A How to Guide for Digital Transformation at a $25B Bank

Speakers: Jim Marous & Laura Merling

[Music Playing]

Jim Marous (00:13):

Hello, and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, CEO and Founder of the Digital Bank Report, and co-publisher of The Financial Brand.

Jim Marous (00:23):

Financial institutions of all sizes must stay focused on providing and improving digital services, or they risk being left behind. The good news is that smaller banks are already experts at relationships, and can leverage this expertise and the trust they have earned in a digital world.

Jim Marous (00:39):

The questions become where should investments be made and how can a mid-size bank punch above their weight, competing with larger banks, FinTech firms, and big tech competition?

Jim Marous (00:50):

We have Laura Merling, Chief Digital Officer at Arvest Bank on the Banking Transformed Podcast. Laura shares the steps that are needed for banks of all sizes to remain relevant in a digital banking ecosystem.

Jim Marous (01:03):

So, Arvest operates more than 240 bank branches in Arkansas, Oklahoma, Missouri, and Kansas with $26.5 billion in asset. Despite its size, Arvest can still be considered a community bank in most of its markets.

Jim Marous (01:21):

So, Laura, you have an extensive career, having spent time at Ford, AT&T Collins Aerospace, and most recently, at Google Cloud. None of these were banking positions. Two questions; first, what drew you to Arvest? And secondly, how does your background actually help you at your new position?

Laura Merling (01:43):

Yeah, great questions, of course. I think, so what drew me to Arvest was really the opportunity, and the desire and the willingness. So, the banking industry, as you know, is going through a large transformation right now. Obviously, transformation's ongoing, but it's kind of at its peak of transformation and disruption.

Laura Merling (02:07):

And for me, that's really interesting. I want to be a part of helping get through that, helping redefine it and transform it. And Arvest commitment to that transformation was also very important.

Laura Merling (02:23):

What the leadership had done in terms of their commitment, understanding that it's not a one-year journey commitment to investment, resources, all of that. And even doing what we call ... it's basically a study, a change study. Like how ready are you — you call it drive change, and it's how ready is the leadership for this transformation?

Laura Merling (02:48):

And so, they had going in, had an understanding before I even started of who was ready for change and who wasn't. And so, I think that was to me, a sign of like, "Hey, this is fantastic. It's well-set for success."

Laura Merling (03:03):

In terms of my background and what brings me to this, I think it's understanding more broadly at a foundation level that technology is the means to the end. It's not about technology, but what it is about is how you think about changing and transforming a business, which is understanding where the market's going, looking out a few years, and working backwards from there to say, how do we get there?

Laura Merling (03:29):

And so, when you think about it, it's anything from people process and technology that has to change along with what's your business strategy, what's your revenue growth strategy? What's your efficiency strategy? And then what's your customer experience that you want to achieve? And that's where that community bank piece comes in, is how do we continue to grow and scale while we continue to remain a community-focused bank.

Jim Marous (03:54):

You know, it's interesting, you talked about the fact that what drew you there was leadership, and we talk about it often on the podcast. I write about it in The Financial Brand, and we've done research on it, that organizations can't transform if the top leadership does not buy in.

Jim Marous (04:09):

Because basically, change by itself is hard enough. And if you don't have the top management believing in what needs to be done, you're not going to accomplish anything. But when you move from an organization where you were to a new organization, not everything is as rosy as it seems possibly when you make the change.

Jim Marous (04:26):

So, what were your immediate challenges that you found when you joined the organization, and how did you address these early challenges?

Laura Merling (04:34):

Yeah, I think there's probably challenges that many ... I think one challenge was unique to Arvest, and I think other challenges are consistent across other companies. So, the one that's unique to Arvest, I would have to say, is I call it the Arvest Nice or the Arvest Hug, which is everyone is so caring about each other. The culture itself, it's amazing. It's incredible to be a part of.

Laura Merling (05:02):

But part of what you want to be able to do is say, "Hey, this isn't working.". Or "Hey, maybe we need to revisit this." And I think sometimes, that niceness and the wanting to help everything … like they’d got to the end of the earth to help a customer be successful, to help their colleague be successful. But the challenge is sometimes, you have to say, "Hey, this isn't working."

Laura Merling (05:28):

And so, I think that that Arvest Nice was one of it. And you don't want to lose that. So, the question is, how do you keep that while also getting people to speak up and have a voice? And so, that's been a work in process.

Laura Merling (05:41):

I think the other thing that most companies encounter is how do you do things fast enough? How do you shift from being project-based to being product-based? So, it's how do you get to quarterly releases and more ongoing releases versus that big one-time waterfall.

Laura Merling (06:02):

I'm going to work on this for a year and a half, I'm going to deliver it, and then I'm going to come back to you five years later and do the next one. And that's usually what you get in banking because the projects are so large.

Laura Merling (06:13):

And in that one, we found a way to solve it pretty quickly, which was how do we get people to think in 90-day increments? How can I get a quick win? And we're calling them quick wins, and it's how do you find something to achieve in 90 days? And so, now, we've gone from where we started.

Laura Merling (06:30):

I've been here at the bank about a little over a year, and we now have every department from the front line all the way to my operations team. Everybody's talking about quick wins, which is how do we find things we can do in 90 days? And I think that's a whole mindset shift. It's taken us time to get there, but it's really exciting to see.

Jim Marous (06:50):

That's interesting. That is something that banking really struggles with. We build annual plans, we have annual investment reviews, everything's in an annual basis.

Jim Marous (07:00):

And we talk about it often that organizations have got to think in a new mindset because annual changes get you off the hook if you don't do it on an annual basis. If you do it quarterly, you have four different times you got to pay the piper and say why didn't you achieve what you're supposed to achieve. And even faster than that.

Jim Marous (07:19):

I've talked about it many times in the podcast that when I visited WeBank in Shenzhen China, they have a 14-day duration between ideation and implementation. That is just an amazing speed. But when it's part of the culture, when it becomes part of the way you do business, it certainly makes it easier.

Jim Marous (07:38):

And congratulations for what you've done at Arvest because getting to a quarterly mindset is a massive change compared to what the legacy thinking was.

Jim Marous (07:47):

So, what are the biggest differences you saw in the banking industry compared to other places you've worked? And similarly, what are the similarities?

Laura Merling (07:56):

Yeah, I mean, I think the similarities are an easy one to start with. So, I'm going to start there.

Jim Marous (08:02):

Yeah, yeah.

Laura Merling (08:04):

I think the similarities are you always have culture as a factor for transformation, which I think Arvest was leaps and bounds ahead of other things I've experienced. But I also think, skillset. So, do we have the skills to use the new technologies and move forward? And if not, do you have an upskilling and reskilling program, which we've also put in place over the last year.

Laura Merling (08:29):

I think the other things that you'll see is do you have a long-term vision? And I know in today's age, it's hard to say what things are going to look like in five years. It's hard to say what they're going to look like in five weeks.

Jim Marous (08:43):

Yeah, exactly.

Laura Merling (08:44):

You kind of want to have directionally some concept of what you expect, what's the North Star, so to speak, for who you are, where you're going and what you want to be in five years. You might make twists and turns along the way, but you've got a destination that you're headed to because you want everybody to be rowing in the same direction.

Laura Merling (09:02):

And that will give you the foundation to say, okay, now how do I make my investments that target towards that destination? And I think all of those are kind of generally the same constructs that you look at when you first enter into all of this.

Jim Marous (09:18):

What were the differences between where you were and where you've come to?

Laura Merling (09:22):

Yeah, so I think the differences really from that to here, is I would say I've worked in other regulated industries. So, AT&T, highly regulated; aerospace, highly regulated. Automotive, self-driving cars, very regulated.

Laura Merling (09:41):

And then I got to banking and honestly, the regulatory ... I mean, you want it this way, but it's also so tightly integrated. And not only is it integrated, it's there in front of you on a constant basis versus in the other industries, you could almost plan and then do stuff.

Laura Merling (10:05):

Here, we're always having to evaluate it almost on a weekly basis in terms of what's happening and where it's going. And I don't think that it's a bad thing. It's a change in how you think through stuff.

Laura Merling (10:17):

And so, the work that we do with our risk and compliance team — all this transformation we're going through, we have a partner that sits with us in every meeting, every discussion about every change we're trying to do. Whether it's moving to the cloud or whether we're looking for new product offerings, or whether we're revamping our loan origination system.

Laura Merling (10:38):

They're right there with us at every step of the way. And I've just not had that before. And that's probably just me going from non-banking to banking, is that experience. That's probably the biggest one, realistically.

Jim Marous (10:50):

Well, it's interesting because you say that the person's in the room in all the discussions. A lot of organizations don't put the compliance person in the room and just give them the idea at the end. And then the compliance person says, "No, you can't do this, this, and this."

Jim Marous (11:03):

Putting them in the room is a very big advantage to making change happen. Because if they become part of the solution, they aren't simply there to say no to this or no to that. That's a really great point you made there.

Jim Marous (11:17):

We're in a period of significant economic uncertainty. We're not really sure where it's going to go, but many financial institutions have actually scaled back their investments across the entire organization, including in the technology area.

Jim Marous (11:31):

What areas of technology do you believe should not be cut right now, and better yet, where must banking maybe double down on their investment?

Laura Merling (11:41):

I think the things you can't shortchange on. I mean, the reality is, I think cloud computing infrastructure, we've done a partnership with Google. To me, it was one of the first and foremost foundational things we needed to do was that investment, which would allow us both speed and scale.

Laura Merling (12:03):

Speed to upgrades, adoptions, changes. It's why startups go to the cloud from day one. So, we need to be able to do that, but also be able to get scale if we want to grow the business. We need to be able to have that leverage.

Laura Merling (12:17):

I think other things that go along with that — we've invested within the cloud environment in a data platform. And so, when we think about data platform, think about it as a foundation for real-time data flows. A lot of banks — banks historically, are batch process.

Laura Merling (12:36):

In today's world, people want to see things and know things as much as possible in real time. And so, making that shift. It's also being able to do things like personalized offers or real time offers, and knowing what's happening in real time with a transaction or an interaction with a customer or a potential threat to that customer.

Laura Merling (12:58):

And so, those two things is like foundational, are really there. I think a couple other things really thinking about in today's environment, how do you protect your customer and thinking around protection and what that means for the customer. Those areas are, for me, like first and foremost, where we see the need for investment.

Jim Marous (13:20):

You know, it's interesting; as I understand it, you're transforming your core. You mentioned Google as part of the process, but you also have other partners. So, you have a lot of moving parts happening at the same time. How do you manage those multiple partners?

Jim Marous (13:35):

And more importantly, how do you select the partners that you're going to use right off the bat? Because obviously, at $26 billion, you can't build it all from internally. In fact, you can build very little internal. What advantages do the partnerships bring in and how do you get them all moving down the same direction?

Laura Merling (13:53):

Yeah, it's been an effort of orchestration over the last year. And so, we want a wide enough set of partners that we get diverse perspectives, but we don't want it so wide that it's not manageable. And so, we've said we are reducing the number of vendors that we have in partners, but we are going to focus on a few. But we definitely want the diversity of thought, experience, and input.

Laura Merling (14:21):

And we've created almost what we'll call a playbook, which takes every work stream across the bank that we're working on that ties to this transformation. Because to your point, it's everything from the strategy and the vision to the organizational structure and design, to communications, to upskilling and reskilling, to the technology, to the business strategy.

Laura Merling (14:47):

So, it's every part of the business. And it's having sort of these work streams and then tracking to those work streams and having owners, and knowing who those owners are, and then trying to do regular reporting on that on a frequent basis.

Laura Merling (15:00):

We do a lot of I'd say, in my view, is 90% of the success of a transformation is how well and how often you communicate. Culture change, all of that is about communication and bringing everybody along for the ride. And so, a lot of what we're trying to do around this vendor, vendor selection, all this whole process is communication.

Laura Merling (15:22):

The vendor selection itself for us has been more about who wants to be a partner in the ride with us, who wants to be a partner in the journey. We've got a lot of learning to do, we've got a lot of change to do. And if you're just here to sell me some software, I don't want that. If you're here to embed yourself for eternity, I don't want that.

Laura Merling (15:45):

So, part of it is thinking about who's going to help us get through each phase of this, and are they ready to say, "Hey, this is where I'm an expert and I can help you. By the way, I'm not an expert in that." Not only do I want to know what you do, I want you to admit what you don't do.

Laura Merling (16:00):

And I think that that true partnership is when somebody can say, "Hey, that's not us." Or there's a couple partners we're working with that I've gone to them and say, "Hey, look, this isn't working. Either this person isn't working, this process isn't working, this structure isn't working — we need to change it." And how quick they change it and how they react, determines if they'll continue to be our partner or not.

Jim Marous (16:24):

That's interesting though because a lot of times, we're afraid to ask the tough questions. You know, especially with partners where every partner says they can do everything: "I can not only change your core, but I can also be the best at new account opening processes." And that's not true. The reality is the marketplace has better people there.

Jim Marous (16:44):

If you find the partners that you mentioned that allow those other partners to come in because they do certain things better, the trust goes up. Because basically, you're going to know, my partners are working towards my goals, even if it doesn't involve them the whole way. The pie is fairly big.

Jim Marous (17:01):

But too many times, we get stuck in a situation where our core provider says they can do this, this, this, this, or the organization believes, "Why am I going outside my core provider and paying double?" They always think of it as paying again for something that the other provider should provide.

Jim Marous (17:18):

But to your point, you're trying to do things fast, and you can't always do it fast that way. It's really interesting how you're really managing so many things moving at the same time. And as you said, it's an orchestration, but it's something that many organizations back off of, they think of linear progression saying, "I'll do this, then I'll do this." And that really doesn't work very well because you end up doubling up a lot of times also.

Jim Marous (17:42):

You've become known for developing and successfully implementing a replicable framework for transformation based on five pillars. Can you describe those a little bit?

Laura Merling (17:52):

Oh yeah. And that foundation is really kind of where we are what we're following and where we started. One is what's your business vision? What's your strategy? Again, that has to set whether you're looking out three years or five years or even 10. It's kind of where are you going, because that sets the foundation for everything.

Laura Merling (18:13):

And I like to borrow other folks' frameworks, so there's where to play, how to win framework that's been created out there. And I use that for kind of the business strategy. And so, we had to start with that.

Laura Merling (18:27):

The next piece is the customer, and know who your customer is, understand your customer needs, who are those personas? And your customer might be your end consumer or might be in a commercial environment. It might be another business, or maybe it's business to business to consumer if you're thinking like indirect lending for dealers or something like that.

Laura Merling (18:49):

So, a lot of it is about understanding who your customer is. But in that scenario, it's also understanding who your customer isn't. I always go back to, you have to know who it is, and you also have to very specifically say who it is not. Because otherwise, the net gets too wide.

Laura Merling (19:05):

And then in that model, we continually address everything from (and this is a hard process) the customer in, versus from the bank out. Normally, you think of something and you go, "Oh, well, I want to improve a customer experience." Okay, let's figure out how our processes are today, and then what could we remove to simplify it?

Laura Merling (19:26):

It's like, no, no; what's the customer expectation on the other end? What are they using? What tools are they using? What technology, what experiences do they have in the rest of their day-to-day life? And how do you start from the customer working inward.

Laura Merling (19:39):

If you're trying to get a loan, is it about time, efficiency? What do they think you already have? What data do they expect that you already know about them, especially if they're an existing customer? How to remove those roadblocks and barriers. And so, that customer piece is really, really important.

Laura Merling (19:55):

I think the next piece is really what I would call sort of this technology assessment. And so, we always go back and say, thinking foundationally about technology, what is it? Where are we? And then how do we go from where we are to where we want to be? So, for us, one of the things we're trying to do is we look at moving to cloud. We're going to move out of one of our data centers.

Laura Merling (20:23):

So, when we think about this direction of what we need for cloud, why are we moving to cloud? What's the goal? How do we pick who the cloud provider is going to be? But then also, what are some of the interim steps. Just the migration to cloud to get out of one data center, we've had to change the path twice since I've been here, just in terms of how we were going to get there from the migration.

Laura Merling (20:44):

So, the technology assessment's ongoing, it's not a one and done. You want a baseline of where you are, so you know what you need to do, but you always have surprises. I mean, we've already had three big surprises in some of our legacy technology in the last six months. And so, you have to adjust.

Laura Merling (21:05):

But again, if I know where I'm going, I can choose which piece of that legacy technology am I going to replace first, and how do I think about it, and where do I start? So, I think those are kind of a couple pieces of the framework.

Laura Merling (21:19):

There's also then what I'll call governance. And governance, it goes back to that orchestration. This doesn't all happen just by happenstance. You have to have an orchestration of the prioritization and how things move and when they move, you have to be bringing people along for the ride.

Laura Merling (21:43):

You know, every company has its own pace at which it can move and transform. Even places like Arvest where everybody's ready and excited to do this transformation, there still is a pace of change based upon the volume of things you're doing and what the change is that you have to do.

Laura Merling (22:02):

And of course, within governance includes metrics and measure. So, how are you going to measure your success? Just saying we're going to change the customer experience, well, that's interesting, but it's not measurable. So, what are you going to change about it.

Laura Merling (22:22):

You know, I go from 15 seconds to create a new account to, it takes me five seconds. Or maybe it's more something like today, it takes me I don't know, three days and 300 steps to do a loan. Tomorrow, I want it to be three clicks to do a loan.

Laura Merling (22:45):

It's that, what is that? How are you going to measure that success? And why are you doing it? From a customer perspective, it's about, I want to know that I've been approved for a loan, or it's about ... so it's either acknowledgement that, okay, I know I have approval or it's about time to funding. And it depends on whether I'm a consumer or commercial business and what the pain point is that I have.

Laura Merling (23:08):

So, that metrics and measures are super important part of that. And of course, the other pieces which people tend to talk about is culture, people skills, people process. That's super important.

Laura Merling (23:23):

I think the other piece of this is the culture upskilling, reskilling, and bringing everyone along. The process is also what ... I put it in the culture and people piece because on the process side — we built processes around the things that were either technology worked ages ago or around the way that we used to interact with people in a branch.

Laura Merling (23:42):

Those processes and policies need to change. And so, making sure that we're looking at that as well. So, anyways, there's a couple of pieces within the sub-pieces there, so sorry about that. It gets exciting.

Jim Marous (23:54):

No, no, it's great. And it's interesting because you bring up the people aspect and everything you're talking about. I mean, you came in brand-new, outside the banking industry, dying to change things. And you had the support of senior management.

Jim Marous (24:08):

But getting everybody aboard is a difficult process because going to digital transformation to many people within the organization, they view it as, you're going to take my job, I'm going to be replaced. So, how do you actually communicate that the people you have on board can be part of this change as opposed to being left behind?

Jim Marous (24:30):

And even more importantly, how do you hire and train new people at a time when getting new employees that are really tech-savvy, that are the people you really have to have, are so hard to find.

Laura Merling (24:44):

Wow, those are two fully loaded questions.

Jim Marous (24:46):

Yeah, and I probably should have separated them because I'm going like, "This would be one of ones you go, okay, what was the first part of that one again?"

Jim Marous (24:53):

So, the first one is really around how do you get the people within in your organization to buy in to the process and feel like they're going to be part of it?

Laura Merling (25:02):

Yeah, no, you know what, I think there's a couple of things. I go back to communication. So, one is we started a ... so the CEO — there's a couple things. One is the CEO does a monthly CEO update; where are we, what are we doing?

Laura Merling (25:17):

Secondly, my organization, we do something called the Monthly Transformation Talk. Over the last six months, we've, I think tripled the size of the audience attendance of that transformation talk because not only do we make it live and we answer questions and we bring different speakers in — we have people in our team that are going through transformation, but we're also doing things that are not technology-driven.

Laura Merling (25:44):

So, not all the transformation things are technology-driven. So, we had like a trial that we did in our market that had no technology. It was all about simplification of process for our customers. And so, we had those leaders come in and talk about that project.

Laura Merling (26:00):

So, we made it kind of this cross-functional view of what's happening in the transformation and different representatives come in and talk. And then we record those. But in the meantime, we do live chat and answer questions. And so, that's great. So, it's that real-time access.

Laura Merling (26:18):

We also have done, when we are rethinking things — the great part about the way our bank is structured is we have a set of what we call peer groups. So, there's loan manager peer group, and there's private banking peer group.

Laura Merling (26:35):

And so, there's all these different peer groups. And what we've been doing is we bring them in to the different topics and discussions that we're having around different products or offerings or different industries, and they actively become part of the discussion and description.

Laura Merling (26:47):

We've been working with another vendor, IDO — I don't know if you've heard of them, they do design thinking. We've made sure that our peer groups are involved in those discussions. So, they get to learn the process, they get to see, they feel how it's engaged. And so, a lot of it's just making sure they're part of the conversations that we're doing along the way.

Laura Merling (27:09):

Now, do we get some meetings that have a lot of people in it? Yes, but it's important. People want to hear and they want to know. And then we also do frequent readouts on where we are and what success we've had and what milestones.

Laura Merling (27:23):

So, it's all about making sure they're engaged, they have an opinion, they're included. How do we get their feedback along the way? And it's been that way on pretty much everything we've been doing.

Jim Marous (27:35):

What's good is that really builds trust because if you do those types of things — we've interviewed a couple of people in the podcast that it really gets down to if the employees trust that you're doing things that will be better for the customer and good for them, they'll get on board.

Jim Marous (27:49):

You know, the other part of my question was around how do you hire those key people today when the marketplace is so competitive and where you're a medium-sized bank in truly the heart of the Midwest. How do you get that accomplished?

Laura Merling (28:06):

Yeah, well, it's interesting. Back to the thing about bringing people along, because part of it is, it's all about trust. So, even when you hire new people, the people that are there want to trust that, hey, I have a role in this. And so, building that trust and bringing folks along is super important. And it all comes from transparency.

Laura Merling (28:27):

We're very transparent. It's one of the key pillars of the organization of us here at Arvest. It's one of our key pillars. And so, when we think about hiring, what we had to do first was we started with, we had a lot of great talent here. We said what are the main skills we need? If we're moving to Google Cloud, I want my current infrastructure team to understand cloud computing. I want them to know, I want them to come along for the ride.

Laura Merling (28:53):

And so, what we did was we launched a program, an upskilling and reskilling program. And we started out with our team that needed to learn the cloud. Our team that needed to learn the data platform, not just GCP as infrastructure.

Laura Merling (29:09):

So, we started there. We created role profiles, we created job descriptions from those role profiles. We created learning journeys. So, we really started with what do we need first?

Laura Merling (29:23):

And then as of, gosh, as of the end of November, my entire organization across the technology team and across bank operations — so my group is both technology and operations; we have role profiles and learning journeys for all of them to be able to go through.

Laura Merling (29:44):

Now, the learning journeys, we're still working through some of them. We at least have base learning journeys that people can start on. Obviously, it's hard to go from zero to everything for everybody, but we at least have base things that people can do. And over the next couple months, we should expand it.

Laura Merling (29:59):

But everybody has access to these learning platforms that we've made available and a baseline learning journey. And so, for us, that was really important to make sure that we had a path for people to grow before we ever started hiring from the outside.

Laura Merling (30:17):

Because you don't want to all of a sudden, start bringing in new skills and people go, "Well, what about me?" Because we have a lot of great people, a lot of really smart people that know the bank. They know other technologies, they know all the existing infrastructure and technology, I think it's important.

Laura Merling (30:33):

So, we try to launch this at Arvest. It's taken us time to get it right. We're close. It's not perfect, but we're getting closer.

Laura Merling (30:44):

In terms of the hiring, we then wanted to say, "How do we hire people that one, are a culture fit?" First and foremost, it's about a culture fit in terms of are they collaborative, are they mentors? We want them to be mentors to the other people because we're going to bring in somebody that already has some existing skills around these technologies.

Laura Merling (31:03):

We want them to be comfortable that part of their role is going to be bringing people along for the ride. So, not just coding, but educating in parallel and partnering. And so, it's really been about that. And so, again, we started with we prioritized what things we were going to do.

Laura Merling (31:20):

We have a multi-year roadmap. That multi-year roadmap matches to where we want to be in five years. And so, the way that we're hiring that skillset is based upon that roadmap, but also, based upon what skills we have and how long it's going to take us for some of those for upskilling and re-skilling. And so, we're finding that right blend.

Laura Merling (31:39):

Our estimation is probably, we'll end up with maybe a quarter, maybe a little less than a quarter of new skills blended with the existing skills and reskilling.

Jim Marous (31:53):

You know, it's amazing because it does get down to the people, and everything you've described up to this point, has really been major transformation to the financial institution that's got a legacy core. And I don't mean legacy core as in to technology side, but really a legacy core in a mental state, in a cultural state and everything else.

Jim Marous (32:14):

And to get the flexibility that you've gotten at Arvest, to do what you need to do, and to do it at scale, it’s pretty impressive. And so, let's take a short break here and recognize the sponsor of this podcast.

[Music Playing]

Jim Marous (32:28):

Welcome back. I'm joined today by Laura Merling, Chief Digital Officer at Arvest Bank. Laura and I have been discussing the digital transformation journey at Arvest, and how smaller financial institutions can really become future-ready at a time of amazing economic uncertainty.

Jim Marous (32:46):

So, Laura, during our break, we were talking a little bit about some core elements that all start with "S" that you've focused on and how you've added this. Can you describe that a little bit?

Laura Merling (32:59):

Sure. We decided we needed some guiding principles for our transformation. So, obviously, there's the strategy, but you want some guiding principles overall as you're thinking about each piece of it. And so, our three guiding principles are simplification. So, think about simplification for the customer.

Laura Merling (33:17):

Standardization because you can't really get to simplification without some level of standardization. And then the other piece of it is scale. So, how do we scale to meet the needs of our customers and the business? And then we have a lot in motion all at the same time.

Laura Merling (33:34):

As we've been discussing, there's many moving pieces to this puzzle and sometimes, people can get tired, and we get so enthralled in what we're doing. And so, we just recently added another S, and my team all makes fun of me. But we added S which is "sunshine" is the fourth S.

Laura Merling (33:54):

And that's really to make sure that we're always thinking positively about what we're doing, where we're going, and we're thanking the people along the way that have helped us. And it's just a node, an acknowledgement to you know what, we're going to get in the weeds and get in the thick of it, but we got to kind of step back and go, "Let's be thankful for what we have, where we're going, and how we're getting there." So, sunshine's our fourth S.

Jim Marous (34:17):

It's funny because sunshine's important because … I'm going to add an S — because the whole process you've been talking about is scary. I mean, change is scary. The transformation is scary. New people coming into an organization is scary.

Jim Marous (34:30):

You know, you have legacy employees that have been there 20, 30 years and this is an entirely different way of doing business, but towards the same goals. So, a lot of organizations right now are really being challenged with how do you manage data and analytics, and how do you deploy these towards better experiences, both internally and externally.

Jim Marous (34:52):

How are you doing that at Arvest?

Laura Merling (34:56):

One of the things that we did first was start out by building this data platform on Google Cloud. And you can't just lift and shift all your data over because you don't want to take data that might be bad, or it's not aligned. And so, what we've been doing is use case by use case, what data do we want to move over?

Laura Merling (35:18):

And so, we've set those use cases again based on our strategy of what are we trying to achieve in 2022, what are we trying to achieve in 2023? So, we have themes for each year of our transformation about what we're trying to achieve. And then the data that we move over aligns with that theme.

Laura Merling (35:35):

The other piece that we're also doing, and I think this is something that a lot of banks struggle with, which is how do you get a single view of your customer? And that's single view, and I think maybe not just banks, but even maybe retailers, but how do you get a single view of your customer?

Laura Merling (35:50):

If you think about it, I have different product lines. We've got mortgage, we've got credit card, we've got deposit products, you've got lending products. When you think about that across the board, how do you get a single view? Because every one of those legacy systems stores what they view as the single view of the customer, the customer master record in each of their systems.

Laura Merling (36:11):

So, one of the things that we've been working on is creating, we'll call it master data management. So, how do we create a single ID that represents the customer across all of those platforms so that we have a single view of a customer. So, our customer has a single view of their entity and our folks that are at the frontline also have a way to have a single view of that customer's profile.

Laura Merling (36:34):

And so, really, that will totally transform and change the customer experience. But we had to start by saying, it goes back to what are the use cases? What data elements are we going to start with? What systems are we going to start with to solve those problems? Because again, doing it all at once is just impossible to do.

Jim Marous (36:53):

So, it's part of this process also — are you exposing more employees to the data and the analytics and the actual deployment of ideas from the implementations — are you sharing this data and these insights with employees across the organization as opposed to have them simply housed in the data area?

Laura Merling (37:14):

Yeah, so we are, and part of that is we've got to get the data to a place that's usable and then make sure that people get access to it. But first, it's a data culture mindset shift as well. How do I use data? How do I think about data?

Laura Merling (37:30):

So, one of the first things that we did was we worked with our internal teams to create, I'll call it our transformation dashboard. And so, just to start to show people what types of data you might want to look at.

Laura Merling (37:46):

How do you compare digital transactions to non-digital transactions? How do you look at digital interactions versus non-digital interactions? How do you measure those? Where do you measure them? How do you look at them? Not globally, but how do you also look at them by a branch location or by a market, by customer type.

Laura Merling (38:05):

And so, what we tried to do was get some of that just to create a dashboard and start demonstrating to people what the art of the possible was. How might you use this data to then transform your market, your line of business?

Laura Merling (38:19):

And it's really been hugely valuable just to get the mindset going while we get the data where it needs to be and in the condition it needs to be in order to make it available to them. So, again, it's bringing them along while you're standing up things to make them better.

Jim Marous (38:34):

It's interesting. All the things you're talking about, really, there's so many moving parts in the process, which is blowing my mind. I'm just thinking, boy, working for your organization would be both really, really fun, and really challenging every day. And I'm sure it is for you as well.

Jim Marous (38:49):

You know, one of the things that we sometimes put to the side, and we don't think about as much, but we need to, is innovation. How do you support innovation from an internal basis and the importance of speed and scale of creating ideas, and actually taking action on those ideas?

Laura Merling (39:09):

Yeah, innovation is top of mind for us. Some of it comes back to those quick wins. How do you think about how you can solve a problem and what can you solve in 90 days versus over-complicating it? Sometimes, we make innovations and they're too big and complicated. They're going to take years to deploy. So, one of them is that, so it's a mindset shift.

Laura Merling (39:29):

The other piece of it is I've been at enough large companies now and you have successes and failures on innovation, and sometimes, the failures usually happen when they're not tied to a business outcome, and they don't have a business owner. And so, what we've been very thoughtful about doing is in our innovation program, we are tying it to what our business goals are.

Laura Merling (39:56):

These are the new markets we're trying to go into, these are the new customers we're targeting or the focus that we want to have on the new product portfolio. And so, we're very specific about a handful of key innovation areas that we want to use to drive the business forward versus innovation for the sake of innovation.

Laura Merling (40:16):

And so, it's a combination of thinking through quick wins to improve customer experience or efficiencies or potential revenue combined with some of these other projects. And then those projects, you also have to know when to kill them.

Laura Merling (40:30):

So, one of the other things that happens sometimes in large corporations is your innovation project never dies. It should die because it's not successful and you haven't called it unsuccessful. We actually stopped two pretty significant innovation projects this year because they weren't getting the results that we wanted.

Laura Merling (40:51):

It was back to what's the metrics? What are you trying to measure and achieve? If you don't get them, maybe you should shut the project down. You might adjust it if you can, which we tried that and we still weren't getting what we want. So, okay, let's cancel it and hit the reset.

Laura Merling (41:03):

So, what we do is we're putting in place this model that is a ... I'll go back to — I hate to say this, but time box it. So, 12 weeks, 12 weeks and 12 weeks. You get through the first 12 weeks, did you achieve what you wanted? Okay, is it ready to go to production or do you need another 12 weeks for evaluation? Okay, we need another 12 weeks.

Laura Merling (41:24):

So, you do that, but you do it three times. If you get to the third 12 weeks and you get to the end of it and you still don't have an answer, you should probably shut that project down and move on to the next. Again, it's all about framing it because otherwise, these things have a life of their own and you end up not achieving what you want. So, it's having a business owner, it's time-boxing it and making sure that it's solving a business outcome.

Jim Marous (41:48):

So, as we get close to the end of this podcast, my big question right now, as you look back, what have been your biggest victories over the last little bit more than a year?

Laura Merling (41:58):

Oh, we've had lots of victories. I would say the exciting part for me has been our move to cloud. The team, initially, as you might suspect, if they don't have a cloud computing background, might have been like "How do we do this? How are we going to do this?"

Laura Merling (42:19):

And we've been able to make leaps and bounds progress on that to the point where we think by mid-year next year, we're going to be out of one of our data centers. And that's pretty fast.

Jim Marous (42:31):

That's huge.

Laura Merling (42:32):

That's lightning fast. Now, I'm going to say that and my team's going to be like, "I can't believe you said that publicly in case it doesn't happen." But the excitement around the interest in learning — because we set up those learning journeys and the training opportunity and the partnership that we had in terms of educating.

Laura Merling (42:52):

The excitement around it, I mean, our team did some estimate of moving our dev servers over from our current environment to the cloud. They said they thought it would take a couple of days. I think they had like three days, and they ended up doing it in six hours.

Laura Merling (43:05):

And so, it's little victories like that that goes such a long way in bringing the team along for the ride. Those are the victories that we look for. I mean, there's lots that we've had along the way. Our other piece was how do you narrow the scope of what you're doing?

Laura Merling (43:22):

When I first started, we had probably 300 projects on our to-do list of projects we wanted to do. Remember, I said we're trying to switch from project to product. We had about 300 of them. It took a lot of negotiation, alignment, understanding, and we got it down to about 64.

Jim Marous (43:46):

Oh my gosh.

Laura Merling (43:47):

That's a lot of conversations. That's a lot of people being-

Jim Marous (43:53):

And you're the new kid on the block telling people that their number 84 that they really had their heart set on is not going to happen right now.

Laura Merling (44:01):

And we have that again this year, but I think because this past year, we were able to not only show these are the 64 we're going to work on, but we're going to show you the progress.

Laura Merling (44:11):

So, every month, we do a readout to the executive committee and to the bank presidents about here we are, we've got 64, these are the 15 we're always tracking. These are the ones we're going to read out once a quarter.

Laura Merling (44:24):

But doing that consistently and doing the readout and getting to the end and saying, "Hey, X percent of these we delivered on time. X percent of these we delivered in year, but not necessarily in the time window we wanted. And by the way, these things, these four projects got moved into next year, and here's the reasons why they're moved into next year."

Laura Merling (44:44):

And being transparent and open, laid the foundation for us in the next year. So, as we look into 2023, we just finished our prioritization model approach; what are we doing? Where are we going? Where our investments are going to be. And by doing that, it almost set the foundation that people were like they trusted us when we said, “Look, this is what we're going to do. This is what we can do and you know, we're going to deliver it.” And that's really important.

Jim Marous (45:12):

You know, that that goes back to some of the first things we talked about, which that by itself builds trust within the organization. If things get measured, you step up the plate on things you've done, but you also step up to the plate things you did not do. That builds trust in the process, which is so important.

Jim Marous (45:29):

Okay. So, as we look to 2023, what are the key things that you really have that you really want to accomplish in the next year?

Laura Merling (45:38):

We do need to accomplish this single view of the customer. To me, that is foundationally one of the main things that we need to do. And so, getting that done.

Laura Merling (45:48):

I think one of the other things that we're working on is, I'm going to call it back-office optimization. And to your point, it's more about efficiency and process. A lot of back office in banks is still manual. It's a lot of paper.

Laura Merling (46:04):

How do we think about automation, when and where, and how we can. But it's not about removing headcount, it's about letting people focus on people, and letting people focus on relationships and servicing the customer versus I got to go move a bunch of pieces of paper around and implement them. So, it's really that kind of look.

Laura Merling (46:24):

I'd say one of the other things is growth. We know growth — when you launch new products, new offers and you want to grow the business, it doesn't happen overnight. You don't turn a switch and you have growth. And so, we have a couple of things we're doing this year around some platforms around commercial lending. And that is some of the foundation that we've built for our new banking core.

Laura Merling (46:51):

And so, making sure that we get that out and focus on that and work on that successfully, because that's part of the future growth of the bank, that's another key pillar for us. And I'd say probably the last key pillar is really about ... well, there's probably two more.

Laura Merling (47:08):

One is really about protecting our customers because that's an ever-changing thing; how do you protect them? What's happening in the market and in the industry?

Laura Merling (47:17):

And then the last one is our people. This reskilling program that we've launched, we've started in the technology organization. We went to my operations team and now, we're going on to the rest of the bank. It's bringing everybody along.

Laura Merling (47:34):

How do you use these new tools that are data tools and what does AI mean for my piece of the industry? Or if we're looking at virtual reality or augmented reality, how do those things impact it? So, there's a couple of key pieces. They're all in parallel, but if they aren't done together, you won't get there.

Jim Marous (47:53):

I'm going to tell you, Laurie, you're going to be revisiting us because I'm going to check up a year from now and see how well you've done. But I have no doubt, it is so exciting where I have the opportunity to interview somebody that really blows my mind with what they can accomplish when most people say, "Oh, we can't."

Jim Marous (48:15):

You obviously, went in with the support of your senior management because you wouldn't have been hired unless you had it, and saying, "We will do this." And there's a lot of risk in this. There's a lot of unknowns. Especially as almost on the day you were hired, the economy started taking some south routes. You said, "Geez, what could be worse than the COVID crisis?" Well, I'll tell you what, an economic crisis can really change banking.

Jim Marous (48:39):

But what's interesting is you're proving that at a $25 billion organization, you can punch way above your weight and make things happen. And I think one of the advantages is because you have the agility built into the size component that makes it so things are possible.

Jim Marous (48:56):

You also have partnered with amazing companies to move towards a process of speed, scale, and efficiency that makes it so that you can make changes happen without having to do it all yourself.

Jim Marous (49:08):

We've mentioned it multiple times; trust. Your trust in not only your employees and your employees' trust in you and the senior management — but your trust in your partners to say, "Guys ..." And I use this analogy often: "I'm going to hand you the ball, but I'm not going to block for you. You got to go down the field on your own and do it the way I want it."

Jim Marous (49:27):

And you measure everything, you make it very clear. Obviously, in some other interviews I read, it's very clear that you guide with questions as opposed to answers, which makes the new kid on the block ... you're not quite as new as you were a year ago, but the new kid on the block build credibility because you're not coming in and saying, "I have all the answers, but I do have all the questions."

Jim Marous (49:52):

And in the digital transformation process, questions guide where you prioritize, where you apply resources, and it allows you to find the problems in the process that are unexpected. You said you had surprises in some of the things you work with — to bring together the old and the new.

Jim Marous (50:07):

I mean, I'm bragging on you, but I'm bragging on Arvest as well because this could be highlighted quite a bit in our platform because there are so many organizations that say, "Geez, I don't think I can do it." Well, they can. And the reality is it takes certain components of the foundation, but it also takes a lot of guidance from your standpoint.

Jim Marous (50:28):

So, thank you so much for being on the podcast. I'm glad we were able to have you on. As I said, we will be revisiting you to see how you've done because I think this is a great story for the banking industry to understand that digital transformation is not something that's based on the size of the organization, it's really based on the passion — let me use your word, the "sunshine."

Jim Marous (50:48):

You know, if you can make it fun and you can make it exciting, things will move forward. So, thank you again.

Laura Merling (50:55):

Thank you. I enjoyed it. I look forward to returning.

[Music Playing]

Jim Marous (50:59):

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoyed today's interview, please give our show a five-star rating on your favorite podcast app.

Jim Marous (51:09):

Also, be sure to catch my recent articles on The Financial Brand and the research we're doing for the Digital Banking Report.

Jim Marous (51:16):

This has been the production of Evergreen Podcasts. A special thank you to our senior producer, Leah Haslage, audio engineer, Sean Rule-Hoffman, and video producer, Will Pritts.

Jim Marous (51:26):

I'm your host, Jim Marous. Until next time, remember, size does not limit the potential for digital banking transformation. The key is to prioritize investments and focus on the entire organization becoming future-ready.

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