THE KISS PRINCIPLE

Let's face it - a good kiss is hard to beat. Perhaps that is why the KISS ("Keep It Simple Stupid") principle, advising people to keep simplicity as a main goal has stood the test of time. KISS is a concept that can be directly linked to Albert Einstein who said "everything should be made as simple as possible, but no simpler." In banking, as in most other endeavors, whether one enjoys a good kiss, believes simplicity is a good thing, or simply does not wish to argue points with Einstein – the principle makes a lot of sense. That is why we were not surprised to uncover a recent study from Harvard that seemed to back up Einstein's premise and connect it to business. To begin, extreme competition is driving banks to design, develop and launch products and services at an increasing rate. Proliferation boosts profits, but it can also add complexity to the management and measurement process. Understanding this paradigm is important. According to the study, roughly two-thirds of overall profitability comes from just a handful of products or services. Try telling that to bankers, however, where in an effort to stay at the forefront of customer relevance, they continue to add product and service offerings in an effort to attract and retain customers. The days of a single checking and savings account are gone, as banks try to differentiate themselves in a crowded market. Being able to offer tailored solutions to meet specific customer needs is now the norm, rather than the exception. All of this is unavoidable, but it also comes at a cost. For banks, understanding which offerings are profitable, where competitive threats may surface and which customers are not yet using the most profitable offerings (to know where additional profitability can be achieved), is crucial to ongoing success. Given heightened pressure to compete, bankers must remain focused on maintaining a balance between offering too many products and services and not enough. While simple enough to state, the study indicates why this task may not be that easy. First, consider that roughly half of respondents said their company had increased product and service offerings by at least 50% over the past 5Y. Of those who had seen increased profitability from this additional complexity, roughly 75% said leveraging existing platforms was the key to their success. Banks expected to offer more products and services in upcoming months should take a lesson from this group and seek to leverage existing platforms and processes wherever and whenever possible. This helps increase the odds of success, while reducing "launch" costs. Next, the study found that roughly 50% of the successful group formalized the process for adding or removing offerings to ensure only the strongest survived. Capturing the cost structure, economic value and project probability of success were all critical elements successful companies build into their review process. Keeping things simple and tailored for each client is important, since studies also find that customers given 6 or fewer options are more than 10x more likely to "buy" something than customers given more than that. Pucker up your offerings, but remember how you KISS can be as important has who you kiss.