Banthoon Lamsam, chairman and chief executive of Kasikornbank, shares how employee-centred strategies and digitisation is keeping one of Thailand’s largest banks upbeat as it regionalise its operation in an ASEAN economy.
If you do not see the video already displayed below, please select the alternative sites from the tabs here:
Here is the transcript of the video.
Emmanuel Daniel (ED): It’s very interesting to follow the evolution of your bank and your own thinking in strategy and execution over the years, and where you’ve brought it today. I am very pleased to speak with Banthoon Lamsam, the chairman of Kasikornbank in Thailand.
In your younger days, you were a very big proponent of the use of strategy and a big advocate of Michael Hammer. How has your thinking or strategy evolved over the years? Where are you today in terms of strategy and execution?
Banthoon Lamsam (BL): Well, Professor Michael Hammer’s reengineering concept at that time is ancient history. It was a big thing because it represented the first time that a large company tried to do something differently. It met with good reception in terms of being innovative, but that is not anywhere near the necessity to innovate today, when things have actually gone way beyond the very simple part that we were trying to do back in 1993-94.
ED: In fact, that was exactly the purpose of my question because the whole theme has come out as being very important today and the world is changing. Everything we understand about channel, about customer, about risk is now up on its head. You’re the original chairman who brought the idea of strategy and innovation into the Thai corporate culture. How has that evolved over time and what do you think of innovation today?
BL: I think all companies have to think of strategy now. As the environment changes, the competitive landscape also changes. People have to always be on their toes because the customers’ taste can completely differ from what it’s been in the past several years. So, I don’t think that’s something new. I think, it’s a challenge for any company to think of new directions fast, and most importantly, to get the whole organization moving in the same direction. Big companies tend to be very clumsy. If you’re the chairman or the CEO, you can think of something – that’s the easy part. The difficult part is convincing the rest of the organization to actually act that way.
ED: People is an important component in strategy in Thailand. This includes your relationship with your people, your ability to carry your people with you, and your inability to do some things that a regular U.S. company might do like cutting staff or reassigning them. How are you dealing with your people in terms of what you need to do in your bank?
BL: The worst convention of cutting costs is to cut out the people, which has not been an easy thing to do in a Thai context. We did agree to mutual separations years after the crisis, but I don’t think that cutting out people overnight will be positive and it will actually demoralize the people.
ED: What was your experience with the automation process?
BL: Well, automation in the banking business is more of the ability to access the necessary information so you can serve the customers, and where you make the decision. I think the day to day work of transactional banking has been taken over by the computer, but banking as a financial business requires a lot of risk management. A lot of that has to do with dealing with people on an individual basis in the day-to-day business, when customers come to our banks and make transactions. So, that’s actually part of the cost.
ED: You’re talking about operational?
BL: Operational risks and also diminishing of the risks against the illegal transactions, money laundering and all that. That takes a lot of human effort today.
ED: What are you doing to put in place the kind of culture where integrity is taken care of? Is it a daily threat and is it something that you worry about, because now you’re Chairman and you’re not necessarily involved in hands-on daily operations?
BL: I have a dual role, which is unique in Thailand, and only Kasikornbank has this. I am chairman of the Board and also CEO. That is common in the United States, but is certainly an exception here that we had to negotiate with the Bank of Thailand. This will not last forever and will go away with me. I’m still fully responsible for the banks’ operation. The new team is taking care of the day-to-day business, and that is a good sign, but in the end I am still responsible for making sure that the bank moves in the right direction, strategically, and that the Board is on board.
ED: What are your key priorities today, especially in digital banking?
BL: There are four areas or key priorities that have already been communicated to the investors before I depart in the not too distant future. One is to make sure that we don’t get caught in a bad cost structure. Reengineering has to be multiplied a hundredfold now to make sure you don’t get stuck in a process that is cost intensive and labour intensive, and that happens all the time. After a while, the process becomes inefficient.
ED: Your cost-to-income ratio is in the 40% range at the moment.
BL: Well, it’s not good enough, in my opinion. It still has to be improved. So, that’s an area that IT and reengineering has to be involved, making sure that we are on our toes, not overspending on something that you cannot count on the return.
ASEAN Strategy and Regionalisation
ED: But you’re doing that at a time when you also have another ambition, which is to regionalise things?
BL: Yes, I mean, that goes the other way because if you go to the second part of the strategy to make sure there is a foothold in ASEAN and I think Kasikornbank should remain not only as a Thai company so we can negotiate the flow of capital in trade that comes around.
ED: Why have Thai banks been slow about regionalizing?
BL: Thai banks, by size, are not that big to go out and buy anything or even set up a network. You have to work more on a relationship kind of structure.
ED: But the case for regionalization has been in the Indochina region for a while?
BL: Well, the bulk of the business is not there. These ASEAN countries are only beginning to come around in terms of economic growth. Also, it’s not automatic that you get to open branches in these countries after you go through the procedure. Opening a bank branch is a highly political manoeuvre.
The direction is to make sure that KasikornBank will be perceived as an ASEAN bank. I don’t think it is necessary to have any aspiration to become big in Japan or China or Korea. As long as the flow of the capital from these three countries is coming to us, we can negotiate that.
ED: How about on organic growth, mergers and acquisitions?
BL: Organic growth is probably the way to go for the time being given the limited capital and managerial resources that Thai banks have. Thai managers should learn new cultures and should work in another cultural environment and language. It’s not something that is as automatic as in some other countries where English is more of a common language.
Digitisation or disruption in the banking system
ED: So, you’ve got cost, you’ve got regionalisation?
BL: This thing is very hot in terms of the involvement of the ITs in the new kind of financial transaction. We call it a disruption, you call it digitisation. We want to call it a digitisation because it has no impact. Digital banking sounds blank right now, but a disruption is something that can wipe you out and if you don’t watch out, that can really happen. So, we have to get going in that direction also.
ED: So, what have you been doing since we noticed from your numbers that the bank seems to be resonating in the last few years, meaning that your profitability is good?
BL: Well, the normal banking business has been okay in the past several years. It will go down a little due to the asset quality cycle, but that is not something that can be too worrisome. As the economy comes around again, the banks will operate more profitably. The more important thing is to get new kinds of platforms that can transact the financial business more efficiently.
ED: Does this involve teaching your existing staff?
BL: It involves, first, being aware that you can be wiped out if you just stick to the old procedures.
ED: Who are you afraid of, other banks, non-banks?
BL: Anybody that has the ingenuity to use the new platform, the IT platform, and to make something that can replace existing financial transactions that banks normally do.
ED: In Thailand, because of the protection the banks have, it’s not an immediate concern.
BL: Well, it’s not immediate, but it’s something that if the world comes around to that, Thailand and the Bank of Thailand will also have to come around to that.
ED: What are some of the recent successes that you’ve had?
BL: I don’t think anything drastic happened in the past year, but we have set up a new body that deals not only with the day-to-day IT operations, but also thinks of new methods to replace the existing procedures.
ED: Going back to your regionalisation team, which are the low-hanging countries that you think you can go in and make a difference or increase business?
BL: None. You can settle a branch but that doesn’t mean that you have eaten the fruits. Some countries are more amenable to setting up our branches than others. We have a branch in Laos and we will be having a branch in Cambodia pretty soon. However, Burma and Vietnam are tougher.
ED: In the last few years, you seem to have put your fingers on and been quite successful with supply chain financing and it seems to come to you through your association with the Japanese banks?
BL: Not really. I think these technical terms are not important as the mentality of the management team. We need to make sure that we interpret the things going on in the marketplace fast and correctly enough.
ED: But you have a good management team that put in place the processes?
BL: One thing that is good today can become obsolete in another day. We do have a good relationship with the Japanese regional banks. They also have to come to us in their own ways because Japanese SMEs will have to relocate to ASEAN to manage their costs. So, that’s something that we are working with the Japanese regional banks so that together we can co-serve these companies.
ED: Is there a scope for expanding that into building your own SME business?
BL: We do have our own SME business. Kasikornbank is perceived to be more focused on the SME sector than other banks in Thailand. It’s a tricky sector to be in since the risk is harder to manage and you have to know when to stop.
ED: So, digitization, or disruption as you call it?
BL: That’s the third variety. The fourth variety is to make sure that after I depart, the new generation of management can handle this.
ED: What sort of road map are you putting in place?
BL: I need to identify a key person that have the basic technical know-how to run the banking business, but more importantly, I have to build the culture that it can work together.
ED: Will that person be from within the bank or outside?
BL: I think in the past, banks have acquired people from outside. They cannot source fast enough from the internal staff. I think people have been moving around to make sure that the bank has a strategic and cultural environment that attracts talent. We have to attract talents that can come in and work together well.
ED: Does the Thai economy work for or against the bank, given where it is today?
BL: Well, the Thai economy has slowed down recently. It is not a total surprise since other countries are experiencing the same thing. But you have to be able to manage that slowdown until the cycle comes around again.
ED: There’s the cycle of a normal economy and a number of structural issues.
BL: Well, that’s something that the government has to handle to make sure that they put Thailand on a more solid platform for growth.
ED: Do you think that after elections that will get better?
BL: I cannot say for sure when that is going to happen. I don’t think that is the only factor that we have to consider. I think, in the meantime, we make sure that with the current interim kind of political structure we have, things can be still get done.
ED: I’ve seen how you’ve led the bank for all these years and you’ve always been a man with strategic clarity. How has your strategic clarity evolved over time and did you feel at any point that you lost your way and found your way back again? Was there a journey that you went through where you learned a few things about yourself and your bank that made you stronger today?
BL: I think it’s important to perceive how the world is changing around you and to make sure that I have the kind of people that are capable of finding out what the technical solutions.
ED: So, you’re more dependent on people now?
BL: Right. As I grow older, as I go close to the day that I will have to depart from the bank, it’s important that I have the people behind me that can properly find out what to do.
You must be logged in to post a comment.