This communication brings the last conversation about changing our thinking about distribution down to a tactical level. The objective is to provide an example of how the process might be implemented within an organization.

For a quick review we challenged the traditional thought process about retail and wholesale, or owned and not owned distribution. We moved to a perspective of the company facing the customer regardless of the delivery "channel" for our services. This is conceivable due to the changes in technology, people and process generated by the Information Age evolution.

A simple diagram of a common structure in financial services is one of product or business lines:

This classic structure presents a number of issues from duplicative expense and strategies to communication barriers between the business lines wherein the customer is lost. To stay focused on our objective, the seamless delivery of services to the customer, we have created multiple customer contact points without integration of the organizational brand. Marketing and sales efforts such as direct mail, telemarketing, retail and wholesale sales efforts to these customers are typically driven by each business line independent of the others. The "communication" and "coordination" of efforts is attempted by the business line executives meeting once a week (or on whatever schedule) to share and inform executives in other lines on current and future management. Without delving into the human and organizational aspects of these forums, and how far reaching they are upon their conclusion, it is quite probable that this method can be improved upon. Not at the top, but by further integration of the processes and organizational communications closer to the customer.

In financial services this structure exists primarily due to our management of risk and compliance. People that understood unsecured lending to amounts of $10,000 on a signature had a competency different from that required to underwrite a $250,000 loan secured by a mortgage. The preparation and maintenance of compliant legal documents for products required focused people and system expertise as regulation became over-burdensome. The marketing of these products began to break away from the traditional retail branch delivery into direct mail and centralized telemarketing at different points in time motivated by demand or opportunity further pulling apart formerly integrated efforts. Technology applications began to be designed to business line and product specifications and credit cycle management accelerated in some disciplines and moved more slowly in others.

That was then, this is now. The potential now exists to integrate the information and provide knowledge to the customer by leveraging the new and existing resources at our disposal. This is not a new alignment, but an adaptable matrix that provides information about the organizations willingness to lend money in variable configurations of rate, amount, and product based on the knowledge that is created each time we touch the customer. The end result is that the customer gets presented with choices structured in a way that meets their need, not with an individual product presentation that does not.

The required change in organizational structure is centered upon credit cycle management and technology competencies rather than business line competencies. In other words a change from vertical business alignment to "cubed integration" requires an integrated view of information and credit cycle management for marketing and delivering financial services.

Before we talk about cubed integration we should define Credit Cycle Management. For this discussion it is the process of evaluating information (demographics, credit bureau information, credit scores, asset and liability information etc.) on our "through the door" customer population, and the outcomes of those populations that translate back to our front end marketing, lending and risk based pricing rules. This data capture, information storage and knowledge creating cycle is accomplished completely within and through database and analytical technology. People use the information to establish decision gradation or "cut-off" points for the rules however the technology is fully capable of storing, manipulating and analyzing, and outputting this knowledge.

An example of a cubed alignment puts the information gathering and decision processes at the center of the alignment. This effectively aggregates the technology and credit risk management functions for any of the lending lines or products. Sales and marketing may be kept focused on particular channels although in my view these lines are beginning to blur. When matrixed decisions can be delivered to any point in the network to serve the customer the potential channels begin to merge creating a consultative sales force effort with targeted marketing support. As an example it is conceivable in this structure to deliver a lower rate home equity loan decision to the automobile dealer in the time it takes to render the traditional auto secured decision of the past. The sales target becomes companies who create buying occasions. This broadens the sales spectrum while the marketing mission is then designed to target particular industries and companies.

This may appear to many to be a view of centralized functions versus business line functions. It is not. The centralized credit cycle management and technology functions are responsible for the capability of delivering all of the companies’ products to the point of customer access whether they are internal or external, direct or indirect. It responsible for delivering multiple decisions which cross all product lines. Sales and marketing can take the form of consolidated or delineated structures i.e. full line or product managers. Operations manages the exception processes, documentation and fulfillment and servicing also with varying structural possibilities.

The ability to improve communications and consolidate redundant processes is important. Delivering products when and where the customer wants to transact with the best choice(s), that may not be the traditional choice(s), and to manage the process consistently at the multiple access points the customer may choose to enter and exit from, is critical. Viewing distribution in terms of the customer and their convenience, rather than wholesale and retail, mandates adaptive alignments and a culture centered on the use of extensible information producing technologies.