Stick To What You’re Good At: A Lesson From Deutsche Bank

After decades of trying to be what it’s not, Deutsche Bank has finally decided to go back to its roots and stick to what it’s good at. Kudos to them for realizing they’re just not good at banking. As the board and much of their c-suite is reshuffled I image they will take stock of their battle hardened skills and collectively decided what their the new Deutsche Bank will be.

Maybe they’ll go into gambling — an industry where losing money and underperforming is a key pillar of the business model. They can follow in the footsteps of Eldorado Resorts which recently acquired Caesars Entertainment with their own purchase of Wynn Resorts.

There they can hold banking and investment seminars where they teach their guests how to lose money. Shortly after the seminar is over and hours after the liquor started flowing guests will pile into the casinos and begin to lose money. Sure, there are a few details to iron out, but for the most part I see this as a viable path.

Perhaps instead of gambling they can shut down the bank, transfer all assets to a new entity and launch Deutsche Bank, the startup. As a startup they can bring in new money and more importantly, investors that will tolerate years, potentially even a decade of billion dollar losses. At the end they can go public, cash out, close down the business, and transfer all their assets to a new entity thus beginning the cycle again. Not only will they not be criticized for running a functional business, they also won’t be required to wear ties.

While these options are available a boring restructuring seems more likely. The German bank will attempt to go back to its roots with a focus on providing the financing large German businesses need. This new strategy might work. It’s important for businesses to take a long term view of their success during their success. While some business owners may think expansion is always the path forward sometimes refinement holds greater returns.

Deutsche Bank, GE, and millions of companies big and small keep falling into this trap. They get a taste of success and immediately throw their working formula out the window. We see it independent retailers that over-expand, opening too many stores too quickly. All their capital goes into the new locations forcing them to purchase more inventory on credit reducing their margins. Eventually the entire business is unprofitable and lying under a mountain of debt.

It happens to vendors when they expand out of their product line prematurely. All the good faith they built up by producing something in their wheelhouse goes out the window the second they add something less appealing that doesn’t stand up to the quality standards they set.

While I can see the merit of Deutsche Bank’s restructuring it certainly won’t be as fun as an acquisition of Wynn or as headline grabbing as becoming a startup and Benjamin Buttoning themselves. That being said, maybe it’s best that we all stick to what we’re good at.

I am however available to consult. Deutsche Bank you can reach me at hello@shopketti.com.

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