Shinsei Bank Case Study

1. Rise of Shinsei bank:

• How LTCB failed/bankrupt. : Established by Govt in 1952 with a motive to fund post-World war Japanese basic industries. Successful until 1980s, the bank faced bad loan debts/nearly $40 billion in nonperforming loans due to its exposure in real estate, bubble burst and fall of land prices in 1990s.

• The firm was nationalized and Purchased by US private equity fund company in 2000: Ripplewood Holdings
• Ripplewood restructured LTCB as a commercial bank, Shinsei Bank
• Innovations and Customer-focused Models.
• Implement New IT systems

CEO Yashiro moved quickly to establish Bank Business in three areas:

1. Commercial
2. Retail
3. Investment

Shinsei was committed to providing an improved, customer-focused model with such conveniences as internet banking, 24-hr cost free ATMS and fast service based on real-time database reconciliation.

1. CEO agenda:

• In addition to revamp existing commercial-banking operations, Revolutionize retail banking in Japan by offering high-quality products and services on a convenient, easy-to-use, low-cost based unique and innovative approach.
• Innovations to get competitive edge over other banks in the market.
• Existing IT systems were not capable to support bank’s existing corporate business adequately.
• Improved Customer-focused model.

CIO Role: Designed a modular, flexible infrastructure that is based on simplicity and parity.

Complete overhaul of IT systems to deliver a new robust, modular, flexible and adaptable IT systems that could scale with growth and adapt to new opportunities that the dynamic business would create.

Two approaches: Big-Bang approach (would be too risky) or incremental method (would be too slow).

So, they adopted an approach to first place a new, modular infrastructure that initially would function in parallel with but eventually would supersede the current infrastructure.

Dvivedi’s Vision:

• Focus on business issues to be solved first… Break the problem into small logical pieces and then find solution for each. Look for the standard component/solution in the market if available, otherwise asked one of their partners to build a new component which should be reusable. So components were reused by to build various products and services.

Guidelines to make processes more efficient:

1. Speed: How fast? Work in a step-by-step process to achieve the deadline. Reuse of components allowed the team to make new capabilities with minimal testing.
2. Cost: How low cost can be? Can save in costs by using existing systems to build new IT systems and save time too. It was not required to build everything from scratch.
3. Capability: What new capabilities IT will enable? Changes in old technology.
4. Flexibility: Infrastructure to be designed in a flexible way so to make it expandable to address growing operation needs, changes in business. Reusable components, use of alerts to notify employee to manage workflow.
5. Safety: Secure systems? Break the problem into small pieces so issues can be tackled for each independently. Security of data sent over network.

• Developing and organizing the technology
• Use of public internet technology
• New business strategy would be to serve retail customers
• Outstanding customer services.

OUTSOURCED WORK: Outsource the work to third-parties (Indian software services) where internal development skills were lacking. Remove the dependencies for smooth work. Establish the relationship as Partners instead of suppliers.