Spanx and the Core Issues with Digitization - Part 1

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Sam Maule Managing Partner, North America
5min read

I wish I could write as well as Leda Glyptis. I wish I had her command of the English language which I’m sure is one of several she speaks. I wish I could articulate her banking experiences in prose such as she does. But I can’t…

So today I’m gonna talk about Spanx. I’m going to discuss what this incredible product has in common with the digitization of financial services. Leda, please don’t judge me.

I love Spanx.

I have to credit my wife Mendi for introducing me to the product when I was recovering from blowing out my Achilles playing soccer a few years back. Nothing will quite put on weight like being laid up for six months, especially when you’re pushing fifty years old. I noticed my t-shirts were getting tight after a few months of doing basically no physical activity. Mendi jokingly mentioned I should just buy a Spanx undershirt instead of investing in a whole new wardrobe and voila, my love affair with Spanx began. Now, if you aren’t familiar with this wardrobe saving and self esteem boosting product, let me give you a little bit of background. Sarah Blakely, the founder of the company and a gifted salesperson, came up with the idea back around 2000. Sarah loved the slimming features control top pantyhose provided but hated the look of the seamed toes that came along with the product. She experimented with several prototypes and eventually came up with the idea of compression undergarments that provide near invisible slimming features. Her path to success; however, wasn’t all that easy. She went through the typical startup cycle many of us are familiar with. People telling her she was nuts or if it was such a great idea someone would already be doing it, piling up debt on credit cards to get the concept up and running, etc. Sarah stuck it out and grew her innovative product line of compression undergarments for women and, eventually men (thank God). Fast forward to today and Sarah is a billionaire running a company with a net worth of over $1 billion. So what does this have to do with financial services, other than the obvious startup success story Sarah brings to the table? I see at least three common themes between the Spanx product and the digitization of services banks provide. Let’s discuss the first of these in this post.

Overcoming the Status Quo

There’s a saying I’m incredibly fond of that goes like this: “In a gold rush don’t mine for gold when you can sell shovels.” And in my opinion that’s the brilliance of the Spanx product. Sarah Blakely realized most people today, especially as they age, are finding it harder and harder to stay fit. What’s the most common New Year’s resolution: to lose weight. What’s the one New Year’s resolution most people fail at: keeping the weight off. Let’s face it; it takes dedication and will power to stay fit in modern times. The Spanx product doesn’t address the weight loss issue. Instead, if focuses on a temporary fix, an image placebo that does, from personal experience, raise an individual’s self image. The first step in overcoming any issue is to admit you are facing a problem and need to address it. For me that was the hardest part of ordering my first pair of Spanx. I had to admit I need the support (see what I did there?). This miracle product allows someone like myself who has an ageing infrastructure to cheat Father Time at least from an outward appearance. The same concept is so true for banking. The vast majority of banks are faced with a bloated and ageing tech infrastructure. This isn’t really a disputed fact. Ask any bank CTO or CIO what portion of their annual IT budget is allocated to keeping the ship from sinking and patching up issues. And the vast majority of these systems are legacy mainframe systems dependent on the 60+ year old programming COBOL code. Let these facts drive home this point:
    • Reuters noted 95% of ATMs are dependent on COBOL
    • 80% of in-person payment transactions are COBOL based.
    • Reuters estimates there exists over 220 billion lines of production code
    • Over $3 trillion of commerce is handled every day by COBOL based systems.
*Source: Reuters And to think this is only addressing one aspect of a highly complicated legacy tech stack. Bank tech executives are also faced with a plethora of other challenges such as the consolidation of multiple systems of the past decades, customer data spread out over a multitude of banking products, a continuous stream of challenging regulatory reporting requirements, and trying to keep up with technology advances moving at light speed, not to mention new fintech startups who aren’t facing these legacy system constraints. It’s enough to make one break out the chocolate chip ice cream and eat directly from the tub. Not that I’ve ever done that.

If it ain't broke...

The other major challenge facing banking executives is, to be honest, the current business and tech model is still making a shit ton of money. The majority of banks are seeing record income; well, at least the big banks are. I once had a US super regional bank CIO tell me his bank would never migrate of their legacy core system. “It simply isn’t worth the risk and it works. Why shake things up?” I often lean on the following analogy when this point is raised. The Rolling Stones, one of my favorite bands, landed in the top 10 highest grossing live concert tours netting over $120 million in ticket sales in 2017. Their business model works despite the fact the average age of the band members is +73 years old. I, for one, am not purchasing tickets for their 2025 world tour. Their product is facing a shelf life end date that plastic surgery, hair plugs, teeth whitening, and Spanx can’t address in the long term.

The Core Issue

Getting back to Spanx; the one area the product really doesn’t address is the real core issue. If I’m really serious about looking like I used to on stage ten years ago then I have to address my core problem: my core. I have to eat right and exercise. And the older I get the more of a pain in the ass this is. If I continue down my current path and simply use Spanx as a stage prop then the only real movement I’ll make is going from a size L Spanx to XL in the next few years. The same is so true for the banking industry. We have to admit we have a core problem. Simply digitizing analogue processes and declaring we are now digital isn’t good enough. It’s the equivalent of buying the world’s largest Spanx t-shirt and struggling to slide it over our ever expanding tech stacks. This is why we at 11:FS embrace the statement “Digital banking is only 1% finished”.

Making a strong start

Look, it’s a process. You don’t get fit over night. But simply masking the growing health dilemma issue by struggling to slip on a compression t-shirt from hell every time you leave the house isn’t the answer either. The secret to getting started on a personal transformation is relatively simple. Start. The same is so true for real digital transformation of banking services for your customers and internal teams. You want to get started? Start. But do it in the right way, not simply by masking the ageing infrastructure through middleware. Where to start? Easy. Reach out to the 11:FS team. We will be happy to setup a tech diet and exercise plan that addresses the unique needs and DNA of your bank. This isn’t a one-size-fits-all solution. It won’t be easy, there will be pain involved, but it will address the real core issues you’re facing. And yes, the next time you see me on stage I’ll still be wearing my Spanx. I’ll also be eating right and exercising, I promise. But I’m vain enough to wear the Spanx. Don’t judge me. Stay tuned for Part 2 of Spanx and digitization next week. You can also catch Sam as a host on Fintech Insider, or come and meet him at Money20/20 Europe next week - where he may or may not be wearing Spanx.