Why Design Thinking Can’t Solve Bank of Ireland’s Problem

Bank of Ireland recently started recruiting for its design center. This implies design thinking will be deployed to fix customer problems at Ireland’s oldest bank. I believe design thinking will not fix the banks only problem. I believe the solution will not occur within the building. Here is more detail on why I think this is the case.

I believe Design Thinking is essential for Bank of Ireland.

I believe Design Thinking should be represented in the work room, coffee room and boardroom of every organisation.

I DO NOT believe Design Thinking will solve Bank of Ireland’s problems as stated in its call for action for the design team lead role i.e.

“Come help us redesign Ireland’s oldest bank.”

This is because Bank of Ireland doesn’t have a customer problem.

For a real customer problem to exist customer inputs/outputs, sentiment and their actions need to have a substantive effect on a business and it’s business model.

This is demonstrably NOT the case.

Regardless of the economic downturn, banking crisis, the fundamental failure of Irish banking’s business model, subsequent bailout and all time low customer satisfaction levels with the banking industry. Bank of Ireland continues to operate largely as it has since its inception.

Its business model has remained in operation and relatively unchanged regardless of user inputs and outputs, sentiment and actions.

Bank of Ireland enjoys generally the same levels of profit and loss and customer numbers now as it has always enjoyed.

I call this type of organisation Customer Inelastic. i.e. customer sentiment and action have very little or no effect on the organisation’s business model.

Bank of Ireland has two different business models in operation which I call a White Box and Black Box.

These two business models exist in a state I call Customer Impermeable.

This means the customer of the first business model the “White Box” are entirely different and separate from the customer of the second business model “Black Box”. Customer inputs, outputs, actions and rewards for these two business models do not cross between or generally affect each other.

Business Model 1 — White Box

This is the bank on the high street and the one the general public and SME customer understands and interacts with. A bank receives money from this customer by offering various financial services e.g. loans, credit facilities, current accounts, mortgages etc.

Customers here get rewarded with interest payments.

Customers here want better services and they complain a lot about how those services are delivered but they generally don’t have a customer problem because their reward is the same as it has always been. They get to borrow for the things they want or need a house, a holiday, a child's education, if they are lucky enough to have money to save they get a small reward for that.

Business Model 2 — Black Box

This is the hidden professional bank that large scale government, industry and finance customers deal with. The general public doesn’t really understand how this part of the bank works hence it is a black box. The bank takes money from business model 1 and uses it to make profits for the customers of business model 2 i.e. the bank’s shareholder/stakeholders/investors using complex financial mechanisms, instruments and services e.g. share trading, forex, bonds, asset acquisition etc.

Customers here get rewarded with significant shares of profits, dividends etc.

These customers tend to be more satisfied but more discerning with their services. They will always want better efficiency, diversity and profitability but again they generally don’t have a customer problem because their reward is the same as it has always been in fact they may be more rewarded now than ever before.

Design Thinking Can’t Help You Solve the Banks Real Problem

Design thinkings singular goal is to solve customer problems in a continuous loop of design, testing, observation and applied learning. I don’t think it can help in the stated goal.

  1. I don’t think there is suitable evidence to suggest the bank has a customer problem.
  2. I also think because the banks two business models are Customer Impermeable it can’t deploy design thinking effectively to create an inclusive solution to the bank’s problems. This is simply because the bank can’t close the circular learning loop design thinking promotes and requires.

A Business Model Problem

That is NOT to suggest the bank does not have significant problems.

The bank very much has a Business Model problem. The historically hard barriers to entry which protected its market share and high profitability are being lowered significantly and directly attacked through technology and disruptive innovation.

Fintech startups are coming into the market with redesigned services and offerings that can disrupt both the white and black box business models.

The bank is getting disrupted in business model 1 by new entrants coming along with customer focused high street financial offerings. These are designed from the ground up to be more efficient, delightful and convenient. These are also cheaper, safer and more useful. Why wouldn’t a customer leave Bank of Ireland and use them?

This form of disruption will force the bank to innovate and redesign its services to keep its established user base.

Design thinking will help with this task but it will not solve it.

The bank is also getting disrupted in business model 2 by fintech startups who are taking black box services traditionally high value profit centers for the bank and opening them up to customers of business model 1. They are disruptive because they are turning black box services into white box services. This is exactly what startups like CurrencyFair are doing. Why wouldn’t a customer leave Bank of Ireland and use them?

This form of disruption will force the bank to innovate and redesign its professional service and profit centers for entirely new end users not traditionally in receipt of the rewards of these types of services.

Design thinking will also help with this task but again it will not solve the problem.

What does a Redesigned Bank of Ireland actually look like?

For Bank of Ireland to be redesigned as a human-centered and customer focused bank one thing needs to happen.

Customers must be considered equitable in terms of both the inputs and outputs of the bank’s overall business model. This means they are equally rewarded, participate in and have full transparency of the white AND black box business models.

A future Bank of Ireland and its customer would have

  1. Total Customer Transparency — customers would see exactly how their bank makes and uses their money.
  2. Total Customer Stakeholding — if a customer invests a euro and the bank makes a profit on that euro they would receive an equitable share of the profit generated by the entire business model not some small part of it.
  3. Total Customer Satisfaction — if a customer uses a service or financial offering it must be efficient, delightful and convenient. It must also be cheaper, safer and more useful.

When Will Design Thinking be Fully Useful?

Unless the bank makes its white and black box business model Customer Permeable it will never be able to use Design Thinking to it’s full effect to solve the bank’s problems.

I do not think there is the will or desire within the organisation to make that change hence I do not think the solution will come from inside the building.

I think fear of disruption of the existing business model and user base and not empathy for the customer will drive change within the organisation.

This is why I think Bank of Ireland will end up buying a whole range of startups that solve particular customer problems in the market and offering those services under the Bank of Ireland brand.