Last month I spoke to ANZ’s shareholders about four big shifts which are redefining the future for ANZ and for business - global integration, demographics, resources and technology.
"If you think about the integrated nature of the global economy, we’re clearly living in an age of tectonic change."
Over the summer break here in Australia, I’ve reflected on these and the growing uncertainties in the geopolitical and economic environment. It’s clear now, more than ever, it’s critical we get ahead of these shifts because the world is changing fast.
Today we live in an age where the spirit of Moore’s Law - the theory computer processing speed doubles every two years - seems to apply to many areas of life: from the adoption of new technologies, to urbanisation, to the impacts of climate change.
In a fast changing world, it’s increasingly clear we need to take quantum leaps rather than make small incremental jumps to really take advantage of the forces shaping business and the opportunities they are creating.
However I told shareholders there is another important reason why we need to get closer to these big shifts: it’s because it will help us to be better at engaging with the big issues we as a society are worried about.
I think it’s fair to say that at times large companies like ANZ can have a tendency to behave like ‘citadels’ – huge fortresses which have been built for defence and designed to protect the status quo.
But this is changing. Alongside the significant opportunities that exist, the world is now a much more transparent, connected place led by communities and conversations enabled through digital technology and social media. It also faces some serious challenges. People want to know that business is listening and they want to know what business is doing to be part of the solution to those challenges.
Of course, business can make a positive difference – if we step out, listen and engage constructively on the real issues people are concerned about. And to do this, we need a strong understanding of the macro-forces reshaping our world.
To my mind global integration, demographics, resources and technology are the four big shifts that are most relevant to the world- and ANZ - which are gaining momentum.
If you think about the integrated nature of the global economy, we’re clearly living in an age of tectonic change. Global trade flows have already tripled since 2002.
Alongside those global trade flows come exchanges of people, exchanges of ideas, exchanges of aspirations and an understanding of different cultures.
And a globally integrated world has the power to transform lives by lifting people and indeed their countries out of poverty.
The first wave of globalisation was, of course, driven by the United Kingdom, and the second was led by the United States.
Today, we are seeing a third wave of this big shift. This is not old-school globalisation dominated by the industrial economies, but a new wave led by emerging economies, many of which are in our region.
In Asia Pacific, this transition is also being driven by the structures and agreements that are now being put in place to facilitate trade and investment flows.
Regional banks like ANZ have a pivotal role to play in this shift and we need to be in the thick of it: facilitating trade and investment whilst building trust between those joining the new integrated global economy.
And as we continue to grow our business in the region, we also have to be vigilant those we deal with comply with the highest social and environmental standards.
As a bank, we have always stood by people and companies that work hard to build good businesses; we are the bank for those who want to step out and take advantage of the new global economy.
The second big shift is the world’s changing demographics.
Throughout the world, the size, age and geographic pattern of the global population is changing. From rapid urbanisation to rapid ageing…we need to anticipate the new demands this creates.
It’s a complex, fast-moving picture. The shape of the family is changing at speed. Incomes are rising. The Asian middle class is growing. Birth rates are falling. Health developments are driving life expectancy up.
All of this is occurring against a backdrop of rapid urbanisation. Around 45 million people in Asia are moving to cities each year. By 2050, two thirds of the world’s population will be urban and we will see dozens of new megacities.
Inevitably, these changes bring new challenges. As cities become larger and denser, infrastructure is becoming more complex and more costly. Concerns are growing about the financial security of an ageing population. Health services are under real pressure.
And as the world grapples with these changes, we want ANZ to be out there, understanding the issues, looking at the opportunities being created, and asking how business innovation can solve some of the emerging challenges.
The third big shift I want to talk about is the increasing pressure on the world’s resources.
There will be two billion extra people on the planet by 2050 – many of them members of the new middle class, living resource-hungry urban lifestyles.
There is undeniably a widespread concern about the world’s ability to manage its resources fairly and efficiently. We need resilient economic and political systems to meet the growing demand for food, water and energy, as well as for essential commodities such as iron ore and copper.
There is also concern about the use of carbon-intensive resources in the generation of energy.
We know our customers and the broader community are concerned about climate change. We know a growing number of Australians see it as a ‘serious and pressing problem’.
In China, we are seeing a big focus on reducing pollution including carbon emissions. This in turn is seeing growing investment in renewable energy including solar and wind farms which in turn is boosting the global position of Chinese producers.
Even the world’s biggest producer of coal acknowledges ‘the challenge of decarbonising energy’.
ANZ is a large financier in the resources and energy sector. We are also Australia’s largest financier of renewable energy, supporting wind and solar power projects as well as hydro and geothermal power stations. And we have a long-term target to increase our lower-carbon gas and renewables portfolio by 15 to 20 per cent by 2020.
Decarbonising energy is a shared challenge for governments, for business and for the community. I know the finance sector will continue to address this challenge and we want ANZ to be playing its part.
The final big shift is technology.
When I joined ANZ, seven years ago, few would have predicted that goMoney, our mobile banking app, would be our largest retail banking channel, processing $100 billion in transactions since its launch in 2010.
The pace of technological change is accelerating every day. And it’s creating a profound cultural shift in banking. For 179 years of ANZ’s history, the branch network has been at the core of our psyche but now that has changed to digital almost overnight.
Asia is leading many aspects of the technology shift. A teenager in Shanghai is more likely to have a social media account than their American counterpart in Seattle. Almost twice the proportion of people living in Singapore own smartphones compared with those living in Europe.
In the business world, there are many who still underestimate the impact of technological change. At ANZ I want us to fast track the change to a digital culture.
We need to embrace the change in customer behaviour technology brings, and to make sure we are offering the best possible digital services. We need to adapt to the widespread disruption of traditional business models, and make sure we are helping our clients thrive in these exciting but challenging times.
So, these are the four big shifts, and these are the areas I want ANZ deeply engaged with.
Already we have made a great deal of progress. In part that’s because ANZ’s super regional strategy is more than just a strategy. It is a mindset we have created in the bank that recognises we are part of a shared journey with the four billion people who live in the Asia Pacific region – a journey to build a more prosperous, secure and sustainable bank in a more prosperous, secure and sustainable world.
Today however, the big shifts which are reshaping our operating environment are no longer occurring at an evolutionary pace, they are happening at a revolutionary pace.
My job as ANZ’s chief executive officer is to ensure we successfully adapt to this rapidly changing environment and that we deliver value for all our stakeholders over the short and indeed over the longer term.
Increasingly though this means we need to think and behave differently: to not be content with the status quo or with incremental change.
And in a more transparent, connected world, we have to do more to step out of our comfort zone and engage with the conversations about the macro-forces which are reshaping our world to ensure we stay relevant to our customers and to the community.
These conversations may be challenging but I believe they will help stimulate new thinking within the bank and about the bank.
Most significantly, I believe they will help us ensure we are ‘future ready’. And they will help us play an even more positive role in supporting our customers and our society.
I know we have a lot to do to realise this aspiration. Let me know what you think about the four big shifts and what you think about ANZ’s progress.