privacy, fraud, and cyber security?

📌 Financial Inclusion: potential to reach underbanked or unbanked populations through mobile-first solutions.

📌 Demographic Trends: younger, tech-savvy consumers are more likely to adopt digital banking.

4️⃣ Technological Factors

📌 Innovation and Digital Transformation: rapid pace of technological innovation (AI, blockchain, cloud, …) is both an opportunity and a challenge.

📌 Cybersecurity Risks: a strong focus on cybersecurity and continuous investment in protecting customer data is essential.

📌 Fintech Integration: collaborations, partnerships, and APIs can expand service offerings.

📌 User Experience (UX) & Interface Design: intuitive, user-friendly, and accessible across various devices to retain and grow their customer base.

For nearly a decade, I have served on various advisory and supervisory boards of banks and financial services companies. In these uncertain times, discussions about strategy have become increasingly crucial. Surprisingly, many argue that strategy can be formulated independently of the people who will execute it, implying that any competent C-Suite should be able to successfully implement a given strategy. While this may hold some theoretical merit, the reality is often quite different.

Consider the case of a large investment bank attempting a rapid expansion into retail banking. While the strategy might look promising on paper, its success hinges on whether the existing leadership team possesses the skills and experience necessary to navigate this new market. A C-Suite accustomed to high-risk, high-reward investment strategies might struggle to adapt to the more conservative, customer-centric approach required in retail banking. Conversely, a retail banking specialist thrust into the leadership of a high-frequency trading firm might find themselves out of their depth.

Conversely, a well-aligned C-Suite can elevate a seemingly mundane strategy to new heights. For example, a fintech startup with a strong leadership team in technology and customer experience could turn a simple digital banking app into a disruptive force in the industry, leveraging their expertise to create innovative features and seamless user experiences that traditional banks struggle to match.

In my view, a strategy can only be successfully executed if there is a strong alignment between the strategy itself and the skills of the C-Suite tasked with its implementation. This is a two-way street: the skill set of the C-Suite both enables and constrains the potential strategies a company can pursue. I believe it is perfectly acceptable, and even advisable, to tailor a strategy to the specific strengths of a company and its leadership team. Just as a skilled conductor brings out the best in an orchestra by selecting music that suits the ensemble's strengths, so too should a company's leadership leverage their unique talents to craft a strategy that plays to their advantages.

In the ever-evolving financial services landscape, recognizing and embracing this symbiotic relationship between strategy and the C-Suite is not just a matter of good practice; it's a matter of survival.

http://www.FrankSchwab.de

1️⃣ Evolutionary Forces in Banking

The banking and finance industry undergoes significant evolutionary forces, marked by non-physical products, high competition, and escalating costs. Ulrich Cartellieri's 1990 assessment of German banking as the "steel branch of the 1990s" resonates today. With up to 50% more bank branches than gasoline stations, questions arise about the need for such proliferation in a digitized era.

2️⃣ Strategy Formulation and Execution Gap

The challenge lies not in lacking awareness or foresight among decision-makers but in bridging the gap between formulating and executing strategies. Alignment in understanding, ownership, accountability, incentives, and corporate culture is crucial for successful implementation.

3️⃣ Missing Ownership and Incentives

Strategies falter when those tasked with execution lack a deep understanding and ownership. Incentives play a pivotal role, aligning personal goals with organizational objectives. Without the right motivations, even well-intentioned strategies can fail.

4️⃣ Lost Core Business Focus

Failure occurs when banks deviate from the core of a functioning business model. For instance, neglecting payments, a core function, can jeopardize consumer and merchant retention. The importance of focusing on the essential aspects of banking cannot be overstated.

5️⃣ Unrealistic Profit Goals

Prioritizing unrealistic profit goals over a sustainable risk portfolio is a recipe for failure. Striking a balance between profitability and risk management is crucial for the long-term health of a bank.

6️⃣ Implementation Challenges

Even well-crafted strategies can falter due to challenges in implementation. Banks may excel in devising strategies but struggle with the practical aspects of bringing them to life, including project management, resource allocation, and change management.

7️⃣ Poor Leadership and Communication

Leadership, from the top to middle management and front-line employees, plays a key role in strategy execution. Communication gaps and a lack of understanding at different levels can lead to poor implementation.

8️⃣ Lack of Consistency

Consistency is crucial for successful strategy implementation. Shifting strategies due to leadership changes or lack of continuity can impede progress. Successful strategies often have clear objectives that remain unchanged throughout their execution.

📌 Conclusion

In conclusion, the failure of banking strategies stems from a combination of factors, including leadership issues, a lack of alignment between strategy formulation and execution, and challenges in adapting to industry evolution. Understanding the core functions of banking, setting realistic goals, and fostering a culture of innovation are vital steps toward sustainable success in an ever-changing financial landscape.

To the (closed) poll here on LinkedIn: https://bit.ly/429OxCD 

🙏🏻 Thank you for your comments 

Christopher Schmitz Clare Walsh Ewan MacLeod 

Gerald Faust Hans Radtke Henri de Jong 

Jim Marous Julian Mattes         Karl Ivo Sokolov 

Kęstutis Gardžiulis         Khaled Abbas Matthias Kröner 

Michael Harte         Rajeev Kakar Rene Gruner 

Robert Caplehorn Tim H. Wolf Wössner

When seeking to understand the key reasons for the failure of strategy implementations, one can pinpoint recurring themes such as ‚inability to manage change,' 'conflicts with established power structures,' 'encountering cultural resistance,' and 'ineffective communication.' Consequently, achieving success in your business transformation efforts greatly relies on your ability to comprehend and navigate the individuals and dynamics you will encounter.

Let's examine a specific component: strategy meetings. Strategy meetings play a crucial role in helping organizations achieve their objectives and propel their implementation efforts forward. However, these meetings can sometimes encounter disruptions in the form of Zebras, Wolfs, Hippos, and Rhinos - colorful metaphors for challenging personalities that can negatively impact the decision-making process.

Let’s have a look at the characters first: 

The ZEBRAs “Zero Evidence But Really Arrogant”

Zebras, often hailed for their confidence, can unwittingly sabotage strategy meetings. Their penchant for asserting opinions without factual evidence can derail discussions and lead to decisions grounded in subjective views rather than objective data. Their arrogance may stifle alternative viewpoints, creating an echo chamber of ideas.

The WOLFs “Works on Latest Fire”

Wolfs thrive on tackling the latest fires, often at the expense of long-term strategic discussions. Their ability to focus on immediate concerns can divert the meeting's attention and impede progress toward long-term goals.

The Hippo “Highest Paid Person's Opinion”

Hippos, often revered due to their position, can unintentionally cast a shadow over other voices in strategy meetings. Their opinions, given undue weight, might suppress diverse perspectives and discourage open dialogue.

The Rhino “Really Here In Name Only”

Rhinos, while physically present, may lack active engagement, leading to unproductive meetings. Their passive presence can hinder meaningful discussions and lead to missed insights. 

It is not about getting rid of the wild animals - it is about taming them

While Zebras, Wolfs, Hippos, and Rhinos are wild animals they also come with benefits. A Zebra may have innovative ideas and a diverse perspective that stimulates the strategic discussion. The wolf is able to address urgent matters swiftly and effectively and has skills in crisis management and quick problem-solving which can be valuable in certain strategic situations. And a hippo can bring to the table their ability to provide strategic direction, guidance, and decision-making based on their experience, expertise, and authority within the organization. And the main benefit of a rhino is their potential for passive observation and awareness. Their presence allows them to absorb information, gain insights into ongoing discussions, and stay informed about the organization's direction and decisions.

The influence of Zebras, Wolfs, Hippos, and Rhinos can undermine the efficacy of these meetings, leading to suboptimal outcomes. However, by adopting counter measurements, organizations can navigate these challenges successfully. That raises the question, how to tame them best.

Facts & figures are king to tame zebras 

The best way to encounter zebras is by encouraging a data-driven approach, where opinions are backed by solid evidence. It is recommended to gently challenge Zebras to present substantiated facts supporting their claims. Or you can provide alternative viewpoints supported by data, showcasing the importance of a balanced discussion to tame Zebras. And it is helpful to lead by example by presenting your own arguments with well-researched facts and figures.

Allocate time, delegate responsibility, align with strategy and balance the discussion when dealing with wolfs

To tame wolfs it is recommended to allocate specific time slots for addressing urgent matters in order to maintain a balance between short-term and long-term discussions. And you can assign someone to handle immediate issues outside the meeting and provide a summary during discussions. A further measurement to tame wolfs is to emphasize how addressing urgent matters aligns with the organization's overarching strategy. It is also recommended to strive for equilibrium between addressing immediate concerns and discussing long-term objectives.

Foster an inclusive culture, emphasize data, ask for equal input and challenge hippos respectfully

It is important when dealing with hippos to foster an inclusive culture where all participants feel valued and encouraged to share their insights. You also should encourage data-backed opinions, demonstrating the importance of evidence in decision-making. A proven method to tame hippos is to create opportunities for input from all team members to ensure a comprehensive view of the situation.  It is also helpful to politely challenge hippos' opinions and present alternative viewpoints supported by data.

Set clear expectations, create opportunities for input, assign follow-up tasks and establish feedback loops to awakening rhinos participation

A measurement to encourage rhinos participation is to communicate the purpose and role of all participants to set clear expectations. You may designate specific moments for Rhinos to share insights or ask questions during discussions. It is recommended to assign follow-up tasks related to meeting discussions to encourage engagement beyond the meeting. You may also gather feedback from Rhinos to make improvements and enhance their participation.

A structured agenda, a facilitator role, data-driven culture, diverse participation and an inclusive environment are overarching strategies to make best out of your strategy meetings

To effectively manage all types of participants consider implementing the following overarching strategies:

1.     Have a well-structured meeting agenda that includes dedicated time for urgent matters, strategic discussions, and input from all team members.

2.     Assign a skilled facilitator to guide discussions, manage contributions, and ensure everyone's voice is heard.

3.     Cultivate a culture of evidence-based decision-making where opinions are supported by data and facts.

4.     Invite a diverse group of participants to ensure a variety of perspectives and insights are considered.

5.     Create a safe and inclusive environment where all participants feel comfortable sharing their thoughts, regardless of their rank or role.

By proactively addressing the challenges posed by Zebras, Wolfs, Hippos, and Rhinos, you can promote effective, balanced, and productive strategy meetings that lead to well-informed decisions and successful outcomes.