The Boston Consulting Group might house the world’s highest concentrations of brainpower per square foot. BCG is to consulting what Goldman Sachs and Cravath are to banking and law.
When it comes to intelligence, they are tops.
In terms of IQ, that is.
EQ? Well, that’s not so much what they’re aiming for.
Case in point—the most recent article from BCG’s Industry Insight series, The Next Billion Banking Consumers. (The piece shares two authors and whole paragraphs verbatim with a more general piece from BCG’s Perspectives article series, titled The Next Billion).
BCG’s article series—particularly Perspectives—have been the source of breakthrough thinking for several decades now, including the experience curve and the barnyard portfolio theory, and the general concept of strategy as the pursuit of sustainable competitive advantatage.
The article opens big:
The problem of financial exclusion—individuals’ limited access to or use of formal banking services—looms large around the world. It both reflects and contributes to the stark socioeconomic divide that pervades many emerging markets…
By embracing innovative business models, however, banks can upend the economics of reaching consumers long considered impossible or unattractive to serve.
Great—energizing the banking sector to help accomplish what microfinance suggested might be possible. Cutting-edge capitalism, bringing the next billion—“just above the poorest of the poor and just below those who are currently targeted by most banks”—into the mainstream of the global economy.
Indeed, much of the article addresses the need for changes in product development, distribution, marketing and organization structure, listing some exciting innovative practices.
Then there appears this paragraph:
Unfortunately, regulations sometimes make it difficult—if not impossible—to offer products that suit the financial means of the next billion consumers. Our analysis shows, for example, that Indian banks would need to charge a 32 percent interest rate just to break even on the kind of small, short-term personal loan that the next billion consumers would want. Yet national regulations prohibit banks from charging interest rates to priority sectors that exceed the prime lending rate, which currently stands at about 12 percent. This problem underscores the need for regulatory reform that complements initiatives to reach the next billion consumers. (italics mine)
The need for regulatory reform? Let me get this straight. A banking industry in a country with 5% inflation and 6% one-year t-bill rates needs 32% interest rates to break even in a new market, and the problem is—the presence of usury laws?
How about—oh, I don’t know—a banking industry that can make money on less-than-32% interest rates?
Unless I am seriously missing something—always a possibility—the inclusion of this paragraph, alongside discussion of radical product and distribution redesign, is socially and politically tone-deaf. Narrow. Myopic.
It feels like a hammer seeing an all-nail world. If your constant goal is the pursuit of corporate competitive strategic advantage, then of course regulatory “reform” is inconsequentially different from product innovation—it all adds to competitive advantage, right? (Except of course for the poor schmoe trying to make a buck with his feet in plus-32% debt cement shoes).
In an increasingly connected world, the view of competition as the be-all and end-all of business—even just of strategy—is antiquated. Out of sync. Competition without commerce just doesn’t add up to much.
The world is connecting more. And it isn’t about just the connections, or the connected. It’s about the synergy in the combination.
Kind of like IQ and EQ.