Competing in an increasingly digital age

When Hein Knaapen, Chief Human Resources Officer at ING, took part in a panel discussion at London Business School’s HR Strategy Forum in February, he said something striking while discussing how established businesses can best compete in an increasingly digital age. ING’s biggest competitor, Knaapen said, is not a bank at all: these are Amazon and other big techs, platforms that are now often behemoths selling an ever-expanding range of consumer goods.

To understand the context of Knaapen’s remark, we need to know something of ING’s recent history. The Dutch banking giant was founded in 1991 as a merger of an insurance firm, Nationale-Nederlanden and a bank, NMB Postbank Group. It quickly grew into a firm with a global reach, employing 51,000 staff and offering retail and wholesale banking to customers in more than 40 countries.

During the financial crisis of 2008, ING received financial support from the Dutch government and as a result the EU required it to sell off a number of its businesses. When Ralph Hamers took over as CEO in 2013, he decided to go back to first principles. Unlike his predecessor, Hamers was a banker. Says Knaapen, “He brought us back to banking and started thinking about what we are for in life.” The Think Forward strategy was launched in 2014.

The strategy is transforming the bank through, amongst other notable changes, an €800 million (£706 million) investment in digital processes. When complete, it will mean that ING’s banks in every country will use standardised infrastructure, data and support, both making the bank’s operations more efficient and making it as easy as possible for ING’s customers anywhere in the world to do business with the bank. Mobile banking will be as simple and straightforward as banking from the desktop.

Clarifying purpose and direction

Since the strategy was launched, ING has attracted around three million new customers. In some ways, the bank’s 2008 problems have brought some good things, says Knaapen: “While it hasn’t been easy, the bank is now clear about where it wants to go: “This was a very difficult period but it has helped us lay the foundation of where we are now.”

This all helps explain why Knaapen, quoting Hamers, says he sees a company like Amazon as ING’s main competitor. “Looking at the platform they have created, they have become brilliant at offering customers, at a low cost, almost anything they’re looking for. What Hamers sees is that it will be reasonably easy for them to venture into what banking is about as well.

“If we compare ourselves to the conventional banks, there are banks that do that better than we do, and there are banks that do a worse job than we do, but that’s not where the real competition of the future sits.” It’s Amazon’s use of a platform as a “convenient vehicle for a user to get access to everything they need” that gives it a huge competitive edge.

Part of ING’s digital offer, Knaapen adds, will be about tackling cost. He felt that his fellow panellists were wrong to prioritise innovation above cost reduction: "Unless you are in such a niche that you can really make huge margins, the innovation we will bring about will be a great customer experience at a low price.”

In an increasingly difficult economic environment, however, all ING’s competitors want to provide better online services. What is different about ING? The answer, says Knaapen, lies in its historical predisposition towards “innovation, learning, curiosity”. Despite the financial crisis troubles of 2008, he adds, the bank “has been able to keep that alive, that fundamental capability to look around and to incorporate innovation into our main operation”.

That innovation includes arrangements with more than 140 fintech firms that will enable ING to integrate the most up-to-date technological developments into its main operation.

The more important challenge – aimed at making ING as nimble as possible – is “how to make sure that in the back, our standardisation increases, so we can be much more flexible about making changes. If you standardise your processes and platforms, that will enable you to change much more quickly than when it’s a messy plethora of processes or systems.”

So, given Knaapen’s role as head of HR, what can the HR function do to help ING make the necessary changes? There are two levers, he says: “One lever is that we will bring together all our local HR admin into a global people’s services organisation, which is there for all the transactional needs of the employee; it is admin, but delivers in such a way that it creates a differentiating employee experience that builds engagement. It’s about giving people the feeling that they’re being cared for.”

The second lever is the business partner network. At ING, an HR business partner is responsible for coaching and mentoring the leadership and management capabilities in one particular part of the business: “We think HR directors should be unburdened from case management, from admin, from servicing, because that's being taken care of by other parts of the HR function. They can fully focus on their most important responsibility, which is to create better managers and greater leaders.” In this, ING partnered with LBS, who are delivering an ING-customised programme, the Think Forward Leadership Experience to the bank’s managers, 6,000 of them, both senior and junior, from around the world.

One of the themes hotly debated by the panel and audience at the LBS HR Strategy Forum was how businesses should nurture the leadership skills of millennials, who are seen to be less tolerant of hierarchy, have a greater expectation of personal fulfilment and display a reluctance to remain in one job for very long. Knaapen thinks that these traits have been exaggerated, and that most are a function of age rather than generation. By the time they reach 35 and have a mortgage and family, he thinks, they will be prepared to settle down.

In any case, Knaapen is not convinced that staff turnover is necessarily a bad thing. Currently ING’s attrition rate is 3%–4% a year, he adds. He believes that an organisation needs to be vitalized all the time. “I really think developing your staff and bringing in new people is one of the vital ways in which you stay sensitive to your environment,” he says.

Knaapen is very clear that if ING is to succeed in this hyper competitive marketplace, it needs to focus on developing a range of leadership styles: “In order to be nimble you need a diversity of leadership, since different circumstances and different parts of the bank require different leadership. The sort of leadership you need in the back office, where standardisation and continuous improvement are important, is probably a different sort of leadership to what you need in the front office, where deep responsiveness to the customer is essential.”

As HR chief, Knaapen knows that a large part of his role is supporting ING to meet this challenge: “You can’t take leadership capability for granted – you really have to work hard on building it.”