Arkadi Kuhlmann: There's No Such Thing As an Industry That Can't Be Reenergized!

Arkadi Kuhlmann: There's No Such Thing As an Industry That Can't Be Reenergized!

Arkadi Kuhlmann is chairman, president, and CEO of ING DIRECT USA. With branches that sell coffee and mountain bikes in addition to checking accounts and mortgages, ING has attracted more than one million depositors and $12 billion in assets since its launch in September 2000. Here is a rough transcript of his remarks:

I'm just delighted to be here. I feel slightly humbled that I get to represent 700 of my employees and colleagues. This is probably the only conference at which I'd be allowed to speak. In the banking industry, I'm kind of the bad guy. Being at RealTime is fun because we get to talk about things I don't normally get to talk about in the industry.

When you're trying to re-energize an industry and transform a company, it's about creating a story. Banking is a regulated industry, and you need to actually please the regulators. You need to take the core message of what you're trying to accomplish and translate it into storylines that other people will find meaningful. In some ways it's in the eye of the beholder, but in our world, it's walking the talk.

Our vision is all about leading Americans back to savings. When we started the company, we wanted to start with a big idea. Let's go back to some roots and fundamental values: self-reliance, independence, having a grub stake. We wanted to simplify the financial products. Saving is good because it gives us flexibility and security. We can position our products differently, our delivery differently. We can make a real difference.

It sounds like a pretty simple idea. And I want to let you know: It is. The challenge is making the talk walk. We had to find an underlying business rationale for that kind of mission. It's really about high-volume, low-margin businesses like retail. What's happening in the industry? Most retail banks operate at 3-4% margin. What if we can cut that in half? Let's organize a simple mortgage, a simple savings account. We reengineer the products. We reengineer the process.

Let's start cutting out branches. Let's redesign the processes and reengineer them from the customer back to the shareholder instead of the other way around. Internally, we put our marketing and IT departments in one area. If your core competencies are marketing and IT, you really have to do both of them together.

You've also got to create a culture in which employees will believe. It's not about the CEO and his leadership. It's about individuals and their leadership. It's important not to create a cult. We don't want everyone wearing green jackets. We want a flower seller, a jazz musician, and other people all in place. The worst thing would be to have 200 MBA's all in the same place. If you want to reengineer an industry, don't hire people from the industry.

We started the company in September 2000. We burned through $41 million, and we earned that all back by Year Two. If people tell you you can't do something, that's the usual motivation to get it done. We kind of have a chip on our shoulder. Look at everything at do it differently. Why have numbers on accounts when you can have names? Why have numbers if you can have colors? That agitates everybody. It agitates the employees that don't fit, the marketplace, the industry. Why are you messing with my industry? You don't want to be pleasing all of your customers. You want to sort out your customers. Your best customers will become evangelists. And the people who hate you, really hate you, will tell others.

We also have non-traditional sites such as the ING Direct Cafes. We sell a little coffee. We sell orange clothing. People ask us why we're doing this, and we don't really know. There's kind of a black box effect. But we drink coffee. We wear clothes. And we have a little mystique. In Boston, we opened a branch and spent a morning giving out free T tokens to people in Boston. If you look at our products, we try to do a lot of cool stuff with direct mail. Our billboards have a little of an edge to them. And I don't think it really matters if it itches or itches real bad. The important thing is that it itches.

We've also reengineered our products. But what really matters is our consumer advocacy. Here it's all around principle. You need to dare a little and take things from one industry and apply it to your own industry. We took a look at privacy, and our privacy statement is unlike any other in the industry. You need to look at it from the eyes of the customer. We do financial literacy education. But a lot of things that surround us in the halo have nothing to do with our financial activities. If you let the accountants look at that stuff, they'll kill it, they'll your consumer advocacy, and they'll kill your personality. Consumers don't mind spending $7 on popcorn at the movie theater, but they don't want to pay a service fee. That tells you something about what consumers value. There are not a lot of rules in what we do. There aren't a lot of restrictions. There are no fees. Yes, some customers rip us off once in awhile. But why have rules that make everybody else frustrated?

Under all of these business models, there's a lot of determination to be solid on the quant side. These kinds of models that try to change industries usually get discarded after five years. You've got to keep coming back to the scorecard in a language that the industry can understand. You can afford to make some changes.

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