Customers Hate Disruption: The Banking Crisis
A great example of why customers hate disruption is the global banking crisis of March 2023.
Because the US government has borrowed, spent, and printed too much money since January 20, 2021, Americans have experienced the worst inflation in 40 years. Moreover, until March 2022, the federal-funds interest rate was held at near zero. Accordingly, many banks unwisely purchased long-term Treasury and mortgage-backed bonds at these low interest rates. Subsequently, the Federal Reserve Bank has been raising this interest rate dramatically — from .08% in March 2022 to a range between 4.75% and 5.00% (a 6150% increase), in March 2023.
Result? The value of those long-term Treasurys plummeted, driving poorly managed Silicon Valley Bank (SVB), First Republic Bank, Signature Bank, and Credit Suisse into the ditch. Many others will follow. SVB wasted time on ESG and DEI projects, gave away $83M to BLM and other leftist causes, and went nine months without risk management — instead of focusing on banking.
This unforced crisis wreaked havoc on customers (depositors), and they hated it. It disrupted their lives. Now, the resulting bailouts of and mergers among these banks will reduce their numbers, thereby restricting customer choice.
Disruption Basics
Across the business spectrum, CEOs, consultants, journalists, and industry analysts are over the moon about disruption — blowing up a traditional method of commerce — believing that new ways are always better than old ways.
This is nonsensical and sophomoric.
Have you called customer service lately? Do you like talking to an AI-driven computer instead of a human being? That’s disruption, and it sucks. An SVP of technology at a top-four bank recently told me that AI is meant to eliminate employees, not satisfy customers.
It wasn’t long ago when store shelves were empty. We had a supply-chain crisis — AKA disruption. Mothers couldn’t find baby formula to buy. New products, building supplies, and spare parts were almost impossible to get. Disruption.
Now, crime is so bad in NYC and other cities around the USA, because leftist mayors and DAs are allowing thugs to roam the streets, that stores have to chain up merchandise to prevent theft. Customers are sick of the disruption to their shopping routines; often, they walk out of the stores in disgust. Increasingly, they move out of these cities. According to the US Census Bureau, NYC lost 5.3% of its population — over 468,200 residents — from April 2020 to July 2022.
What Is Disruption?
Disrupt is derived from Latin: disruptus, past participle of disrumpere (break apart, split, shatter, break to pieces).
Follower Culture
Why, then, is disruption a thing? Because venture capitalists (VCs) push it mercilessly. If you bring a business plan to a VC, his first question will be about disruption. Why? VCs believe that the only way to be unique is to destroy the status quo. That’s wrong.
There was a time, when I lived in Silicon Valley, that an entrepreneur HAD TO HAVE an Indian strategy (HQ in America, engineering staff in India) — or the VC would show the door to the entrepreneur. Why? It was Baskin-Robbins flavor of the month — and an obviously dumb idea. It was impossible to manage teams across the ocean and time zones. Duh. But, it was the flavor of the month. And stupid. This is how VCs operate.
In Chapter 10 of Brand Is Destiny, I explain that, in our “follower” culture, companies engage in disruption because it’s the thing to do. CEOs love to keynote conferences that highlight disruption.
Newsflash: Disruption Is Not Your Goal
Customer satisfaction is your goal. How can you create a strong brand — an emotional bond with your customers — if you’re disrupting their personal and business lives? You can’t. People like gradual, sensible changes — not disruption. Remember that when someone tries to shove disruption down your throat. Contact me to dump disruption and build your brand.
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