The chief executives of Australia’s large banks have every reason to be apprehensive about the challenge Mark Bouris is now throwing at them.
Rarely in history has a challenge of this sort been mustered against the big banks and, if it is successful, it will change the role of the chief executive in Australia. It will also threaten bank profits and/or term deposit rates via lower margins.
Because Bouris appears in popular television shows like Celebrity Apprentice it is very easy not to take him seriously as a chief executive and a real challenger to banks.
But behind those appearances and the regular advice columns he writes for Fairfax newspapers is a plan to create a CEO brand as part of a public company (Yellow Brick Road) that can be harnessed to take a substantial share of the home lending and other banking markets.
When Bouris operated Wizard Home loans in the previous decade Bouris showed that he understood the home lending market as well as anyone in the land. He sold the business to GE for $500 million but still played a big role in the operation.
GE later sold Wizard for a token amount as part of the difficulties encountered in the global financial crisis.
But the Bouris challenge to the banks via Wizard was minuscule compared this one. The current challenge was carefully put together step by step. First Bouris set up a branch distribution system via the Yellow Brick Road public company. Compared to bank distribution networks it is small but, in the computerised world, you do not need an elaborate distribution system. In addition the technology cost of entry to banking products is much lower than it was in the Wizard days.
The second step is to gain access to wholesale, government guaranteed deposit funds and Bouris is doing that via his deal with Macquarie. Later he will probably securitise mortgages.
The third step is foster a climate for anti-bank attitudes among the home borrowers and he does that via his columns in the Fairfax press.
Then finally you launch home loan products that offer much lower rates of interest than the banks. And Bouris is marketing those low-cost loans via advertising credits he built up with the Nine Network.
That’s an amazing combination and it is rare for established players to have such a competitor suddenly emerge. It will be a year or two before the full impact is assessed.
But as Bouris gains traction many CEOs are going to relook at their own role. A great many CEOs think that marketing is confided to half-yearly speeches to the legacy institutional shareholders and a journalistic lunch or two. CEOs are going to have to take a very different approach as they seek to reach stakeholders whether they be customers, suppliers or self managed fund shareholders.
Of course they will not try to duplicate Bouris, but they will still take a much more public approach to CEO marketing.
I have been fascinated that that Marius Kloppers, the chief of Australia’s largest company BHP, is suddenly changing his CEO marketing rules. His divisional heads are becoming more prominent and Kloppers personally took journalists to see the US gas revolution where BHP is a major player.
Kloppers did not change his approach because of Bouris or because he was under succession pressure. Kloppers recognised the game was changing.
Bouris is merely accelerating that trend.