It’s not often you talk to a CEO that actually knows how to write a computer program. But ask Ralph Norris about his earliest experiences with computing and he’ll probably tell you the story of his first IBM XT PC – fully loaded with 256KBs of RAM and two 5 1/4” floppy disk drives.

It was the early 1980s and Norris was working at the Auckland Savings Bank (ASB) – but even then he knew how to ‘sell’ somebody on the sizzle of what computing could do. “The first program I wrote on it was actually a little maths programme for my son to teach him multiplication tables,” he says. “It would fire a multiplication question at him – say 4×4 – and he would have to key in the right answer.”

Norris could have left it at that, but he coded in a sweetener for his son. “When he put in the right answer it would come and go WOW! with some pretty ordinary graphics (laughs) and it really got him interested in doing his times tables.” Over the years Norris’s enthusiasm for all that IT could offer continued to drive his business rationale. As head of the ASB Bank, he’d been instrumental in the launch of virtual bank ‘BankDirect’ (for the most part an internet only offering with no physical branches) and he fully appreciated the power of the internet in terms of slashing a business’s transactional overhead.

Satisfied customers?
Fast forward to 2005 and after several tough years at Air NZ (more on that later), Norris was ready for a new challenge. Returning to the banking industry the incoming CEO at the CBA was faced – not with averting imminent catastrophe, as he had been at Air NZ, but instead continuing to lead a massive IT initiative (called Which new Bank?) that had begun prior to his tenure.

Nonetheless, as soon as he got his feet under the desk at the CBA, Norris wanted to know what wasn’t right with the bank – specifically from its customers’ perspective. Whereas ASB Bank had consistently been at the top of customer satisfaction surveys in New Zealand, at the CBA the story was almost exactly the reverse.

“We have been the worst rated bank [in customer satisfaction surveys],” he says. “So when I arrived here one of the first things I did was get a clear understanding of what were the drivers of customer complaints.” As it happens the customer dissatisfaction was spread across almost every customer touchpoint the bank had. “The drivers were things like queues,” says Norris, “product competitiveness, staff knowledge and training, follow up, people taking ownership, issues around levels of error rates.” At Air NZ, IT had been used to great effect in turning around the company’s customer’s perceptions. Could the same thing be done for the CBA? Before he’d know, Norris first had to find out what was right with the company’s IT infrastructure, and what was wrong with it. Or as he puts it “poor and good”.

So how are poor and good defined in an organisation like the Commonwealth Bank? For Norris it’s all about the coalface. “Well first and foremost,” he says, “it’s how do you interact with your customers? So you need to ask ‘what’s our technology utilisation and deployment in regard to the ability of customers to interact with us?’. If I go back to Air NZ for example, when I arrived there I found our internet offering for booking direct was very poor indeed. The system wasn’t intuitive, it hadn’t been well thought through. It didn’t have the range of capability that it should have and so it was very easy to quickly identify that there was some pretty basic problems in the way that IT was being used within the business.”

Although the breadth of the CBAs business operations meant the ‘what business are we in?’ question wasn’t as easily answered as it was at Air NZ, Norris says it still boiled down to customer service. “The Bank is a service industry,” he says, “and so we have a number of different customer groupings that we’re servicing. We are servicing individuals, we’re servicing businesses. There are small businesses, there are mid-sized businesses, there are large businesses and there are government businesses. So there’s a range of different customer groupings that we interface with.” And the bank itself is in a lot of different businesses he says. “We obviously have banking as a business, but we’re also the largest life insurer in Australia. We are the largest retail funds manager in Australia and we’re also the largest retail stock broker.”

Norris says the CBA’s management deciding to launch the ‘Which new Bank’ project prior to his arrival was a brave one. “That was largely built in house and I have to say that the decision by the board and the senior management team at the time [2003] was a gutsy call.” It was also expensive (see the Which new Bank: Explained sidebar).

“When you’ve got 900 people involved in developing a system like that interfacing with a number of banking and legacy systems and getting something that’s actually going to work, able to be developed within budget, inside the deadline, was a pretty significant accomplishment, almost Guiness Book of Records stuff.” As Norris explains it, Which new Bank was dealing with significant deficiencies in front end systems and the way the bank interacted with its banking customers (as opposed to insurance or stocks). “Those systems were very poor,” he says, “and that was due to the fact that like many banks of this type the CBA had a range of legacy systems which were discrete – that is, they were not integrated, they had grown like topsy and so the program had to bring all those systems together through a middleware approach so that we could create a view at the front-end of the business of the total customer relationship.”

Ultimately Norris says the CBA has developed “probably one of the most sophisticated customer relationship systems that I’ve seen. At ASB we had a pretty good one but this one takes it probably a generation ahead in quality and sophistication.”

The new CRM system is being used across a range of the bank’s important customer touch points. “Branch staff and call center staff are using it,” he says, “and it also interfaces into internet banking services. We have internet banking services that are aimed at our individual customers and then we have a broader capability in what we call CommBiz, which is our corporate and small business internet service. All of those systems interact off the same front end platform. And that has given us the ability to start to make sense, from a customer’s perspective – that we actually understand the scope and breadth of their relationship.”

So has it worked? Quiet phones in the 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.”

Flirting with disasters
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 infrastructure neglect meant Auckland’s entire CBD was dependent on only four underground power cables for its electricity.

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 we had multiple diesel generators and diesel tanks which saw us able to operate almost seamlessly in that time.”

The wisdom an experience like this imparts to a CEO is something that can’t be taught at business school. “As often is the case,” he says, “you learn from your experiences and it’s usually the things that go wrong that teach you the most – and that certainly was quite an educational experience.” Back to the CBA and 18 months of concentrated effort later Norris says the bank’s disaster recovery capability is world-class. “We now have a brand new state of the art ‘hot-site’ out in the north west of Sydney which has just been commissioned which provides us with a very very good back up capability that we haven’t had up till now of that quality.”

Perhaps the biggest disaster that Norris has had to deal with, however, was Air NZ, as it was here that his IT know-how became fundamental to the very survival of the organisation he led.

It was shortly after 9/11 & the Ansett collapse when Norris was tapped to drag the airline out of a hole (after the New Zealand government had injected $800 million to keep the national flag carrier flying). Looking at the books it was clear the company was teetering on the edge of total collapse. In Norris’s words Air New Zealand had “racked up the biggest loss in New Zealand corporate history”. Things had to change – and change fast. “When you have an organisation that has stood on the verge of bankruptcy it really concentrates the minds of the people who work in that organisation,” he says. Garth Biggs, CEO of Gen-i (then Air NZ’s strategic IT partner) recalls it as a challenging time. “The airline certainly had a mindset that it was in survival mode,” he says.

“In a typical scenario companies are really focused on their robustness and quality and so on and obviously in their operational areas Air New Zealand continued to do that but overlaying it all was much more urgency around costs – examining why they were doing everything they were doing. It was questioning, questioning, questioning. It was very challenging but absolutely essential for their survival.”

Priority one for Norris was to stay in business, but to do that he had to make it clear to staff and customers alike, exactly what business Air New Zealand was in. “If I have any real criticisms of the company when I joined it,” he says, “it would be a view that the business was all about flying ‘planes’– rather than about flying ‘people’ – so its systems, processes and logistics were designed around flying planes. We could have been flying freight, we could have been flying bombers, but the fact of the matter was our business was about flying people – so getting staff in the organisation to identify with what was the real role of the business I think started a strong trend towards customer focus.”

A shift to the web
Driving the whole initiative was the impetus to drastically cut operating costs, and pivotal to this was the airline’s website – as getting passengers to make their bookings online would cut processing costs and help Air NZ further reduce its dependency on third parties like travel agents (who could offer fares from a range of carriers).

Although its 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 by the time he left Air NZ in 2005, its website had become one of New Zealand’s most successful e-commerce websites, with daily sales in excess of $1 million.

Has it all been done?
So is an in-depth understanding of IT a prerequisite skill set for today’s CEOs? Norris isn’t convinced, but says to some extent it’s happening by immersion. “Even today 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 commercial side of the business and to have an extensive IT background you need to come up through the IT stream, but I think what has happened, though, is that just by the very pervasiveness of IT – CEOs with PCs on their desks and BlackBerry’s and the like, they’re using IT a lot more, personally, and therefore are becoming conversant with what IT can do and also the pervasiveness of the internet as well has created a significantly broader knowledge of IT capability I think.”

At a media presentation just prior to his appointment to the CBA, a newbie tech-journalist leapt to his feet and asked Norris in excited tones. “Ralph, what is the future of technology?” The room was quiet for a moment, Norris looked taken aback and then the gathered crowd roared with laughter. He’s talented, after all, but he’s not the Oracle from The Matrix. At the time his answer was “constantly evolving” and that’s the answer he sticks with today. So where exactly are banking services on the technology evolutionary scale? Norris uses the evolution of air travel to make his point. “I think we’re only scratching the surface with the use of IT,” he says. “The evolution of aircraft is quite a good analogy and I think that we’re probably running at the moment somewhere around the 707 (the first mass production commercial jet that made its debut passenger flight in 1958) and if you look out to the Boeing 787 Dreamliner and the 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 where Norris sees opportunity. “We’ve done a lot in being able to use credit cards and debit cards internationally. And in terms of transferring of funds we now have the ability to transfer funds through the internet to other banks internationally as long as you’ve got the swift access numbers. As far as the ability for loans – could you borrow in another currency? Yes you can do that. You can’t do that live online currently but I can see the time that you will.” But, Norris warns, dealing with global finance markets is not a game for novices.

“The question is do you want to take the foreign currency risk? If you borrow in US dollars the interest rate might be 5.5 percent, but if you are earning in Australian dollars and the dollar depreciates, then a 10% change in the currency is effectively a 10% addition in your interest cost. Banks got into a lot of trouble especially here in Australia in the late 80s with foreign currency loans. A lot of people just didn’t understand the inherent currency risk and while they looked as though they were getting a really cheap interest rate when the Australian dollar depreciated 25-30% against the Swiss franc, they got into really significant difficulties.”

So how does a CEO keep his company out of technological difficulties? Once again for Norris it’s identifying deficiencies and constant evolution. Careful planning, integration, the right people in the right roles (he works very closely with his CIO for example) – and always with a focus on the customer experience. Closing the interview I recall my first interview with Norris in late 1999 – a quick phone call to see how confident he was that the ASB’s systems would handle the much hyped ‘Y2K’. When I asked him where he would be at 11.59pm on the 31st of December 1999 I expected him to say he’d be hunkered down in an ASB command and control centre barking orders to tech staff like a shift supervisor at Chernobyl. No, he said, he’d be at a family barbecue probably letting of some fireworks. Such is the confidence of a CEO who knows the job’s been done right.

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