ING Direct Canada was launched in 1997 by veteran Canadian banker Arkadi Kuhlmann as a subsidiary of ING Groep NV, a global financial-services corporation headquartered in the Netherlands. It was the first test of a new direct banking business model featuring no-frills, high-rate savings accounts that could be accessed online only. Doing away with the costs entailed by a network of branches, ING Direct depended instead on a small network of ING Direct Cafes as face-to-face contact points. The motto was “Sip, surf and save”: You could hang out over a specialty coffee and use the free Internet and Wi-Fi services, or you could get help from a bank representative to open a savings account paying 4 percent interest—at least twice as much as anything offered by Canada’s biggest banks.
Kuhlmann developed the ING Direct strategy, assembled the leadership team, and served as CEO from 1997 to 2000 (being “reelected” annually by a vote of the company’s employees). The bank broke even in just four years and was well on its way to becoming, by 2008, Canada’s largest direct bank. An initial investment of US$50 million had been turned into total assets of US$23 billion. And where was Kuhlmann by this time? In 2000, he left to launch ING Direct USA, taking his strategy, his executive team, and his ideas about leadership with him. The new bank hit breakeven after just two years, and after just six, it had become the largest online bank in the much bigger U.S. market, with $92.2 billion in assets.
For Kuhlmann, the opportunity to manage ING Direct Canada provided a perfect situation in which to put his ideas about leadership into action. First and foremost, the bank was founded to launch an innovative business model and, in the process, to disrupt the savings end of the banking industry. As it happens, Kuhlmann already believed that “culture-based leadership is necessary in order to adopt innovative business strategies and to unleash the power of disruptive ideas.” He was also convinced that “culture-based leadership” had become the most promising approach to launching and operating a company in the contemporary business environment.
According to Kuhlmann, the critical factor in today’s business environment is the simple but pervasive fact of change. Nowadays, he says, the forces of competitive pressure change directions more or less constantly and with relatively little warning. As a result,
companies’ life cycles are getting shorter…. Businesses are successful and not successful over shorter lifetimes…. So the world is getting…. more short-cycled, but at the same time, we keep hoping for the silver bullet. You want that one spark in the party, that one hit in the company, that one person to stand up and grab it all, and it’s tougher than ever before.
As Kuhlmann sees it, a new company has to hit the ground running with a strategy to innovate and disrupt: If it doesn’t, it risks finding itself in a market that’s entered yet another cycle—one in which competitors are already innovating its planned innovation.
So how does a company start out—and stay—innovative and disruptive? The key, says Kuhlmann, is identifying a “cause”: “A successful company,” he argues, “must have a cause that is bigger and broader than the organization itself.” What, for example, was the “cause” that Kuhlmann identified for ING Direct? “When we started the bank in 2000,” he recalls, “it was a time when instant gratification and spending without regard for one’s ability to pay back the money had enveloped America. It was a recipe for disaster, and we believed that the right thing to do was to set off on a crusade to lead Americans back to the old-fashioned values and saving.” Having established a cause, a successful leader must ensure that it’s embodied in the company’s “vision,” which, for Kuhlmann, means what the company intends to do in order “to make a difference” and “make things better,” at least in the environment in which it does business. “An effective vision,” he maintains, “has to be one that shakes up the status quo and starts a revolution.”
All of this is not as abstract as it may seem. “When we started the company,” explains Kuhlmann, “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.” At the same time, the “big idea” had to be “important and clear” to the new company’s prospective customers, and at ING Direct, says Kuhlmann, “that idea was leading Americans back to savings. We saw that there was too much spending going on. Credit cards had become the opium of consumerism. Let’s encourage people to save, we decided, and that has been our mission.”
What’s the difference between vision and mission? According to Kuhlmann, “vision is aspirational, and mission is how you hold yourself accountable. Our vision was to lead Americans back to saving. Our mission was to simplify financial products.” Being accountable, then, means “walking the talk,” as Kuhlmann likes to say—in other words, delivering the actual products that will make things better for targeted customers. Thus the product strategy at ING Direct—both for designing and delivering products—focused on simplicity: “Simplifying financial products,” explains Kuhlmann,
was our tactic for helping people save their money…. Our model was…. a high-volume, low-margin business. We would target the people…. who we thought needed a better value proposition—that is, more affordable savings. We could offer significantly higher rates if we removed costs from our model. Branches are usually a huge cost…. so we didn’t have branches and could pass on the savings to our customers. All our services are provided over the telephone and the Internet. We also opened up several ING Cafes to underscore the idea that opening an account should be as easy as buying a cup of coffee.
None of this, Kuhlmann is quick to point out, is feasible without the right kind of leadership—that is, “culture-driven leadership.” A company’s leader, he argues, “must come up with the mission statement him- or herself. Defining the company’s purpose is a leader’s—and only a leader’s—responsibility…. The leader must embody the company’s cause, and that includes being responsible for defining it.” A successful leader strives to be “a person devoted to a cause [rather] than a manager running a company…. He or she must be identified with the cause.”
In turn, a leader must see to it that the cause is the driving force behind the company’s culture—the set of values that helps employees understand what it wants to do and how it goes about accomplishing its goals. If a leader doesn’t take responsibility for the company’s culture, says Kuhlmann, it “gets created on its own. Or you can direct it in a certain way…. I believe you need to direct the culture—and let the culture direct the business.”
Kuhlmann also thinks that directing the culture is the best way to attract and keep committed employees in an age in which career cycles, like environmental cycles, are shorter. Today, he says, “people that are successful and stay ahead are those that gravitate to a culture that is meaningful for them. They’re on a mission. It’s not a job.” Companies can no longer count on employees to perform their jobs simply out of “corporate loyalty and trust…. I think right now,” says Kuhlmann, “the only reason you would follow me—the only reason—is that I would voice the attributes of the culture in a way that you would say, ‘Yes, that’s meaningful to me. I’m connected to that.’”
CASE QUESTIONS
MUST INCLUDE A SUMMARY OF THE CASE ABOVE
First, review the definition and discussion of “The Organization’s Culture” in Chapter 2. Then address the following question: What effect is a company’s culture likely to have on the efforts of management to practice each of the following approaches to leadership: LPC theory, path-goal theory, the decision tree approach, and the LMX model?
“The way we look at leaders,” says Arkadi Kuhlmann, “has changed, and who we follow has become ever more situational.” According to one researcher, situational leadershipevolved from a task-oriented versus people-oriented continuum…. representing the extent that the leader focuses on the required tasks or focuses on relations with followers…. Task-oriented leaders define roles for followers, give definite instructions, create organizational patterns, and establish formal communication channels. In contrast, relation-oriented leaders practice concern for others, attempt to reduce emotional conflicts, seek harmonious relations, and regulate equal participation.