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How Big Ideas Beat Deep Pockets

Last week, I had lunch in Philadelphia with Vernon Hill, a legendary entrepreneur who reshaped the face of retail banking in the United States and created one of the great passion brands in a field not known for (positive) passion among its customers. What the lunch reminded me-and it never hurts to relearn this lesson-is that when an innovator with brains, guts, and a sense of adventure goes up against establishment companies with lots of money but limited imagination, the innovator usually wins. Big ideas beat deep pockets almost every time.

Up and down the East Coast, Vernon Hill is renowned for his legacy as the founder of Commerce Bank, a one-of-a-kind financial institution that brought a sense of style, humor, and obsessive service to an industry infamous for the opposite. "Every great company has redefined the business that it's in," he told me several years ago, when I first met him.

Emphasizing Quality Service
What Hill did at Commerce was to borrow ideas from state-of-art retailers such as Target, Gap, and Home Depot, and apply them to banking. That meant branches (sorry, "stores") that operated seven days a week and were staffed by front-line employees who "wowed" customers with smiles. It meant coin-counting machines that provided a needed service and entertained kids. It meant issuing credit, debit, and ATM cards on the spot, before customers ever left the store. "Why should it take a week to replace an ATM card?" Hill asked me rhetorically. "It's nuts."

Hill's game-changing ideas became a formula for minting money. He founded the company with one branch and $1.5 million in capital back in 1973. It grew like gangbusters, went public, and wound up being sold to Canada's TD Bank for a stunning $8.5 billion. For more than thirty years, the big, powerful, and unfriendly big banks watched Hill and his colleagues reinvent the retail banking experience, and for more than thirty years they were incapable of mustering a response.

It would have been easy for Hill to step aside from financial services and spend the rest of his days just counting his money. Instead, he decided to write the Commerce Bank chapter all over again-this time on the other side of the Atlantic. Last summer, Hill's new venture, called Metro Bank, opened in London-the first new bank to be chartered in England in 138 years! His game plan: To do everything in London that he did in the United States, and to reshape British banking the same way he did U.S. banking.

Amazingly, the game plan is unfolding faster than expected. Metro Bank has become a hit in London, Hill and his colleagues are accelerating their expansion plans, and the five big "High Street" banks that dominate the scene look helpless to respond.

Which is why I was so eager to have lunch with Hill. I had one question on my plate: Why is it, after everyone saw the success of Commerce Bank here, that the big players in London seems unable or unwilling to respond? Hill's answers speak volumes to the advantages enjoyed by innovators with big ideas and a genuine sense of mission.

"One reason is that the big banks just don't believe in this idea," he said. "I called it the 'Too good to be true' response: How can you deliver great service, offer all kinds of stuff immediately and for free, and still make money? What they just don't get is that customers want to do business with companies where people smile, where they have a sense of humor. And customers will pay more to do business with those companies."

The second reason for the inability to respond, Hill says, has to do with how established executives see the world. "Entrepreneurs look at the whole picture," he told me. "What are you trying to create and how do you get there? Big organizations only look at the parts. If they can't figure out how to make money on each individual piece of the puzzle, they won't do it. But that's not the point! Our policies and practices make perfect business sense as part of the whole."

The third reason, and maybe the easiest to understand, is that big-company executives simply have an aversion to going out on a limb. Hill's entire career has been built on his commitment to be the "most of something" in his field-the most convenient , the most responsive, the most customer-friendly. Big banks, like big companies of all kinds, are more comfortable being pretty good at everything.

Metro Bank's slogan, he told me at the end of lunch, is, "Love Your Bank at Last"-a rallying cry meant to evoke its whatever-you-need commitment to service. One of the new bank's long-established competitors, trying to respond to the Metro Bank, brand, decided to try a slogan of its own: "We aim to serve the majority of our customers in 15 minutes or less."

Which brand would you put your money on?

Image courtesy of flickr user, Fried Dough

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