COVER STORY

SWITCHED ON CEO: Ralph Norris COMMONWEALTH OF AUSTRALIA

Two years into his role as CEO and managing director of the , one-time boss Ralph Norris has once again used his thorough understanding of IT to drive through massive internal change and turn poor customer service on its head.

By David McNickel

t’s not often you talk to a CEO that actually knows branches) and he fully appreciated the power of the internet how to write a computer program. But ask Ralph in terms of slashing a business’s transactional overhead. Norris about his earliest experiences with computing But it wasn’t until he got into the driver’s seat at Air New and he’ll probably tell you the story of his first IBM Zealand that that know-how became fundamental to the XT PC – fully loaded with 256KBs of RAM and two very survival of the organisation he led. I5 1/4” floppy disk drives. It was the early 1980s and Norris It was shortly after 9/11 when Norris was tapped to was working at the Savings Bank (ASB) – but drag the airline out of a hole after the New Zealand govern- even then he knew how to ‘sell’ somebody on the sizzle ment had injected $800 million to keep the national flag of what computing could do. “The first program I wrote carrier flying. Looking at the books it was clear the com- on it was actually a little maths programme for my son to pany was teetering on the edge of total collapse. In Norris’s teach him multiplication tables,” he says. “It would fire a words Air New Zealand had “racked up the biggest loss multiplication question at him – say 4x4 – and he would in New Zealand corporate history”. Things had to change have to key in the right answer.” Norris could have left it – and change fast. “When you have an organisation that at that, but he coded in a sweetener for his son. “When he has stood on the verge of bankruptcy it really concentrates put in the right answer it would come and go WOW! with the minds of the people who work in that organisation,” he some pretty ordinary graphics (laughs) and it really got him says. Garth Biggs, CEO of Gen-i (then Air NZ’s strategic interested in doing his times tables.” Over the years Norris’s IT partner) recalls it as a challenging time. “The airline enthusiasm for all that IT could offer continued to drive certainly had a mindset that it was in survival mode,” he his business rationale. As head of the ASB Bank, he’d been says. “In a typical scenario companies are really focused on instrumental in the launch of virtual bank ‘BankDirect’ (for their robustness and the quality and so on and obviously in the most part an internet only offering with no physical their operational areas Air New Zealand continued to do >

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site had been offering tickets since 1999, airnz.co.nz was not a successful retail channel, he says. “It was interesting when we finalised the strategy for Domestic Express (a no frills/low cost domestic service designed to quickly boost passenger numbers). I said to the team ‘Okay, how are we going to sell this?’ and they said ‘well we’ve got our website’. And I asked them ‘have any of you actually booked a flight on our site?’ – and they hadn’t. So I said this particular initiative [Express] is going to fall flat on its face because there’s no way our current website technology will satisfy our customer’s requirements. The website was too difficult for customers to use – so it was all hands to the pump to endeavour to do something about it.” Twelve months later and any concerns about the success of the strategy had long since evaporated. Some key statistics – online sales volumes had increased from less than 4% of total domestic bookings with the old system, to 44%. The look-to-book ratio (the number of people who look at the site then buy a fare) had dropped from approximately 25:1 to 8-1. The Air New Zealand site had risen from being in the top 50 most visited websites in New Zealand to the top 10. Visitor volumes numbered around one million a month and in purely commercial terms, the site had become one of New Zealand’s most successful e-commerce websites, with daily sales in excess of $1 million. that but overlaying it all was much more urgency around costs - examining why they were doing everything they Satisfied Customers? were doing. It was questioning, questioning, questioning. Fast forward to 2005 and with Air NZ well into the It was very challenging but absolutely essential for their black and topping customer satisfaction surveys, Norris survival.” Priority one for Norris was to stay in business, was ready for a new challenge. Returning to an industry but to do that he had to make it clear to staff and custom- he knew well – banking – the incoming CEO at the CBA ers alike, exactly what business Air New Zealand was in. was not faced with averting imminent catastrophe, but “If I have any real criticisms of the company when I joined instead continuing to lead a massive IT initiative (called it,” he says, “it would be a view that the business was all Which new Bank?) that had begun prior to his tenure. about flying ‘planes’– rather than about flying ‘people’ – so Nonetheless, as soon as he got his feet under the desk at its systems, processes and logistics were designed around the CBA, Norris wanted to know what wasn’t right with flying planes. We could have been flying freight, we could the bank – specifically from its customers’ perspective. have been flying bombers, but the fact of the matter was Whereas ASB Bank had consistently been at the top of our business was about flying people - so getting staff in customer satisfaction surveys in New Zealand, at the CBA the organisation to identify with what was the real role of the story was almost exactly the reverse. “We have been the business I think started a strong trend towards cus- the worst rated bank [in customer satisfaction surveys],” he tomer focus.” says. “So when I arrived here one of the first things I did was get a clear understanding of what were the drivers of A Shift To The Web customer complaints.” As it happens the customer dissat- Driving the whole initiative was the impetus to drasti- isfaction was spread across almost every customer touch- cally cut operating costs, and pivotal to this was the airline’s point the bank had. “The drivers were things like queues,” website – as getting passengers to make their bookings says Norris, “product competitiveness, staff knowledge and online would cut processing costs and help Air NZ further training, follow up, people taking ownership, issues around reduce its dependency on third parties like travel agents levels of error rates.” At Air NZ, IT had been used to great (who can offer fares from a range of carriers). Although its effect in turning around the company’s customer’s percep-

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‘Which New Bank’ Explained n September 2003, the Commonwealth Bank launched Iits Which new Bank customer service vision ‘To excel in customer service’. The service transformation consisted of three themes; excellent customer service through engaged people supported by simple processes. The Bank estimated a spend of $1,480 million over the three years to 2006. This included $600 million of normal project spend, and an additional $620 million in areas such as systems and process simplifi cation, technology and staff training and $260 million invested in the branch network.

tions. Could the same thing be done for the CBA? Before businesses and there are government businesses. So there’s he’d know, Norris first had to find out what was right with a range of different customer groupings that we interface the company’s IT infrastructure, and what was wrong with with.” And the bank itself is in a lot of different businesses it. Or as he puts it “poor and good”. So how are poor and Customer he says. “We obviously have banking as a business, but good defined in an organisation like the Commonwealth satisfaction is we’re also the largest life insurer in Australia. We are the Bank? For Norris it’s all about the coalface. “Well first and largest retail funds manager in Australia and we’re also the foremost,” he says, “it’s how do you interact with your cus- now at a 10 year largest retail stock broker.” Norris says the CBA’s manage- tomers? So you need to ask ‘what’s our technology utilisa- ment deciding to launch the ‘Which new Bank’ project tion and deployment in regard to the ability of customers high and we have prior to his arrival was a brave one. “That was largely built to interact with us?’. If I go back to Air NZ for example, in house and I have to say that the decision by the board when I arrived there I found our internet offering for had the fastest and the senior management team at the time [2003] was a booking direct was very poor indeed. The system wasn’t gutsy call.” It was also expensive (see the Which new Bank: intuitive, it hadn’t been well thought through. It didn’t have improving rate Explained sidebar). “When you’ve got 900 people involved the range of capability that it should have and so it was of customer in developing a system like that interfacing with a number very easy to quickly identify that there was some pretty of banking and legacy systems and getting something that’s basic problems in the way that IT was being used within satisfaction of actually going to work, able to be developed within budget, the business.” inside the deadline, was a pretty significant accomplish- Although the breadth of the CBAs business opera- any fi nancial ment, almost Guiness Book of Records .” As Norris tions meant the ‘what business are we in?’ question wasn’t explains it, Which new Bank was dealing with significant as easily answered as it was at Air NZ, Norris says it still institution in deficiencies in front end systems and the way that the bank boiled down to customer service. “The Bank is a service interacted with its banking customers. “Those systems industry,” he says, “and so we have a number of different Australia for the were very poor,” he says, “and that was due to the fact that customer groupings that we’re servicing. We are servicing last 12 months. like many of this type the CBA had a range of legacy individuals, we’re servicing businesses. There are small systems which were discrete - that is, they were not inte- businesses, there are mid-sized businesses, there are large grated, they had grown like topsy and so the program had >

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complaints department are a good sign apparently. “I was delighted to see that in the first 12 months we reduced customer complaints by some 50% by understanding those drivers and doing something about it - and likewise in the 12 months ending June complaints have come down another 40%. So customer complaints are now only 20% of what they were two years ago.” A good result, but not good enough says Norris. “Customer satisfaction is now at a 10 year high and we have had the fastest improving rate of customer satisfaction of any financial institution in Australia for the last 12 months - so it’s starting to work but there’s still got a long way to go.” Beyond issues of CRM Norris says a range of other IT initiatives are being undertaken at the CBA. “In the time I have been here there were areas that gave me cause for concern in disaster recovery and business continuity - those processes were not of the level of capability that they needed to be.” And disaster recovery is something Norris knows a little about. While many CEOs have never had to deal with a genuine disaster, Norris was at the helm at the ASB Bank in February 1998 when the power went out in central Auckland for over a month. Years of infrastruc- ture neglect meant Auckland’s entire CBD was dependent on only four underground power cables for its electric- ity. After a prolonged period of hot dry weather, all four cables failed in under a month and downtown Auckland was plunged into darkness for nearly five weeks. But the ASB was ready Norris says. “We were very fortunate the head office that we’d recently built in Albert Street had full standby generator capacity and even though our primary computer centre was inside the area where power was lost to bring all those systems together through a middleware we had multiple diesel generators and diesel tanks which approach so that we could create a view at the front-end of saw us able to operate almost seamlessly in that time.” The the business of the total customer relationship.” Ultimately wisdom an experience like this imparts to a CEO is some- Norris says the CBA has developed “probably one of As often is the thing that can’t be taught at business school. “As often is the most sophisticated Customer Relationship Systems the case,” he says, “you learn from your experiences and it’s that I’ve seen. At ASB we had a pretty good one but this case, you learn usually the things that go wrong that teach you the most one takes it probably a generation ahead in quality and - and that certainly was quite an educational experience.” sophistication.” The new CRM system is being used across from your Back to the CBA and 18 months of concentrated effort a range of the bank’s important customer touch points. later Norris says the bank’s disaster recovery capability is “Branch staff and call center staff are using it,” he says, experiences and world-class. “We now have a brand new state of the art “and it also interfaces into internet banking services. We it’s usually the ‘hot-site’ out in the north west of Sydney which has just have internet banking services that are aimed at our indi- been commissioned which provides us with a very very vidual customers and then we have a broader capability in things that go good back up capability that we haven’t had up till now of what we call CommBiz, which is our corporate and small that quality.” business internet service. All of those systems interact off wrong that teach the same front end platform. And that has given us the Has It All Been Done? ability to start to make sense, from a customer’s perspec- you the most. So is an in-depth understanding of IT a prerequisite tive, that we actually understand the scope and breadth of skill set for today’s CEOs? Norris isn’t convinced, but says their relationship.” So has it worked? Quiet phones in the to some extent it’s happening by immersion. “Even today

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I don’t think there are too many chief executives that have much more than a basic understanding of IT,” he says. “Obviously chief executives come up through the com- CEO Gadget Watch mercial side of the business and to have an extensive IT o what sort of technology does this switched on background you need to come up through the IT stream, SCEO keep close at hand? First up, his ‘crackberry’ but I think what has happened, though, is that just by the – Norris swearing by the Blackberry Pearl. “I think it’s very pervasiveness of IT - CEOs with PCs on their desks tremendous. I used to hate having to lug a laptop ev- and BlackBerry’s and the like, they’re using IT a lot more, erywhere when I was off shore – and then trying to link personally, and therefore are becoming conversant with it into hotel networks was a real pain in the backside. what IT can do and also the pervasiveness of the internet The advances today with WIFI hotspots and all the rest as well has created a significantly broader knowledge of it’s absolutely fantastic. We’ve really come a long way in IT capability I think.” At a media presentation just prior that regard. I fi nd the ability of the Blackberry while it’s to his appointment to the CBA, a newbie tech-journal- limited in terms of attachments, it’s a great device from ist leapt to his feet and asked Norris in excited tones. my perspective.” His home is also well spec'd techno- “Ralph, what is the future of technology?” The room was logically speaking. “I have a pretty grunty PC at home. quiet for a moment, Norris looked taken aback and then My wife is a real photo buff and with digital the gathered crowd roared with laughter. He’s talented, technology and all the rest it’s been tremendous after all, but he’s not the Oracle from The Matrix. At the – ending up with 300 GB hard drives and all that time his answer was “constantly evolving” and that’s the sort of stuff and the ability to backup through answer he sticks with today. So where exactly are banking repositories off shore like Cobolt. Pride of place, services on the technology evolutionary scale? Norris uses however, is reserved for Norris’s Sonos wireless the evolution of air travel to make his point. “I think we’re music system. “Sonos dovetails into Rhapsody only scratching the surface with the use of IT,” he says. (the music subscription services). It’s great, like an “The evolution of aircraft is quite a good analogy and I overgrown iPod. It uses a control wheel and it’s got a think that we’re probably running at the moment some- nice display with all the CD covers etc and it oper- where around the 707 (the first mass production com- ates wirelessly with the sound system which is piped mercial jet that made its debut passenger flight in 1958) through my house. You can set up and queue you don’t and if you look out to the Boeing 787 Dreamliner and the have to go to the PC because it’s all handheld.” Airbus A380s, that’s where the potential is at this point, so there’s a great opportunity gap to be filled.” Being able to seamlessly carry out transactions globally is one area Norris sees opportunity. “We’ve done a lot in being able Australian dollar depreciated 25-30% against the Swiss to use credit cards and debit cards internationally. And franc, they got into really significant difficulties.” in terms of transferring of funds we now have the abil- So how does a CEO keep his company out of techno- ity to transfer funds through the internet to other banks logical difficulties? Once again for Norris it’s identifying internationally as long as you’ve got the swift access num- deficiencies and constant evolution. Careful planning, bers. As far as the ability for loans – could you borrow in integration, the right people in the right roles (he works another currency? Yes you can do that. You can’t do that very closely with his CIO for example) and always with a live online currently but I can see the time that you will.” focus on the customer experience. Closing the interview But, Norris warns, dealing with global finance markets is I recall my first interview with Norris in late 1999 – a not a game for novices. “The question is do you want to quick phone call to see how confident he was that the take the foreign currency risk? If you borrow in US dol- ASB’s systems would handle the much hyped ‘Y2K’. When lars the interest rate might be 5.5 percent, but if you are I asked him where he would be at 11.59pm on the 31st of earning in Australian dollars and the dollar depreciates, December 1999 I expected him to say he’d be hunkered then a 10% change in the currency is effectively a 10% down in an ASB command and control centre barking addition in your interest cost. Banks got into a lot of trou- orders to tech staff like a shift supervisor at Chernobyl. ble especially here in Australia in the late 80s with foreign No, he said, he’d be at a family barbeque probably letting currency loans. A lot of people just didn’t understand the of some fireworks. Such is the confidence of a CEO who inherent currency risk and while they looked as though knows the job’s been done right. they were getting a really cheap interest rate when the

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