Strategic foresight for organizational
agility at Nedbank Area Collaboration
Marius Oosthuizen and Caren Scheepers
It was a crisp winter morning on July 4, 2016 on the Highveld in South Africa. Douglas Lines
was in a reflective mood. He only partly noticed the cloudless blue sky, the yellow frosted
grass, the bright sunlight reflected in the windows of the Midrand business area. He did,
however, take note of the heavy traffic on the N1 – the main artery between Johannesburg
and Pretoria, traveling at 10 km per hour, even though rush hour had passed. The drivers’
faces around him looked intent. Lines wondered how the recent economic downturn with
South Africa’s GDP at less than 1 per cent had affected them. When Lines reached the
Allandale off ramp, he noticed the impressive new Mall of Africa shopping center, the
largest in Africa, with Sandton’s skyline in the background. Sandton’s financial district is
South Africa’s main economic hub. At that moment, the Gautrain sped past at 160 km per
hour. He considered what it would take for these drivers to adopt a new way of traveling.
Their dilemma reminded him of a challenge they were facing at Nedbank’s – of adopting
new technologies and changing the mindsets of employees to respond better to future
trends.
Marius Oosthuizen and
Caren Scheepers are
both Senior Lecturers
and are based at Gordon
Institute of Business
Science, University of
Pretoria, Johannesburg,
South Africa.
On reaching the office, he scribbled down discussion points in preparation for the ad hoc
meeting on innovation, a new business-wide push for technology adoption. Lines
wondered to himself, “ [. . .] are we innovating fast enough?” He knew the question of
innovation was on everyone’s lips these days but wondered if Nedbank had the balance
right between adopting new ways of doing business and their strong commitment to
relational banking services. Whatever the answer to the question, Lines felt that the bank
would need to enhance their collaborative and leadership-orientated culture to sustain their
success given the changes afoot in the business environment (See Exhibit 1, Stage 5).
Lines considered what Marius Oosthuizen, a scenario-planning expert, shared on
scenario-planning methodologies (Konno et al., 2014) that had been used to examine the
strategic choices facing Nedbank, in light of contextual trends and industry changes.
Scenarios-based planning of this kind used fictitious narratives (Kenney and Pelley, 2014)
of the future, or a “rigorous and penetrating description[s] of what is happening or could
happen in and around the system [. . .]” (Kahane, 2012, p. 59) within which the business
operates. The scenario-building process was understood as a “[. . .] comprehensive
approach to institutional strategic management, based on an integrated philosophy of
organizational learning” (van der Heijden, 2005, p. 153) and grounded in actual events and
observable changes in the environment of business, while taking an exploratory yet
plausible view of the future. This approach to strategic planning, which uses plausible
(Ramirez and Selin, 2014) stories about the future to undertake a rigorous (Bowman, 2016)
“intra-organizational strategizing” process, sought to provide a set of alternative roadmaps
(Cheng et al., 2016) for the organization’s future. The scenarios that Marius Oosthuizen
offered Lines had used an eclectic combination of scenario-planning methodologies. Lines
DOI 10.1108/EEMCS-12-2016-0221
Disclaimer. This case is written
solely for educational
purposes and is not intended
to represent successful or
unsuccessful managerial
decision-making. The authors
may have disguised names;
financial and other
recognizable information to
protect confidentiality.
VOL. 8 NO. 1 2018, pp. 1-43, © Emerald Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES
PAGE 1
had to decide how to convey these scenarios and their implications for the organizational
capabilities that had to be developed in preparation for the future.
Introducing five future scenarios
Marius Oosthuizen offered a number of possible futures, based on current trends,
Nedbank’s current strategy and probable impending strategic choices. He declared the
following:
By the late 2020s, the financial services industry in South Africa will have undergone a rapid
metamorphosis. The decade since the formulation of the voluntary global regulatory
framework Basel III and South Africa’s updated corporate governance regime known as
King IV, marked the most disruptive yet unanticipated watershed in the industry’s history.
For years, banking executives opined about the potential fallout of the 2008/2009 financial
crisis and what it would mean for business. Yet, few appreciated the enormity of the
changes that were about to converge on their business models. Many were unprepared.
Five scenarios emerge for NEDBANK, one of South Africa’s leading banks, contingent on
their strategic response to these trends;
1. Baseline Scenario 1: Opportunity Missed, Talent Walkout;
2. Baseline Scenario 2: Batten Down the Hatches;
3. Alternative Scenario 1: Carpe Diem, Digital Talent Giant;
4. Alternative Scenario 2: Ride the Waves of Change; and
5. Alternative Scenario 3: Be the Change.
Encroaching policy has sent the cost of doing business soaring, especially for large banks.
While the sector had the historic advantage of becoming highly sophisticated and
integrated, especially compared to other middle-income countries outside the advanced
industrialized West, South Africa’s cluster of financial services institutions represented a
close-knit club of cumbersome silos operating side by side. The quality and diversity of
services offered were world class but their reliance on fee-based revenue models left them
vulnerable to new entrants.
In addition to changing regulatory conditions, the disruptive force of technological
advances changed the rules of the game for an industry that had enjoyed extremely high
leverage and bargaining power in the economy. At a time when telcos[1], such as
Vodafone, and insurance giants, such as Discovery, were applying for banking licenses,
the banks were on the one hand struggling to choose between entrepreneurship,
innovating in terms of product and service through diversification and intrapreneurship on
the other, innovating internally, while sticking to their knitting. The war for talent, specifically
in relation to skilled and experienced engineers in information and communications
technology, meant that conventional bankers struggled to distinguish fad from
fundamentals in terms of the digital technological revolution. Increased complexity in the
systems required to offer solutions to the market, meant that deep expertise was growing
costly and scarce.
The relative isolation of South Africa’s banking industry in the two decades post-apartheid
was diminishing at an accelerating pace. Clients now had access to a wider array of
providers; fast-growing globalized transactional solutions, such as PayPal, began to
emerge and challenged the notion of having “a bank”, causing customers to instead favor
the idea of having “access to banking services”, as and when required. The competition
from international entrants was compounded by the attractiveness for key talent to migrate
toward positions in companies that remunerate senior staff in more stable currencies than
the volatile Rand. This “brain drain” had a crippling effect on long-term strategic projects
undertaken within the corporate high-rises of yesteryear.
PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
From a market development point of view, only a handful of historic players recognized the
emerging growth in the small and medium enterprise segments. Those that did, rapidly
tailored their world-class governance and procedural rigor to suit the more risk-taking
start-up culture of these new clients. (Exhibit 2). Leveraging the legacy anglophone
operations and linkages, they developed a set of services that connect small African
manufacturers with global and emerging markets. Whereas this bolstered cash flow and
customer growth in retail and business banking, losses to the banks from exposure to
public sector projects as a result of South Africa’s weakening rating with ratings agencies
were severe. Capital projects needed to be more severely scrutinized that ever before.
Persistently low savings rates by customers, coupled with relatively higher foreign direct
investment inflows in other African countries, caused banks to look northward for more
stable and significant returns.
Nedbank had taken a particular view of these changes and adapted their strategy
accordingly. (Exhibit 4, Strategic Focus Areas). Based on the assessment of the drivers of
change discussed below and the current strategic response of Nedbank, the following
observations were made by this case study as Marius Oosthuizen remarked.
Assessing the strategy of Nedbank against future scenarios
Nedbank has selected a particular set of strategic imperatives to pursue, which the bank
considers critical to ensuring the future success of the business in the emerging markets
of South Africa and Africa. Some of these are demonstrated by the projects undertaken in
the context of the Area Collaboration (AC) initiative. The following scenario-planning
analysis tested the robustness of Nedbank’s chosen strategy against changing conditions
in the external environment of the South African financial services industry.
Nedbank has opted to grow the bank through a combination of acquisitions, as well as
internal initiatives for organic growth and by committing to their core self-identity as a
relational bank.[2] By conceptualizing their core business as such, and wanting to grow
their footprint in Africa, Nedbank for instance acquired EcoBank Transactional Inc.
(Exhibit 3). The aspiration of EcoBank to be a pan-African bank gave Nedbank exposure to
branch-based retail bank operations in 38 countries and across Africa. In South Africa,
Nedbank opted to retain the branch as the primary vehicle for delivering banking services
to the customer, especially in retail and business banking. Technological solutions and
digital platforms were seen as enablers, rather than replacements for branch-based
banking services.
This selected strategy meant that Nedbank retained their position within the “big bank”
family, with the complexity and cumbersome financial services industry obligations that this
represented. As opposed to a fundamental redesign of the business model and
subsequent operations, Nedbank opted for rightsizing and downsizing where possible,
rationalizing the organization around entrenched legacy systems developed in an era of
person-to-person banking.
Hunting for new business by taking on competitors directly, on the basis of added value
and impeccable customer service, Nedbank opted not to look for new strategic alliances
or partnerships that could offer more niche solutions to evermore demanding customers.
This included aggressively trying to incubate new delivery mechanism internally, especially
where technology was concerned. While this delivered flashes of innovative brilliance and
first-to-market solutions, such as the emerging big-data merchant platform, this form of
innovation proved costly and difficult to maintain given the scarcity of skills and competition
for talent.
As competitors and new entrant non-traditional competitors brought alternative
transactions, borrowing and investment solutions to market, Nedbank consistently
performed as a follower in the market, buoyed by quality and a reputation for stability and
VOL. 8 NO. 1 2018
EMERALD EMERGING MARKETS CASE STUDIES
PAGE 3
excellence. Leveraging their longstanding capacity for internal human resource
development, Nedbank was able to shore up losses in human capital and even served as
a consistent source of management and technical skills for the market.
The introduction of a collaborative approach to service offering across historic banking
silos inadvertently positioned Nedbank to compete well in the small and medium
enterprises (SME) business banking segment. However, a comparatively low-risk appetite
and costly commitment to thorough enterprise development support for clients meant that
the segment was marked by false starts and questions over viability for Nedbank given low
rates of return.
Further afield, it soon became apparent that Nedbank’s key advantage in Africa, given the
alliance with EcoBank, was not access to the low LSM and SME market segments, but was
rather their long term positioning for global entrants to the continent. The promise of a rising
affluent African middle class remained illusive. Instead, the rise of external linkages to
Africa necessitated a re-conceptualization of how Nedbank would make their considerable
experience in wealth and investment available through the network in a cost-effective
manner.
As per the section below, the Nedbank strategy was considered against the backdrop of
broad changes in the industry and environment of business. The outcome was a set of five
scenarios relating to Nedbank’s performance in the decade ahead. (Exhibit 6) The first two,
baseline scenarios 1 and 2, set out future-orientated conjecture about the status quo at
Nedbank and forecast their current strategy against the trends. The latter two scenarios,
alternative scenario 1 and 2, set out a forecast of what may be possible if Nedbank altered
their course through more aggressive adaptation.
The scenarios appearing next emerge from the analysis outlined in the final section and
arise from an integration of all trends observed, with an emphasis on foreign direct
investment (FDI)-based growth or decline in Africa, access to human capital and the
adoption of new technologies. All of these point to the need to adjust to a shifting market
and imply a reformulation of Nedbank’s business model to sustain performance.
Baseline scenario 1: Opportunity missed, talent walkout
In this scenario, Nedbank retains their current strategy while current trends persist.
When Nedbank CEO Mike Brown stepped up to the podium to present their 2026 results
there was a hushed silence in the room. (Exhibit 5). Just over a decade since Brown took
the helm, the initial optimism had been replaced by a protracted period of incremental
slowdown in results. While Brown had established a reputation as a steady hand and astute
banker, the reasons for his long tenure, the unspoken consensus was that a different
approach would be required to achieve the performance of the mid 2010s. South Africa’s
decade of stagflation had dealt a serious blow to all the major banks, placing particular
pressure on the middle range retail segments, pushing customers to revolt against bank
charges and popularizing providers of simplified cost effective banking options. Nedbank’s
strong growth in deposits was being dampened by a rise in bad debts from the mid and
lower segments.
Nedbank was not positioned to capitalize on the turbulence in Africa’s fast growing
economies either. Low oil prices at the start of the decade did not only deflate growth rates
in the likes of Nigeria and Angola sending a knock on effect into consumer markets, but
they also temporarily dampened optimism over infrastructure and other capital projects
leading to the mothballing of some and five-year delays in many cases. Competitors who
shaped their Africa strategy around a public affairs and public-private partnership model
were better placed to pick undervalued assets and benefit from the recovery of the oil
price. While Banco Unico, of which Nedbank now owns 76 per cent, did perform
PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
consistently, this was at a lower than expected rate because of intermittent escalations in
country risk.
Admittedly, much of Nedbank’s woes were beyond their control as exposure to South
Africa’s domestic economic and social turmoil weighed down their otherwise sound market
base. Where Nedbank did misstep strategically was in underestimating the three-pronged
impact of new entrants, loss of talent and lagging on the technological adoption curve.
Accelerated by the toughening environment, the assumed hegemonic position of a bank as
a provider of financial services began to dismantle. The cultural shift required to capitalize
on this tectonic break was a bridge too far. For the generation of consumers entering the
market over the decade, digital technological access to decentralized services was
ubiquitous, and none of the conventional banking organizations were nimble enough to
take advantage of the change.
Baseline scenario 2: Batten down the hatches
In this scenario, Nedbank retains their current strategy while trend reversals take place in
terms of FDI in Africa and technological adoption rates.
When Nedbank CEO Mike Brown stepped up to the podium to present their 2026 results,
there was a sense of tentative ease in the room. Just over a decade since Brown took the
helm, the initial optimism had been replaced by a protracted period of persistent
headwinds and disappointing results. Since Brown had established a reputation as a
steady hand and astute banker, the reasons for his long tenure, the unspoken consensus
was that his risk-averse long-term approach would still be required to eventually return to
the performance of the mid 2010s. South Africa’s inflationary decade had dealt a serious
blow to all the major banks, particularly placing pressure on the middle range retail
segments, pushing them to revolt against bank charges while providers of simplified cost
effective banking options failed to take advantage, due to adverse entry conditions in the
industry. Nedbank’s strong growth in deposits, were offset by a rise in bad debts from the
mid and lower segments. (See Exhibit 7).
While Nedbank was not positioned to capitalize on the turbulence in Africa’s fast growing
economies, the bank’s alliance approach stood them in good stead. Low oil prices at the
start of the decade did not only deflate growth rates in the likes of Nigeria and Angola,
sending a knock on effect into consumer markets, they also severely dampened optimism
over infrastructure and other capital projects leading to the mothballing of some and
five-year delays in many cases. Competitors who shaped their Africa strategy solely around
a public affairs and public private partnership model were hard hit by the downswing and
struggled to recover losses when the oil price returned to $70 a barrel. While Banco Unico,
of which Nedbank now own 51 per cent, did perform consistently, this was at much lower
than expected rates because of the decline in FDI and the sequential effects on
consumers.
Admittedly, much of Nedbank’s challenges were beyond their control, as exposure to South
Africa’s uptick in domestic economic and social turmoil weighed down their historically
sound market base. Where Nedbank did misstep strategically was in underestimating the
impact of loss of talent and lagging on the technological adoption curve. Accelerated by
the toughening environment, the hegemonic position of a bank as a provider of financial
services held its own but at the cost of key talent to adjacent industries. The cultural shift
required to capitalize on this looming tectonic break was a bridge too far. For the
generation of consumers entering the market over the decade, digital technological access
to decentralized services was soon to be the natural alternative and none of the
conventional banking organizations were nimble or hard-pressed enough to take
advantage of the change.
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EMERALD EMERGING MARKETS CASE STUDIES
PAGE 5
Alternative scenario 1: Carpe diem, digital talent giant
In this scenario, Nedbank adapts their current strategy while current trends persist.
When Nedbank CEO Mike Brown stepped up to the podium to present their 2026 results,
there was a sense of anticipation in the room. Just over a decade since Brown took the
helm, the initial optimism had grown into confidence over a period of persistent
capitalization on new innovation to navigate headwinds and sustain results. Brown had
established a reputation as a steady hand and astute banker, the reasons for his long
tenure, coupled with a knack for mobilizing talent to innovate. The unspoken consensus
was now that his two-track approach of “securing the core” and “exploring the periphery”
was behind the bank’s sustained performance since the mid 2010s. South Africa’s
inflationary decade had dealt a serious blow to all the major banks except Nedbank, who
turned the pressure on the middle range retail segments into an opportunity to steer them
to a more efficient, simplified and lower cost mode of engagement with the bank.
Nedbank’s strong growth in deposits, both from their digital banking highway and
pan-African newcomers, offset the unavoidable rise in bad debts from the mid and lower
segments.
Nedbank was well positioned to capitalize on the turbulence in Africa’s fast-growing
economies, the bank’s alliance approach serving as a mechanism to introduce innovative
lending solutions to otherwise inaccessible markets. Low oil prices at the start of the
decade briefly deflated growth rates in the likes of Nigeria and Angola sending a knock on
effect into consumer markets, but only temporarily dampened optimism over infrastructure
and other capital projects. The initial mothballing of some and five-year delays in many
cases did not deter Nedbank’s increasingly aggressive pivot north. Competitors who
shaped their Africa strategy around a public affairs and public-private partnership model
from the outset were fierce competition but unable to offer the integrated value which
Nedbank did. Banco Unico, now wholly owned by Nedbank, not only performed
consistently as expected, but also aided in providing a springboard to Africa’s fastest
growing urban center to the north, Dar es Salam, where Nedbank opened the first Nedbank
Africa Regional Hub. The hub showcased an integrated financial solutions center aimed as
adaptive customer-led solutions powered by a single digital backend that can be accessed
from anywhere in the world, a brainchild emerging from Nedbank’s alliance with IBM.
Admittedly, much of the temporary setbacks affecting Nedbank were beyond their control
as exposure to South Africa’s domestic economic and social turmoil weighed down their
historically sound market base, but game-changing innovation offset these effects. Where
Nedbank was strategically superior to competitors was in underestimating early on the
importance of fostering innovative spaces for talent and by leaping ahead on the
technological adoption curve through creative alliances and partnerships. Accelerated by
the toughening environment, the hegemonic position of a bank as a provider of financial
services was supplanted by the notion that the digital highway could be a social space
where services are traded seamlessly. The cultural shift undertaken to capitalize on this
otherwise jolting tectonic break could be traced back to the early efforts to collaborate and
breakdown silos within the bank. For the generation of consumers entering the fray,
Nedbank had become an innovation ally in the pursuit of their ventures on the continent.
Alternative scenario 2: Ride the waves of change
In this scenario, Nedbank adapts their current strategy while trend reversals take place in
terms of FDI and technological adoption rates.
When Nedbank CEO Mike Brown stepped up to the podium to present their 2026 results,
there was a sense of tentative anticipation in the room. Just over a decade since Brown took
the helm, the initial optimism had drifted from confidence to concern over a period of
persistent attempts at capitalization on new innovation to navigate headwinds and sustain
PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
results. Brown had established a reputation as a steady hand and astute banker, the
reasons for his long tenure, coupled with a knack for mobilizing talent to innovate in the face
of tough times. The unspoken consensus was now that his two-track approach of “securing
the core” and “exploring the periphery” was not viable to sustain performance. South
Africa’s inflationary decade had dealt a serious blow to all the major banks including
Nedbank, who tried in vain to turn the pressure on the middle range retail segments into an
opportunity to steer them to a more efficient, simplified and lower cost mode of engagement
with the bank. Nedbank’s initial strong growth in deposits, both from their digital banking
highway and pan-African newcomers had dwindled, worsened by the unavoidable rise in
bad debts from the mid and lower segments.
Nedbank was well positioned to capitalize on the turbulence in Africa’s fast-growing
economies, the bank’s alliance approach serving as a mechanism to introduce innovative
lending solutions to otherwise inaccessible markets, but the downswing in confidence
outweighed gains made. Low oil prices at the start of the decade briefly deflated growth
rates in the likes of Nigeria and Angola sending a knock on effect into consumer markets,
dampening optimism over infrastructure and other capital projects and causing inflation to
soar when the oil price recovered. The initial mothballing of some and five-year delays in
many projects disrupted Nedbank’s increasingly aggressive pivot north. Competitors who
shaped their Africa strategy around a public affairs and public-private partnership model
from the outset offered fierce competition, offering versions of the same integrated value
which Nedbank did. Banco Unico, now wholly owned by Nedbank, performed consistently,
but there was concern over the sustainability thereof and the impact on the balance sheet.
Admittedly, much of the setbacks affecting Nedbank were beyond their control as
exposure to South Africa’s domestic economic and social turmoil weighed down their
historically sound market base and game-changing innovation failed to offset these effects.
Where Nedbank was strategically superior to competitors, was in understanding early on
the importance of fostering innovative spaces for talent and by leaping ahead on the
technological adoption curve through creative partnerships. Time to market, hamstrung by
a commitment to quality service, reduced Nedbank’s edge as competitors developed
comparative offerings. Accelerated by the toughening environment, the hegemonic
position of a bank as a provider of financial services was supplanted by the notion that the
digital highway could be a social space where services are traded seamlessly. New
digitally orientated entrants in the telecommunications industry quickly provided for this
need. The cultural shift that would have been needed to capitalize on this jolting tectonic
break implied a reformulation of the hierarchical silos of banking as it had been known. For
the generation of consumers entering the fray, Nedbank held promise as an innovative
bank but not an ally in the pursuit of their owner-run enterprises.
Lines questioned the rationale for the five scenarios and Marius Oosthuizen revealed the
underlying analysis. The four scenarios were built on particular underlying trends identified
in the financial services industry. Trends that were beyond the control of Nedbank and
would need to be navigated by the bank.
Alternative scenario 3: Be the change
In this scenario, Nedbank adapts their current strategy to take advantage of the evolving
financial services market opportunities in previously “unbanked” segments.
When Nedbank CEO Mike Brown stepped up to the podium to present their 2026 results,
there was a sense of optimism in the room. Just over a decade since Brown took the helm,
the initial optimism had drifted from confidence to creativity and innovation over a period of
persistent attempts at capitalization on new market penetration to navigate headwinds and
sustain results. Brown had established a reputation as a stealthy innovator and astute
banker, the reasons for his long tenure, coupled with a knack for mobilizing talent to
VOL. 8 NO. 1 2018
EMERALD EMERGING MARKETS CASE STUDIES
PAGE 7
innovate for “social inclusion” – a new banking model bringing financial services to the
unbanked – in the face of tough economic times. The clear consensus was now that his
two-track approach of “securing the upper-income segments” and “strengthening the
emerging segments” was perhaps the only viable path to sustain performance in an
emerging market. This was particularly true of retail banking. South Africa’s inflationary
decade had dealt a serious blow to all the major banks including Nedbank, who tried in vain
to turn the pressure on the middle range retail segments into an opportunity to steer them
to a more efficient, simplified and lower cost mode of engagement with the bank. It quickly
became apparent that growth lay in the lower range retail segments more so than any other.
Nedbank’s initial strong growth in deposits, both from their digital banking highway and
pan-African newcomers had come under pressure until they changed focus, and mitigated
the unavoidable rise in bad debts from the mid and lower segments by proactively offering
recapitalization when needed.
Nedbank was well positioned to capitalize on the turbulence in Africa’s fast-growing
economies, the bank’s alliance approach serving as a mechanism to introduce innovative
lending solutions to otherwise inaccessible markets, particularly because of their targeting
of the public sector wage bills in African nations. Low oil prices at the start of the decade
briefly deflated growth rates in the likes of Nigeria and Angola sending a knock on effect
into consumer markets, dampening optimism over infrastructure and other capital projects
and causing inflation to soar when the oil price recovered. The initial mothballing of some
and five-year delays in many projects disrupted Nedbank’s increasingly aggressive pivot
north but long-term commitment to SME banking and enterprise development provided a
mitigation strategy. Competitors who shaped their Africa strategy around a public affairs
and public private partnership model from the outset offered fierce competition, offering
versions of the same integrated value which Nedbank did. Banco Unico, now wholly owned
by Nedbank performed consistently but there was concern over the sustainability thereof
and the impact on the balance sheet.
Admittedly, much of the temporary setbacks affecting Nedbank were beyond their control,
as exposure to South Africa’s domestic economic and social turmoil weighed down their
historically sound market base and game-changing innovation in digital banking alone
failed to offset these effects. The key to sustained returns lay in an enterprise development
thrust to their SME and entrepreneurship lending. Where Nedbank was strategically
superior to competitors, was in understanding early on the importance of fostering
innovative spaces for talent internally and by leaping ahead on the technological adoption
curve through creative partnerships. Time to market, hamstrung by a commitment to quality
service, reduced Nedbank’s edge as competitors developed comparative offerings.
Accelerated by the toughening environment, the hegemonic position of a bank as a
provider of financial services was supplanted by the notion that the digital highway could
be a social space where services are traded seamlessly. While Nedbank was late to this
game, the CEO’s responsiveness in recognizing this shift and adapting accordingly was a
game-changer for the bank. New digitally orientated entrants in the telecommunications
industry quickly provided for this need – and Nedbank was ready to partner. The cultural
shift resulted to capitalize on this jolting tectonic break implied a reformulation of the
hierarchical silos of banking as it had been known. For the generation of consumers
entering the fray Nedbank held promise as an innovative bank and an ally in the pursuit of
their owner-run enterprises. Nedbank had shifted their brand to imply a “world-class
service, grown in Africa”. This was key to success in urban settings where millions of young
Africans were bootstrapping themselves out of poverty through micro-enterprise, backed
by Nedbank.
Lines questioned the rationale for the five scenarios and Marius Oosthuizen revealed the
underlying analysis. The five scenarios were built on particular underlying trends identified
PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
in the financial services industry. Trends that were beyond the control of Nedbank and
would need to be navigated by the bank.
Underlying analysis: Trends shaping the South African financial services
industry
Marius Oosthuizen used a scenario-planning study by the GIBS Future of Business in South
Africa Project on the future of key sectors in the South African economy (Oosthuizen et al.,
2015), as input to the formulation of the five scenarios for Nedbank. This study examined
the key trends affecting the financial services sector. The study identified the following 17
trends relating to the regulatory environment, the industry, the global financial system and
to customer behavior and markets.
Regulatory
1. Encroaching policy and regulation affecting the industry.
2. Costly policy affecting the industry.
Industry
3. Sophistication of the industry.
4. Positive cluster effect between financial services institutions.
5. Bottlenecks in the IT Industry, especially in terms of infrastructure and human
resources which constrain financial services development.
6. Unsustainable
capabilities.
historic
competitive
advantages
eroded
7.
Pocketed skills compared to widespread industry demand.
8.
Lack of historic competition from external competitors.
9.
A “brain drain” and growing global competition for talent.
by
technological
10. A limited array of services tailored for SMEs.
11. World-class governance.
12. Risk aversion in terms of business lending.
13. Advantageous English language usage globally.
Global financial system
14. National ratings downgrades affecting lending rates.
Customers and markets
15. Low rates of savings by customers.
16. Growing FDI in Africa.
17. Proximity to untapped African markets.
Considering the following analysis of the relative “impact” and “uncertainty” of these trends
on the future development of the financial services industry in South Africa, it emerges that
five trends may be considered as critical to exploring alternative scenarios for the future of
the industry. These relate to the enablement of developments in the industry through
technology, the appetite of the back for SME business banking risk, competition and
availability of talent and skills and changes in the rate of foreign direct investment in the
region (Figure 1).
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EMERALD EMERGING MARKETS CASE STUDIES
PAGE 9
Figure 1 Impact and uncertainty matrix of drivers of change for the financial services industry in South Africa
The low uncertainty trends, irrespective of their impact, either high or low, would not require
exploration through scenarios because the absence of uncertainty implies that strategic
plans may readily be developed to respond. This may seem counterintuitive, but “low rates
of savings by customers”, though likely to have a high impact, is not uncertain and unlikely
to change. As such, the bank can respond directly to the trend. Comparatively, the highly
uncertain prospect of national ratings downgrades and unpredictable choices by key talent
to either stay with the bank or not, would be considered “wildcards”, because mitigation
and contingency plans may be developed but there is no concrete way of knowing whether
they will need to be enacted (Figure 2).
Based on the foregoing analysis, the study argued for the need for South African banks to
enhance their position relative to competitors by:
PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
Figure 2 Future scenarios logic for the financial services industry in South Africa

Adapting to an increasingly stringent policy and regulatory regime, particularly in
terms of cash reserves, which would drive up the business’ costs of service.

Develop organizational agility to offer adaptable service propositions to an
increasingly complex market landscape in the face of competition from nimble
technologically savvy start-ups and telcos likely to emerge in the continent.

Develop a robust business-banking offering to the SME market segment and
increase their risk appetite in this segment, in cooperation with enterprise
development partners and state initiatives, to unlock the potential of the current
drive for home-grown local economic development.

Mitigate the risks of unsecured lending by tightening lending criteria in light of a
poor economic outlook in the short and medium term.

Improve accessibility to African markets through alliances, mergers, acquisition or
organic growth, to take advantage of long-term growth prospects in African
markets.

Importantly, to aggressively explore disruptive technology, in connectivity, virtual
communication, big data and predictive analytics, as an enabler of financial
services independently of the branch-based banking model.

Finally, to consider how the combined advantages of a sophisticated industry
cluster in South Africa, high governance standards and English language usage by
South African banks can be harnessed to improve the nation’s financial services
sectors global competitiveness.
In addition to these observations, it was noted that Africa’s youthful demographics,
combined with trends in urbanization and rapid economic growth from the informal sector
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EMERALD EMERGING MARKETS CASE STUDIES
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to the formal, represented significant market opportunities for retail bank services
(Okeahalam, 2008). However, because of the historic void in supporting services, these
opportunities were to be found in pockets where longstanding firms did not operate and
were not prepared for. The growing need for “inclusive banking” represented an
opportunity for banks, but would require a learning curve in terms of brand, product,
service and culture. (Arora and Leach, 2005). Although governments in Africa were
increasingly alive to this need, the policy environment and regulations in many instances
prevented non-traditional banking firms from readily providing financial services to this
segment (Claessens, 2006). It meant that a wave of changes, both in terms of public policy
and business strategy would potentially converge to provide services to “bank the
unbanked” and unlock the bottom-of-the-pyramid market across the continent (Kostov
et al., 2014).
Recommendations to Nedbank area collaboration
First, it ought to be recognized that area collaboration forms an important microcosm of
what is required of the larger Nedbank group. By actively growing Nedbank’s
middle-market share through the work of area collaboration (AC), Nedbank is bettering
its position relative to the policy and regulatory encroachments considered above.
(Recommendation “a”) The AC “bank first” approach, whereby the client is approached
on the basis of what the bank in its entirety, not merely a single division, but various
products and services from various divisions can offer, to some extent introduces a
flexibility to the bank’s customer facing value proposition. (Recommendation “b”) It is
unclear whether the “micro markets” developed by AC have enhanced the bank’s
appetite for an increased risk approach to SME service needs or if these markets are
being actively pursued. (Recommendation “c”) Steps taken by Nedbank to tighten their
lending criteria for unsecured lending in retail banking, goes some way to demonstrate
a response to the poor economic outlook. (Recommendation “d”)
Nedbank’s stated strategy for entry into the rest of the African continent certainly
positions it strongly to take advantage of future opportunities there. (Recommendation
“e”) The introduction of virtual banking services through its Skype-enabled “video
banking” service located in select branches, demonstrates an incremental approach to
incorporate virtual banking into their service, while maintaining their commitment to a
“personal touch”. (Recommendation “f”) In terms of whether Nedbank is harnessing the
combined advantages of the industry in South Africa to grow into global markets is
beyond the scope of this case, but suffice to say the bank is positioning tactically to be
a global contender without seeking risky growth that would outstrip its ability to maintain
a quality value proposition. This is illustrated by the strategic decision to grow in Africa
through phased acquisition rather than investment in organic growth. While these steps
taken by Nedbank, in the analysis of this study, are positive and aligned to the apparent
strategic imperatives for the industry, they do not however address the implied
underlying uncompetitive cost structures of Nedbank’s longstanding branch-based
service model, a challenge shared by all South Africa’s “big four” banks, having made
decades of investments in costly and elaborate legacy systems now made redundant
by rapid advances in technology.
In addressing the 17 trends observed in the financial services industry, the consultants,
Marius Oosthuizen and his colleague, Dr. Caren Scheepers, an Organizational
Development specialist, recommended to Lines and his team that Area Collaboration takes
a leading proactive role in building their organizational agility. This would necessitate a
combination of cultural, structural, leadership and product adaptations, retaining a high
level of flexibility and remaining market-led.
PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
The consultants systematically analyzed the 17 trends and identified particular domains of
organizational agility that would be required to weather the storm. Table I below offers the
trends, agility domains and particular competencies, as defined by relevant skills,
knowledge and attitudes or mindsets that are required to meet the challenges that the
trends represent:
As Table I illustrates, Nedbank would need to take a leadership role in the industry and with
regard to specific competencies. For instance, contextual acumen is required to
proactively address trends in the regulatory environment. Leadership in sourcing,
developing and sponsorship of top talent represents an amazing opportunity for Nedbank,
as is the Innovation leadership role. Analyzing trends in Africa and seizing investment
opportunities represent an opportunity for a leadership and pioneering role in Africa.
Proactively influencing the spending patterns and leadership in national wealth creation
offers huge opportunities to Nedbank as a trusted partner in the development agenda of
African nations. Balancing progression and innovation with stability and integrative
responsible reporting presents another prospect to Nedbank’s leadership role. These
leadership roles are illustrated in Figure 3 below:
As Figure 3 illustrates, AC must play a leading role in building Nedbank’s organizational
agility domains to address the prominent trends. Capability in Talent leadership for
instance as well as Innovation leadership will serve the organization in the long term.
The culture of collaboration that the leaders in the different regions, representing a
number of area collaboration forums exhibited, is an impressive example of what is
possible with collaboration across clusters and as such is a role model to the rest of the
organization. The question remains how AC could be playing a leading role in its current
format.
The consultants, Marius Oosthuizen and Caren Scheepers recommended to Lines and his
team that alternative organizational designs or structures would need to be generated to
take advantage of the opportunity presented. At the point of the investigation around the
end of 2015, the collaborative structure that AC had in place, represented an integrator role
that the Area Collaboration Forums in the respective regions or geographical locations
played, with the central head office type structure delivering support. Galbraith’s (2008)
model on lateral integration provided a continuum from informal collaboration toward an
integrator, then a matrix structure and ultimately a separate line organization with full
integration.
The consultants recommended to Lines and his team that higher levels of integration were
required. The next step therefore on the continuum would represent a matrix organization.
In some instances, the AC structure already moved in that direction. The consultants
recommended that the next step, being a new line organization had to be created to play
the leadership in collaboration role. See Figure 4 below for a diagram of the cyclical pattern
on lateral integration.
AC represents the integrator role and agent in moving Nedbank toward the matrix structure.
The consultants recommended the higher form of lateral integration, where a new
organization structure is created. In addition to the collaboration aspect, the opportunity to
create a new prototype of leadership in innovation is also created by ring fencing the entity
from the larger older more bureaucratic segments of the organization. O’Reilly and
Tushman (2004) declared that the best means to encouraging explorative innovation is to
create a buffer between the innovative new structure to incubate the innovative solutions
and the rest of the organization. They called it the “Ambidextrous Organisation”. The
consultants Marius Oosthuizen and Caren Scheepers referred to this concept in
suggesting the new structure, where there are representatives from the different clusters to
create holistic integrative solutions to customers.
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EMERALD EMERGING MARKETS CASE STUDIES
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PAGE 14 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
National ratings
downgrades affecting
lending rates; Low rates
of savings by
customers
Growing foreign direct
investment (FDI) in
Africa; Proximity to
untapped African
markets
14, 15
16, 17
11; 12
Bottlenecks in the IT
Industry; competitive
advantages eroded;
pocketed skills; “brain
drain”; Lack of historic
competition; Lack of
services’ SMEs
World-class
governance; Risk
aversion in terms of
business lending
Encroaching and costly
policy and regulation
affecting the industry;
Sophistication of the
industry; cluster effect
1, 2, 3, 4
5, 6, 7, 8, 9, 10
Trend
Number
Global
financial
system;
Customers
and markets
Customers
and markets
Industry
Industry
Regulatory;
Industry
Type of trend
Skills
Contextual acumen
by gathering
“market”
intelligence on
future policies;
Analysis of
competitors and
industry trends
Talent
Sourcing,
Leadership
developing,
and Innovation Executive
Leadership
sponsorship of top
talent; Exploration
of innovative
solutions
Governance
Proactive
leadership;
compliance and
Risk
integrative
Leadership
reporting;
calculating risks
National
Influencing of
Financial/Wealth national spending
leadership
patterns and
wealth/financial
discipline education
African
Analyzing and
Leadership
synthesizing data
on investments in
Africa and
capitalizing on
opportunities
Industry
leadership
Agility domain
Table I Financial services industry trends and required organizational agility domains
Trends and patterns of investment
as well as future opportunities;
Insight into spirit of Africa
Global rating schemes and
proactively influencing indicators;
current and projecting spending
patterns
Basil and King regulation
frameworks
Disruptive technologies; top talent
leadership
Relevant Laws and White papers in
design phase; Industry life cycles;
Bank assurance benefits and
concerns
Creating a better future for all
and concern for national
impact of spending patterns;
making a lasting and broad
difference; spiritual acumen
Contributing to prosperity of
continent and inquiry into
investment opportunities
Order and structure to create
trust and stability and
proactive risk leadership
Openness and agility to adapt
to new required approaches;
agility to respond and be
proactive to top talent’s
requirements
Building networks with current
and future decision-makers in
government; Update and
broaden global contacts over
industry and related industries
Agility competence required to position organization
Knowledge
Mindset/attitude
Figure 3 Organizational agility leadership domains to address trends in industry
Figure 4 Cyclical pattern of lateral integration
Other scholars were also referred to by the consultants, such as Jansen et al. (2009) who
emphasize the importance of leadership to enable exploration of new innovative solutions.
A separate entity would also enable the creation of a culture that is more externally focused
and flexible, such as the “Ad hoc culture” described by Cameron and Quinn (2006).
Human Resources processes, such as reward systems would need to be aligned to
innovation goals, such as promoting employees who innovate. AC’s current focus on
geographical areas represents a location-based paradigm, an area or region or province
or country. A new way of perceiving the “areas” could be abstract market segments or
generations, such as digital generations or Generation Y, or professional groups, such as
medical doctors, and their specific needs.
The challenge then before the new entity of “Area Collaboration” would be to spearhead the
organizational agility domains. This entity will need to have “streams” or centers of
excellence in terms of the organizational agility domains, such as Talent leadership, where
VOL. 8 NO. 1 2018
EMERALD EMERGING MARKETS CASE STUDIES
PAGE 15
it incubates various work arrangements for top talent to be able to then deliver these
solutions to the rest of the Nedbank organization.
The handover to the rest of the business from this “prototype” business would then at that
point pose its own challenges. The opportunity to experiment and allow an idea to have an
incubation period would benefit these innovations greatly.
Keywords:
Competitive strategy,
Corporate strategy,
Dynamic capabilities,
Strategic management/
planning,
Banks/banking,
Decision sciences
As Lines was leaving his office for the meeting, he contemplated how he would persuade
his executive colleagues on his ideas of conquering the challenges that the industry trends
presented. Of one thing he was certain, though, he would like to clone or replicate what
they were doing at AC, deploying the concept in various ways like locusts into the rest of
the business.
Notes
1. Telco: vernacular term for telecommunications companies who rely on their dominance of
distribution networks, such as fixed line or satellite cellular communication for access to the
market.
2. Relational Bank: This term is selected on the basis of interactions with executives, not as an official
reference to Nedbank’s own stated strategy.
References
Arora, S.S. and Leach, J. (2005), “Towards building an inclusive financial sector: lessons from South
Africa”, Economic and Political Weekly, Vol. 40 No. 17.
Bowman, G. (2016), “The practice of scenario planning: an analysis of inter- and intra-organizational
strategizing”, British Journal of Management, Vol. 27.
Cameron, K.S. and Quinn, R.E. (2006), Diagnosing and Changing Organizational Culture,
Jossey-Bass, San Francisco.
Cheng, M.N., Wong, J.W.K., Cheung, C.F. and Leung, K.H. (2016), “A scenario-based roadmapping
method for strategic planning and forecasting: a case study in a testing, inspection and certification
company”, Technological Forecasting and Social Change, Vol. 111.
Claessens, S. (2006), “Access to financial services: a review of the issues and Public Policy
objectives”, The World Bank Research Observer, Vol. 21 No. 2.
Galbraith, J.R. (2008), “Organization design”, in Cummings, T.G. (Ed.), Handbook of Organization
Development, Sage Publications, Los Angeles, pp. 325-352.
Jansen, J.J.P., Vera, D. and Crossan, M. (2009), “Strategic leadership for exploration and
exploitation: the moderating role of environmental dynamism”, The Leadership Quarterly, Vol. 20,
pp. 5-18.
Kahane, A. (2012), Transformative Scenario Planning: Working Together to Change the Future,
Berrett-Koehler Publishers, San Francisco.
Kenney, S.H. and Pelley, B.A. (2014), “Stories that drive the future: how narratives can improve
scenario planning”, Strategy & Leadership, Vol. 42 No. 5.
Konno, N., Nonaka, I. and Ogilvy, J. (2014), “Scenario planning: the basics”, The Journal of New
Paradigm Research, Vol. 70.
Kostov, P., Arun, T. and Annim, S. (2014), “Banking the unbanked: the Mzansi intervention in South
Africa”, Indian Growth and Development Review, Vol. 7 No. 2.
Okeahalam, C. (2008), “Client profiles and access to retail bank services in South Africa”, Applied
Financial Economics, Vol. 18 No. 4.
Oosthuizen, M., Pooe, T.K. and Durrant, K. (2015), Alternative Future Scenarios for South African
Mining, Manifacturing and Financial Services, Gordon Institute of Business Science, University of
Pretoria, available at: www.academia.edu/12323358/Alternative_Scenarios_for_South_African_
Mining_Manufacturing_and_Financial_Services
O’Reilly, C.A. and Tushman, M.L. (2004), “The ambidextrous organisation”, Harvard Business Review,
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PAGE 16 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
Ramirez, R. and Selin, C. (2014), “Plausibility and probability in scenario planning”, Foresight, Vol. 16
No. 1.
Van der Heijden, K.A. (2005), “Option planning”, Scenarios: The Art of Strategic Conversation, John
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Further reading
Harris, G. (2014), “Four blind alleys of scenario analysis”, Strategy & Leadership, Vol. 42 No. 6.
Wang, H. and Chang, W. (2001), “Fuzzy scenario analysis in strategic planning”, International Journal
of General Systems, Vol. 30.
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Exhibit 1
Figure E1 The business lifecycle
Exhibit 2
Figure E2 NEDBANK Dagwood on cultural transformation
PAGE 18 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
Exhibit 3
Figure E3 NEDBANK’s Africa footprint via Ecobank
Exhibit 4
Figure E4 Building blocks to being the most admired bank
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Exhibit 5
Figure E5 Overview: NEDBANK’s 2014 financial results
PAGE 20 EMERALD EMERGING MARKETS CASE STUDIES
VOL. 8 NO. 1 2018
Exhibit 6
Figure E6 NEDBANK’s long term outlook of South Africa and Africa
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Exhibit 7
Figure E7 Exporting sector expertise to Africa
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Exhibit 8
Figure E8 NEDBANK’s liquidity risk management framework
Corresponding author
Marius Oosthuizen can be contacted at: oosthuizenm@gibs.co.za
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