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Banking on Technology

Anthony Comper, president and chief operating officer of the mighty Bank of Montreal, says he has the best view in …

Anthony Comper, president and chief operating officer of the mighty Bank of Montreal, says he has the best view in Toronto, From his book-lined office on the 68th floor of First Canadian Place, you can see the sun reflected off Lake Ontario, the gleaming skyline of Toronto, and the future of banking. Tony, as he is called, is a member of what bank analysts have dubbed Canada‘s “dream-team”-the 15 or so Canadian and American executives selected in 1989 by Chairman Matthew Barrett to run that nation’s third largest bank, which has $95 billion in assets and 1,200 branches.

Analysts say the vision Comper and the team conjured up for the bank is an aggressive one. The bank competes on price-it is almost always the first to lower its prime and other corporate rates, and cut its mortgage rates. The bank was also the first to offer low-interest-rate credit cards and to freeze bank fees.

But competing on price means competing on costs-something Citicorp, Bank of America, and several other American banks failed to grasp in the 1980s. Competing on costs requires a highly developed analytical technique, something Comper holds in high esteem. It’s not what it costs to run a branch that’s important, it’s what each function within the branch costs to perform and how much those functions add to the bottom line. “As you might expect, we are highly numerate,” says Comper, who has a computer and technology background.

The Bank of Montreal also competes through acquisitions. Last April, it acquired the Chicago-based Suburban Bancorp, significantly expanding its footprint in the post-NAFTA American Midwest, (It acquired Chicago’s Harris Bank in 1984). In July, it announced it would acquire Burns Frey Ltd., a Canadian brokerage firm and merge it with Nesbitt Thomson, making it the largest player in Canada‘s corporate finance and securities industry. In October, the Bank of Montreal became the first Canadian bank to be listed on the New York Stock Exchange.

But these are not the only ways the bank competes. It also strives to outmanage and outthink Its rivals. Here is where all businesses should pay attention, “When we looked at our businesses, what we wanted to know was. What was our potential in a particular community? What variables were under our control for reaching that potential?” Comper says.

To answer these questions, the bank brought in a team from Booz Allen & Hamilton, a business and strategy consulting firm based in McLean, VA. Working with the bank, the consultants created a computer model-dubbed Perform-of the bank’s business, beginning with the Quebec division. Perform was designed to show the bank not only how it was doing, but how well it could do by mapping its performance potential.

The modeling team analyzed census data, national economic data, and the makeup of the Quebec market, and modeled bank functions within each branch, The model looked at three types of performance “drivers.” First were the bank’s exogenous factors, such as demographics, economic growth, and the discount rate, These were considered “exogenous,” because the bank had little control over them,

The team also modeled the bank’s structural drivers, including branch locations, the type of information infrastructure at each bank’s disposal, staff deployment, and so on, The bank had control over these, but not in the short term.

Lastly, the team modeled management drivers. “These were the things we could change immediately, such as what jobs people did,” says the manager in Quebec.

The bad news was that Perform said about 60 percent of the bank’s performance was the result of the first two categories of business drivers. None of these could be altered overnight, and some of them-like the lackluster Canadian economy-were simply beyond the bank’s control.

But the good news was the “model said 40 percent of our results was under our immediate control,” says Comber.

Having a computer model of the bank’s businesses meant “we could quickly reorganize work and put our people where the business really needed them,” says the Quebec manager. “We needn’t make the mistake of assigning six people to cover 20 percent of our retail business and two to cover the remaining 80 percent,” More important, by knowing the bank’s potential, bottom-line results would be more predictable.

Other companies have built business models. Mrs, Field’s Cookies has one that tells how many cookies each store should bake according to the day of the week and the weather. Fingerhut, the catalog company, models its customers’ habits and sends birthday cards. But none has modeled a business as complex as the Bank of Montreal.

Although the bank is still installing Perform, results are becoming apparent. Productivity and market share are growing despite the ups and downs of the Canadian dollar.

“The new methods fit with our culture,” says Comper. “We believe if you can’t measure it, you can’t manage it.”


Joel Kurtzman, former editor of the Harvard Business Review, is an international business consultant and author. He is the director of the International Trade Program at The Manhattan Institute.

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