Barclays Bank Plc - Innovation Strategy Analysis - Example

Barclays Bank Plc

Innovation Strategy Analysis

Executive summary

This report provides a detailed analysis of the innovation strategy at Barclays Plc Group. The structure of the report is given as follows. The first section is an introductory paragraph, providing a brief description of the company and overview of key industry trends, drivers and challenges. The next sections provide more detailed analysis of Barclays’ innovation strategy, including overview of its organizational structure, leadership and structure, systems and processes. Overview of key innovation strategies is followed by recommendation and conclusion sections. Some of the key findings discussed in the report are briefly outline below.

Economic and banking problems in Europe, increasing competition in the banking and investment industry, stringent regulation all pose challenges to Barclays’ profitability and business growth. In order to mitigate potential risks and take over emerging opportunities the company makes a strong focus on innovation. Based on the 4P’s model of innovation, Barclays readjusts its product portfolio, focusing on wealthy/top growth markets and introduces cost-efficient and effective processes underpinned by the most recent development in IT. Nowadays, the company is a leader in the industry in terms of introducing new technology into banking field. In order to support its position of being the partner of choice for all stakeholders, Barclays has massively transformed its approach to leadership and organizational culture. However, as the company is in the period of transformation and big changes, it is important to ensure that technology innovation is aligned with culture adaptation and transformation of people processes.

Introduction

Barclays Plc is the UK based company that operates a global financial services and banking business. The company operates in more than 50 countries and serves more than 48 million customers worldwide (Sands, 2016). The majority of business operations are concentrated in the US, Western Europe and Africa (Sands, 2016). Currently, the company is implementing its “Transform Strategic Plan” aimed to restore Barclays brand image and to rebalance the bank assets. Initially, the company’s strategy was focused on private banking and wealth management. However, nowadays, Barclays is increasingly shifting towards corporate and personal banking, investment banking, head office, and Barclaycard (Sands, 2016).

Barclays as all other companies operating in the banking and financial industries face with various factors that drive the company towards continuous changes and innovation. In order to stay competitive and profitable on the market, to restore investor confidence and to shore up the capital, the bank is seeking for the strategies to cut rapidly the costs and shed non-core operations (Sands, 2016). The company is threatened by ongoing losses incurred by private banking. Therefore, in order to manage this risk, Barclays strives to improve its balance sheet by running down its non-core assets and divesting international wealth management businesses (Sands, 2016). Regulatory changes and legal factors also play an important impact on the company’s overall strategy and profitability. Thus, for example, by 2019 all UK banks will have to separate consumer operations from trading units (Sands, 2016). This regulatory change will more likely force Barclays to introduce some new licensing operations and processes to the retail business. More recently, the company announced about its exit strategy from the African continent demonstrating thus amendments to the company’s corporate strategy (Arnold and Jenkins, 2016). In order to respond and adapt to various external changes, the company makes a strong focus on innovation. This report aims to provide a more detailed overview and analysis of Barclay’s innovation strategy and to suggest some recommendations for improvement.

Innovation strategy of Barclays

In today’s highly dynamic and rapidly changing business environment, innovation is recognized to be a core and critical element of competitive strategies for businesses (Sears, 2016). While innovation processes for companies greatly vary and depend on the geographical location, industry-specific factors and various macroeconomic environment, many firms reinforce the role of innovation to their business success.

Below is presented analysis of key strengths and weaknesses of Barclays as well as overview of major opportunities and threats faced by it.

Strengths

-Strong market position in the UK banking industry

- Improved capital strength cushions against market volatility

- Geographically diversified sources of revenue

Weaknesses

-Barclays’ unfunded pension obligations could have adverse effect on the cash flows if the company would make a decision to pay out $2,501.1 million of its pending pension obligations;

-Negative publicity caused by the regulatory fines imposed on the company in results of Barclays’ manipulations with the London interbank offered rate (MarketLine 2015).

Opportunities

-Increasing penetration and adoption of online and mobile banking. Increasing coverage of Wi-fi hotspots will drive further development of mobile banking. Continuous integration of mobile technology will enable the company to reduce significantly advertising costs and to reduce the burden on the bank branches (MarketLine, 2015).

-Emerging business development opportunities in the retail banking industry of the UAE and India

Threats

-Economic and banking problems in Europe as well as sovereign debt crises in Italy, Portugal, Greece, and Ireland might pose financial challenges for Barclays’ business growth

-Growing competition for retail deposits might cause decrease net interest margin and undermine Barclay’s long-term profitability.

Table 1: SWOT analysis (source: MarketLine Advantage, 2015).

In order to maintain its strengths, reduce the weaknesses and to leverage emerging opportunities, Barclays has made a strong focus on innovation. Innovation is a strategy of Barclays that is deeply integrated throughout the whole organization and all business processes. More specifically, Barclays is a company that demonstrates the clear signs of discontinuous innovation, characterized by adopting different rules of the game, opening up new market opportunities, and continuous rethinking of what the company does and how does it do it (Sears, 2016). While aiming to provide a more detailed analysis of Barclay’s innovation strategy, there is applied 4Ps of innovation model.

Product/Service – what the company offers to the world

The company divests in its global wealth management and personal banking operations and seeks for the opportunities to expand into new markets and segments. Thus, for example, Barclays increasingly focusing on leveraging consumer lending, financial card growth and banking services growth in such regions as Eastern Europe, South Africa, Saudi Arabia, Asia (Sands, 2016). Asia Pacific, especially, Indonesia is recognized by Barclays as one of the top growth markets in terms of wealth management. In order to penetrate this market, the company leverages its innovative products such as Islamic wealth management products (Wealth Insight, 2015). In order to implement this strategy the company needs to ensure that it has appropriate organizational structure, culture and leadership.

Process – how the company creates and deliver offering

Barclays initiated the Gamma Plan in 2010 in order to improve its operating efficiency of wealth management business. As part of this plan, Barclays invested GBP 350 million in business plans, platforms and its employees (Wealth Insight, 2015). The company introduced numerous platforms for both its employees and customers aiming thus to increase productivity, simplify processes, and reduce operational costs. In 2013, Barclays’ initiated implementation of its new Strategy Refresh program whereas the main focus was made on critical review of the firm’s 75 business units (Wealth Insight, 2015). As part of this strategy, the company made a decision to exit underperforming or uneconomic businesses and to focus on investing in business lines with high returns (Wealth Insight, 2015). As a result of these initiatives, the company focused on concentrating only profitable markets and exiting more than 130 jurisdictions out of 200 (Wealth Insight, 2015). Instead of concentrating on mass market, the company aims to narrow its markets to 70 – those that hold more than 80% of the total global wealth (Wealth Insight, 2015). Thus, the company adopts an innovative approach to strategy planning process adopting the principle 80/20, also known as Pareto rule.

Position – where the company targets the offering

Barclays is a universal investment bank that targets both small businesses and large corporations. Bank is positioning itself as the customer’s partner seeking for profitability and efficiency and aims to become “the partner of choice for all stakeholders” (Human Resource International Digest, 2015:15).

Paradigm – how the company frame what it does

Barclays has focused on transforming the brand from ordinary investment bank into innovation leader that leverages technology to provide excellent customer service and experience.

Structure, Processes, and Systems

Barclays has demonstrated deep integration of innovation technology into its internal systems. The company has launched a cloud-based filling document management system that enabled its customers to store confidential personal and business files and documents safely on a secure cloud platform hosted by Barclays (Evans, 2013). Thus, customers who use the Barclays’ “Cloud It” may easily now upload, save and sort various documents such as birth certificates and driver’s license in separate e-boxes. Moreover, these documents can be tagged in order to simplify search of it in the cloud. The firm also enables its customers to upload the photos of documents via smartphones by using Barclays mobile app (Evans, 2013). In 2013, Barclays introduced another innovation to its customer service process. The company was the first firm operating in financial service sector that deployed Nuance’s FreeSpeech voice biometrics solution in order to identify and confirm automatically the identity of bank customers through the voice sound detection technology (Investment Weekly News, 2013). This technology allows the company not only to ensure secure customer identification but also to relieve customers from a necessity to answer multiple security questions to access their bank account, making the authentication process more transparent and less time-consuming (Investment Weekly News, 2013). Once they reach the call-centre, their voice is identified within the first 20-30 seconds of conversation with customer service representative. Thus, customers do not have to respond series of security questions such as “what was your first car?” or “what is the name of your favourite teacher?”, etc. This technology allows to avoid customer frustration, save time and avoid answering same questions for every time they call to the customer service. As Matt Smallman, the Client Experience Strategy and Change, Barclays Wealth and Investment Management commented: "Nuance's voice biometrics technology is playing a vital role in ensuring our wider client service transformation project is an outstanding success. Both our clients and colleagues love that it increases security and convenience at the same time whilst making client calls shorter and reducing our overall cost to serve" (Investment Weekly News, 2013: 153). Since the introduction of this technology, the company reported that 95% of customers enrolled in the Nuance voice system were have been successfully verified upon the first time of using the system (Investment Weekly News, 2013).

Leadership at Barclays

Leadership team of Barclays recognized the necessity to develop and maintain innovative organizational culture in order to ensure firm’s flexibility and adaptability to change. The “Transform Program” initiated by the company’s CEO, Antony Jenkins, is carried out until today. This strategy was based on the three strategic cornerstones of the culture change: (1) achieving turnaround; (2) returning acceptable numbers; and (3) ensuring sustainable development (Marx, 2013). As part of the overall strategy, top management of Barclays focused firm’s effort on increasing stakeholder engagement. The company’s management identified key groups of Barclays’ stakeholders, including regulators, governors, 30-40 key shareholders, etc. and initiated conversation with these groups in order to gain a better understanding of their needs and expectations (Marx, 2013). Based on this information, the CEO has developed a plan and improved significantly relationships between Barclays Group and key stakeholders (Marx, 2013). Thus, the new executive management team of Barclays has managed to develop a deep stakeholder insight, which is an important element and source of business innovation (Jaruzelski et al., 2011). The new executive leadership team at Barclays has developed a new strategic plan that is focused on rebalancing and recovery (Sands, 2016).

However, it is also worth to note, that Barclays is changing its top executive team very often. Thus, for example, Antony Jenkins left his CEO post in July in 2015, while Jes Staley, a newcomer, took the post of Group Chief Executive Officer at the end of 2015 (Sands, 2016). Either it is a well-planned Barclays’ strategy or the weakness of its employee retention strategy, it definitely undermines the role and power of leadership within an organization. Some authoritative sources indicate that this rotation of executive management team is caused in result of active competitors actions (Wealth Insight, 2015). This brain drain problem poses significant challenges to the Barclays’ corporate strategy implementation and undermines firm’s leading position on the market. Probably that is why recently the company has introduced some innovative leadership reforms. Thus, for instance, in order to ensure learning and development at top management level and to enhance leadership’s skills, in 2013, Barclays launched Barclays leadership academy for its management (Human Resource International Digest, 2015). Moreover, there also was introduced a global-leadership curriculum in 2014 (Human Resource International Digest, 2015).

Organizational Culture

As Jaruzenski et al. (2011) claim, company’s culture plays an important role in its capability to innovate. In case of Barclays, it is obvious that innovation strategy is highly aligned with the corporate culture. The company is actively promoting integrity, respect, relationships, stewardship, excellence, emotional connections and trust through various corporate presentations, speeches, and videos (Greenham and Lewis, 2014; Barclays, 2016). As part of its Transform program, Barclays provides every employee with training on the Barclays Values. The company communicates and explains thus to its employees the new strategy, goals, values and the expected behaviour (Human Resource International Digest, 2015).

The company’s culture is based on the principles of learning organization, whereas continuous learning, increased collaboration and diversity are key values and principles (Marx, 2013). Thus, for example, Barclays introduced Colleagu Curriculum program, which was specifically designed to “create a learner-led blend of learning for more than 135,000 Barclays employees” (Human Resource International Digest, 2015: 15). In collaboration with City & Guilds Kineo, Barclays introduced a program, the content of which was created by technologists, business schools, teaching specialists and academics. In result, all employees of Barclays have gained access to unique learning platform with a wide range of recommendations (Human Resource International Digest, 2015).

Barclays also has introduced innovative initiatives towards evaluating employee’s performance in terms of not only what they do but also how. Thus, individual performance is evaluated formally not only against specific achievements but also whether the employee’s behaviour and values were aligned with corporate values in delivering results (Human Resource International Digest, 2015). Thus, the company has made a focus on efficiency and promotion of its core business values, reinforcing thus its competitive identity and position on the market.

However, despite these positive insights of innovation driven culture and strong leadership there were revealed some controversies surrounding Barclays’ corporate culture. In January 2013, there was disclosed information from a third-party confidential report, whereas it has been stated that Barclays’ executives were heavily pressurised to “generate revenue at all cost strategy” and that working climate promoted fear and intimidation at entry-level positions (Wealth Insight, 2015: 11).

Digital Transformation

Barclays is a company that makes a strong focus on radical process innovation offering its customers new ways of getting service and access to the bank (Sears, 2016). While evaluating the Barclays’ innovation strategy, it is possible to state that the company is greatly driven by digital technology developments. According to Jaruzelski et al. (2011), technology sets the direction suggested by the firm’s technological capabilities, leveraging its sustained investment in R&D to drive not only incremental change but also breakthrough innovation. Barclays thus utilizes leading-edge new technology in order to address the unarticulated needs of their clients (Jaruzelski et al, 2011). More specifically, Barclays is actively utilizing mobile technology in order to reduce operation costs, to improve customer service, to increase productivity and profitability. Barclays offers a wide range of mobile apps to its customers: Barclays Mobile Banking, Voice Biometrics, Pingit, etc. Nowadays, the company offers its business, retail, and mortgage customers to carry out a face-to-face video call with a specific member of Barclays staff (Kolakkides, 2015). Recently, the company launched Barclays’ Digital Eagles project – a free advice project aiming to provide support and assist the customers who were not familiar with new innovative services such as video calls or online banking (Davies, 2015). This service mainly targets consumers of older generation who are not using technology and online services for banking operations. Thus, the company aims to close the technology gap for elderly customers and transfer them into the online world (Ballaben, 2015). In 2012, Barclays introduced new digital wealth management client portal, which also enabled the customers to use service more effectively (Wealth Insight, 2015). In 2015, Barclays launched Barclay’s bPay tool, which has become an innovation in consumer banking sector. Customers now can easily pay by not using multiple devices for payment (Sender, 2015).

The company also recognizes the critical importance of data protection and security against various forensic crimes. In order to protect its clients and to increase their trust to the bank, Barclays has become the first major company that gained the government’s cyber security certificate for its digital banking services (Rossi, 2014).

Recommendations

The company has been changing its top executive team members relatively often over the past few years aiming thus to set right leaders on key positions. While these changes are more likely to yield favourable long-term outcomes, it is important for Barclays to focus on cultivating innovation culture throughout the whole organization from the top to down. The research indicates that even though the company claims to have strong corporate values, among which are collaboration, trust and respect, there are some problems with morality. Continuous changes of executive team members also undermine stability in the organization and challenge leadership position. All these aspects are more likely to have negative impact on firm’s capacity to innovate. Therefore, it is highly recommended to reinforce the role of people as an integral element of the bank’s innovative organization. As of today, the company has sufficient processes and systems in place to drive innovation through digital technology developments. However, the potential of people employed at Barclays seems to be underestimated. Barclays needs to adopt systems thinking approach and adopt open systems throughout the whole organization. The company also might create even more innovation-driven culture, whereas employees at all levels of the organization are encouraged to share their creative ideas and vision. While this strategy might be more complicated for implementation in such industry as banking, the potential benefits and opportunities should outweigh the costs. Furthermore, in order to enhance its innovation capabilities, Barclays might redevelop its organizational structure adding new roles and positions, such as: innovation coach, innovation catalyst, and internal innovation scout. In terms of more specific recommended directions, the company is recommended to continue its focus on leveraging technology for improving existing and developing new services and processes. In addition to this strategy, Barclays is highly recommended to diversify its geographical presence and utilize the opportunity of developing cards and retail banking services segment targeting young generation (Sands, 2016). By utilizing the digital capabilities, the company can more easily and effectively reach and communicate with young consumers and offer them specifically designed loans and card products.

Conclusions

Barclays Plc is the UK based company that operates in more than 50 countries and serves more than 48 million customers worldwide. Barclays as all other companies operating in the banking and financial industries faces with various factors that drive the company towards continuous changes and innovation. In order to stay competitive and profitable on the market, to restore investor confidence and to shore up the capital, the bank is seeking for the strategies to cut rapidly the costs and shed non-core operations (Sands, 2016). Barclays is a company that makes a strong focus on radical process innovation offering its customers new ways of getting service and access to the bank (Sears, 2016). Innovation is a key strategy of Barclays that is deeply integrated throughout the whole organization and all business processes. Leadership team of Barclays recognizes the necessity to develop and maintain innovative organizational culture in order to ensure firm’s flexibility and adaptability to change. The research findings indicate that Barclays’ innovation strategy company is greatly driven by technology drivers. Barclays is actively utilizing mobile technology in order to reduce operation costs, to improve customer service, to increase productivity and profitability. Barclays offers a wide range of mobile apps to its customers: Barclays Mobile Banking, Voice Biometrics. Besides focusing on new product and new processes development, Barclays Group seeks for new markets abroad. The company divests in its global wealth management and personal banking operations and seeks for the opportunities to expand into new markets and segments. Overall, the company is ranked to be one of the most innovative companies in the banking/financial industry in terms of digital transformation, but there still are some obvious gaps in terms of leadership, people management and structure.