Bill Kerr: In Europe, people want their banks to be at the cutting edge of technology. They can get loans approved within minutes, without even talking to a person and use a fingerprint to log onto their mobile banking app. To keep up with these rising consumer expectations, European financial services giant, ING, turned to places you might not expect a bank to go for a solution: the music-streaming service Spotify and online retailer Zappos.

After researching best practices in the tech world, ING staged a re-boot that radically re-structured the company and required all employees to re-apply for a job. ING’s workforce declined by 25 percent, but for those employees who made the cut, satisfaction soared.

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Professor Bill Kerr. We recently completed a case study about ING’s transformation and the adoption of agile methodology throughout the organization. Today I’m joined by the CEO of ING Netherlands, Vincent van den Boogert.

Many have followed ING’s dramatic change from operating like a bank to running like a tech company and the great customer service that resulted. So what’s the inside story and what lies ahead? Let’s find out!

Welcome Vincent!

Vincent van den Boogert: Thank you Bill.

Kerr: Vincent, take us back to 2014. Life at ING was pretty comfortable and yet you made this dramatic transformation. Was there a problem?

Van Den Boogert: I learned a long time ago that feeling secure is a risky business. We realized that being digital was really important and that it would really dramatically change the banking landscape. So, for example, let’s look at payments: Payments used to be a kind of a boring item. But going forward, who would be the winner in payments? Would it be the TelKos? Because mobile will be the handheld companies, like Samsung or Apple? Or PayPal? Or Bigtechs or Fintechs, or banks? We didn’t know. What we did know, is that we couldn’t upfront rule out one. We also knew we didn’t have money enough to follow all. So we knew at that time that we should be more adaptive to change. We should be more agile. We were really committed to change.

Kerr: And so you then start a search process that included going to places like Netflix and Spotify. But you didn’t spend much time with other banks. Why go so far outside of your industry?

Van Den Boogert: We strongly believed that the future will be about customer experience and about digitalization. So we said if you want to be curious to what the future looks like, then let’s visit those companies that excel in customer experience in digital experiences. And let’s be very frank: Banks, in general, are not on the front-runner of this customer experience. Therefore, we went to companies as you mentioned like Google and Spotify.

Kerr: So make sure that the customer service you can provide in banking is on par with what they experience with Uber or Airbnb?

Van Den Boogert: Exactly. That was the main reason to go outside. We believe if new competition will come from that area, then let’s look and visit them. And not, let’s say, the more traditional place.

Kerr: Vince, “agile” gets used in a variety of ways. How does your organization think about the term?

Van Den Boogert: So “agile” originates from the software industry, of course. So, for us, agile is about working in small teams up to nine people. Teams that consist of people with different backgrounds, from I.T and Marketing and Product Management, that every two or three weeks bring something that works, test it, see how [the] customer responds, and then make it better, and scale it up.

Kerr: End-to-end responsibility for a product a customer sees and delivering that.

Van Den Boogert: Exactly. So, for example, we have a squad responsible for the best search engine. Or we have a squad responsible for maintaining your mortgage online. And those people have a clear purpose, often a customer-related purpose, and they decide what to work on next. And it’s much more efficient than in a project, because in a project there are a lot of flaws. A project normally takes a while. Up front it will [take] 6, 8, 9, 10 months or weeks. The timeframe you envision is never [accurate]. Probably you’re earlier done, but say, “Hey, now we have some money. Let’s make it better,” or you’re not done on time and then you move on to extend the project at the cost of other resources, and here your resources are your people. So you define yourself how to have them work on different topics. So they define their own purpose and decide whether something is good enough and they can work on something else.

Kerr: This journey includes Europe as well as the United States and Silicon Valley, what was the most eye-popping visit for you?

Van Den Boogert: Well, of course, you can learn from a lot of players, but for me the most eye-popping was when we went to Spotify. Because, also if you look at the other companies, they have almost professional tours. And so you get, let’s say, the real nice story. In Spotify, we were, I think, the first company or the first bank that got access to be there and speak to everybody we liked and there we saw how it was to have agile all the way. And it was not like a marketing tour. We were able to speak to all people we wanted to talk to and they gave what we thought was a real story about what was going easy but also what should you prepare to give up.

Kerr: Wow, so what first did they highlight for you, you might have to give up by adopting this approach, this methodology?

Van Den Boogert: The most thing you had to give up was, for example, control. Because in the old days it was a bit more hierarchical and you knew what the teams were working on. And now, by giving them autonomy and having their own purpose it was not that easy to have always the control. So I think giving more trust than control was probably the first thing you should give up.

Kerr: So your research that you conducted, led you to conclude 9 was the optimal team size. Tell us about that choice and why isn’t it 7 or 12?

Van Den Boogert: Yeah. You could up front say why is it not 8 or 7?

Kerr: Why not round up to 10?

Van Den Boogert: That’s a good question. Up to 9 people is from Jeff Bezos. It’s a 2-pizza principle that means that if you have overwork to do, overtime, then 2 pizzas are enough to feed the group.

Kerr: And these are American-sized pizzas or European-sized pizzas?

Van Den Boogert: Definitely American-sized pizzas. But the belief comes from more social science. Because if you have more than 9 people, then we get sub-cultures. That’s not the best for a team to have sub-cultures. So the belief is that up to 9 is the optimal size. So then the principle was you will never see more than 9 people. You will see 6, 7, 8, 9, not more than 9. So in practice, if you walk through a company, you will see teams up to 9 people.

Kerr: Okay, and in your organization before the change you had had a customer request typically changing hands 3 or 4 times, what does it look like today?

Van Den Boogert: So we were almost obsessed by cutting out handovers. In the old days, for example, our internet banking we have around 30 people that were authorized to publish on the internet, on our closed environment. And that meant that if you were a marketing person and you wanted to publish something, you had to make a request to have it published. And now we have more than 200 or 300 people authorized to publish something on the internet. So it doesn’t have any handover. However, this comes with a risk, of course. So we make sure that all people that are able to publish something have passed a course and have a certificate to be able to publish on the internet. It comes with all the rules. Because if you learned one thing, it’s that you look for kind of a balance between autonomy of the teams and more alignment. Initially, we probably over-promised on autonomy. But now we have come to the conclusion that it’s not the balance between autonomy and alignment. Alignment enables autonomy. Because without alignment, it’s anarchy. So it’s very delicate to make sure that the autonomy comes with good alignment.

Kerr: So you made a decision to not only implement this throughout the whole organization, but also to do so with a Big Bang type of approach. Tell us why?

Van Den Boogert: Well, I think we did almost three things in parallel. So we wanted to introduce this new way of work and go agile all the way, that’s one. Secondly, we want to really introduce a new culture, not just as a standalone, but to support the change. Third part is we did it with also a big restructuring. We wanted to reduce the work force at around 25%. So, these three things in parallel seems, maybe, complicated but we think they really reinforce each other. And then if you look at the three things, then what would happen if you do it phase by phase? First of all, if you want to have a new culture you can’t say “this culture applies to this part of the organization,” because culture is ... I look at behavior. Let’s go at once for the whole company, that’s one. Second is, if you do it phase by phase there will always be people who are hesitating and say, “hmm I’m not sure, will it work?” And they have almost implicit interest to see that it didn’t work.

Kerr: So tell us, how did your leadership team change itself in advance of this process? How did you tell everyone “this is for real and we made the choice, we’re going forward”?

Van Den Boogert: By letting go around 25% of the people, we as a management team wanted to go through the process ourselves. We should feel the pain of saying goodbye, because it’s always easier to close, for example, a call center somewhere else. But it’s very different to have bad messages for your people, so we were the first as a team to go through the process that everybody should feel the difficulty in doing that. Because then also you can easier place yourself in the shoes of our own people. At our second layer everybody had to reapply for their position. And it was the first time in my life I was not able to select my team. We collectively selected the team. So, I had a veto if I didn’t, want to work with people. But we collectively selected the team. And it’s a simple example, but we gave up some preferred parking places for board members. In the old days if you visit the Board, then probably you would go there and defend your plans. That’s what I also sometimes experience if I go to the Board. And then, we also said, let’s change that. So now if people visit our board meetings, they get a surveys afterwards. We ask them 2 questions. One, did you feel welcome? Second, did you feel helped? And just by giving these two messages, also it changes how we behave.

Kerr: So you’re measuring the customer service of the Board?

Van Den Boogert: A bit, yeah. True. So I think these are small symbols but, of course, culture comes with symbols. And we were privileged as a management team. We already had no rooms for a while so we were sitting at one table. Like one team. And the beauty of us sitting around one table is you can’t have fights or arguments. You can have them but you have to solve them quickly because you’re sitting [next] to the guy.

Kerr: You can’t fester in the back room.

Van Den Boogert: Exactly. And we learn that harmony is not avoiding problems, it’s resolving them and so we also try to work a bit in a small team ourselves.

Kerr: Vincent can you also tell us a little bit about how the physical structure of ING changed? Does the building look different or did you make adjustments to accomplish this transition?

Van Den Boogert: Definitely, definitely. So one of the agile principles is about interaction of documentation and how to force the interaction. So, for example, we had a lot of floors and if you were floor 3 you would probably never meet people on floor 4. So what we did is, we made additional staircases to foster interaction between teams. So I think what we tried to do is make a lot of symbols and we changed the walls to whiteboards, or to glass. So all these elements they contributed to support the new way of work.

Kerr: So, in other words, if someone walked in your office it may look like they’re walking into Google’s offices or Netflix’s offices.

Van Den Boogert: Yeah, it’s more like that than traditional banks. And again, it’s not something that you do because it looks nice or you want to be hip and happening. It should always serve a goal.

Kerr: How do you measure the success of the transformation?

Van Den Boogert: Upfront we had three goals. One is, we wanted to reduce the time to market. We wanted to be more flexible. So in the old days we had, for example, for some IT systems, 6 or 8 releases a year. Now we have more than 2,000 changes per month.

Kerr: Wow.

Van Den Boogert: So the number of new features and small changes like continuous delivery really, really improved. Second is, by reducing handovers and connection costs, we reduced also one management layer and so we saved some costs there. And the third part is we wanted to be more attractive for new digital talents. I think we succeeded in all of them. People like to work in small teams, because what is nicer than having an idea and being able to implement it yourself and make it better? And so, in general, that’s nice for people. And if you look at the workforce now, and compare it with 10 years ago, it’s almost 10,000 people less. And so you should expect that there was really kind of a turmoil. But despite that we were able to climb the ladder of being attractive for new talents. Especially also in I.T., digital talents. I think also because our idea about people is that they are not resources that you should, let’s say, exploit. Our talents, you should have them flourish. I think our way to look at talents and about people also changed and helped us to be more attractive.

Kerr: As you think about the journey you’ve made over the four years up until now, what’s 2 or 3 highlights or important takeaways you would give to executives looking to start this journey?

Van Den Boogert: Well, I think first of all, if you consider to do this and you say, “Let’s try and see whether it works,” don’t do that. So either you’re convinced it will work and you go all the way or you don’t do it. I think that’s one lesson. Second for me, a personal lesson, is that there’s brave, braver and stupid. Or it’s comfort, discomfort and terror. And as long as you don’t know whether you’re brave or stupid, I think then you’re in the right zone. Because then there is speed. And a third part is that if you wait until you’re ready, you’re probably never ready. It’s kind of an old joke that the best place for a picnic is a few meters ahead, and if you’re not careful, you keep on walking and never sit down. So we said okay, let’s have a good design, implement it, and then make it better. So don’t wait until you think you’re really perfect.

Kerr: Banks all around the world are thinking about this digitization environment, the challenges they face, holding a mirror up to themselves and saying what must be different? Do you think they all need to have such a dramatic transformation?

Van Den Boogert: Well we believe that customer experience is the way going forward. Not product strategy or price strategy, but customer experience. And we all believe that customer experience, innovation comes at the crossroads disciplines. Because there is not one department that is responsible for customer experience. And if you believe that customer experience needs quick improvements, customer feedback then it’s very difficult to deliver the great customer experience when you’re organized around traditional departments. At least that’s what we believe. So you see, that’s more and more institutions and also banks are trying to experiment a bit and we get a lot of interest to see how we have implemented this.

Kerr: Do you let them in the doors?

Van Den Boogert: Most, we do. Yeah.

Kerr: Okay, and do have a tour that you take them on?

Van Den Boogert: At some point we got so many requests we had to structure it a bit. So now we have almost every week 2 - 3 companies, there is even a waiting list and people have to pay a bit to charity. Prevent that we ... everybody wants to come. But we have some people that’s almost a day job to give them a tour and the funny thing is ... probably we should be proud about that, but the funny thing is that what we’ve done is we just copied principles and beliefs we saw somewhere else. So it’s not that much that we invent it. We put it together and the funny thing is that people now come to see what we copied from others. But at least it gives pride to the organization that we have very big names, very respected companies that want to see how we operate.

Kerr: When you took Harvard Business School on a tour you didn’t charge us anything, so I think we may owe your charity a little bit of money.

Van Den Boogert: That would probably the last sentence in this interview Bill. (chuckling)

Kerr: Great. Well thanks to Vincent van den Boogert for joining us today on the Managing the Future of Work podcast. We wish him and ING all the best in the journey ahead.

Van Den Boogert: Thank you Bill.