BBVA Bancomer:
From Product- to Customer-centered Banking
Today, Grupo Financiero BBVA Bancomer is one of Mexico's largest banks. BBVA owns more than 50% of Bancomer, which offers retail and commercial banking and other financial services through some 1,600 branches across Mexico. As of 2003, BBVA Bancomer's net revenue was Ps. 7,653 million.
Strategic Situation
Consultants who now work for VISION worked with Bancomer through one of its toughest periods, 1995 to 1998. During these three years, currency devaluations drove Mexico's banks to focus on feebased, stay-alive strategies. Fortunately, Bancomer retained its number two-bank status, based on revenues and accounts, but its backoffice costs had risen dramatically.
The consultants have a rare ability to get into the customer's world and invent new business opportunities.
Guillermo Acedo, former CEO Retail Banking, BBVA Bancomer
In addition, two new strategic threats emerged. First, well-financed global banks were moving into Mexico and were effectively using their financial and brand advantages - needing no government bailouts - to capture significant amounts of security-conscious depositors. Second, global consolidation in banking was progressing, and virtually all the large global banks saw the weakened Mexican banks with their strong customer franchises as acquisition targets. Without decisive steps to improve its balance sheet, to increase its ability to attract new customers, and to show new capacities to handle the distinctly Mexican customers, senior managers saw that the Bancomer owners would be forced to sell at a bargain basement price.
Business-line Leader's New Strategy
Guillermo Acedo, the CEO of Retail Banking at Bancomer, declared that the retail bank's business model would change. Instead of focusing on products, the bank would focus simultaneously on retaining existing customers, retaking former customers, and acquiring new customers, while increasing its back office efficiency. Managers at Bancomer realised that developing a customer orientation - especially following an era focused on fee collection - required a cultural change within the bank.
Engagement Strategy
A team of senior consultants and Guillermo Acedo's own senior management team began to build the new working model of the bank, one designed to service customer segments instead of products and regions. The consulting team used its special capabilities to address the areas that would require redesign in order to fulfill Bancomer's new strategic direction:
Value-based segmentation and customer understanding was used to listen to customers and design appropriate offers around the life cycles and styles of the newly defined customer segments.
Commitment-based design and management was used to redesign the management processes, beginning with the customer-facing interactions and ending with the back-office fulfillment activities.
Using the above methodology as its foundation for redesign, the joint team developed the "Customer-Experience-Oriented Business Model," which focused on producing more effective coordination among the critical areas of the bank.
Segment Managers
The new role of Segment Manager became the centrepiece of the new model. More than any other act, the creation of the Segment Manager for each segment transformed the bank into an organisation focused on customer satisfaction. On-going segment research supported the Segment Managers in offering new products and services unique to each segment, while continuing to deepen the bank's relationship with its customers.
A number of innovative offers came out of the work of the Segment Managers. The enormously successful two-week credit card payment cycle was introduced to give one segment the confidence it needed and to feel that it was in control of its money. The key to the success of this offer was not just the card, but also a well-trained phone center. Staff members at the center were trained to listen, interact, and check for satisfaction. This program proved so successful that many banks tried to imitate it.
Banco Malo
A second necessary area for change in the turn-around effort was the Banco Malo or Work-Out bank. Non-performing loans in 1997-1998 accounted for close to 50% of the bank's entire loan portfolio. During the banking crisis, Bancomer had honed a hard-edged model of collections analysis and recovery that was now driving newly solvent customers away from Bancomer.
The joint design team focused on developing new processes and practices that included collections risk analysis and a shift in the culture of the people who were responsible for collecting these debts. Collection teams became Work-Out teams that had the authority to develop refinance terms following the guidelines accorded each segment. These plans focused on enabling Bancomer to recover the loan and the customer to regain credit worthiness.
Back Office and Total Coordination
Bancomer had installed highly efficient input-output models of back-office organisation. These models worked well for high volume standard transactions, but did not serve Bancomer well when the segment experience became the focus. The joint team mapped the back office functions into a coordinated value chain with measures that showed each manager the value his or her team produced across the chain. As the move towards cutting cycle times across the bank's internal value chain intensified, it became critical to include the branches and functions that were not traditionally "back-office." The joint design team put the branches on a customer-centered model of management, budgeting, accounting, and benchmarking. Normally such "enterprise focused" initiatives face resistance, but coming after the other initiatives that were bearing fruit, this effort easily moved forward.
Results
By the end of the engagement, Bancomer was positioned as the emerging leader in customer loyalty, and subsequently emerged as a leader in profitability. The credit card division made a stunning leap forward. In a highly competitive market, this division achieved market leadership, ranking high in market share, profitability, and volume. And, best of all, it achieved the ability to innovate by keeping the clients' concerns at the center of its daily operations. This division alone attracted acquisition interest from both Santander and Banamex, not because of its vulnerability, but because of its success.
Other initial results:
By the end of 1998, cost savings from an increase in real efficiency of end-to-end business processes exceeded more than Ps. 100 million.
- Operating costs were cut by 20%.
- Product to market cycle time decreased from 9 months to 5 weeks.
- An internal consulting area using our Process Redesign for Customer Satisfaction generated more than Ps.
- 100 million in additional profits during 2000-2001.
At the end of the engagement, Guillermo Acedo had accomplished the strategic changes he had sought. Financial results were much improved and the overall strategic objective was met. As a result, the bank was able to be sold at a premium.