One of those big companies that have learned to act small in this way is E*Trade, the online bank and brokerage house. It did so, explained Mitchell H. Caplan, the CEO of E*Trade as well as a friend and neighbor, by recognizing that behind all the hoopla around the dot-com boom and bust, something very important was happening. “Some people thought the Internet was going to revolutionize everything in the world with no limits-it was going to cure the common cold/' said Caplan. Sure, it was hype, and it led to crazy valuations and expectations, which eventually came crashing down. But meanwhile, with much less fanfare, the Internet was creating ”a whole new distribution platform for companies to reach consumers in a whole new way and for consumers to reach your company in a whole new way,“ Caplan said. ”While we were sleeping, my mom figured out how to use e-mail and connect with the kids. My kids were instant-messaging all their friends. My mom figured out how to go online and check her E*Trade balances.“
Companies that were paying attention understood they were witnessing the birth of the “self-directed consumer,” because the Internet and all the other tools of the flat world had created a means for every consumer to customize exactly the price, experience, and service he or she wanted. Big companies that could adapt their technology and business processes to empower this self-directed consumer could act very small by enabling their customers to act very big. They could make the consumer feel that every product or service was being tailored for his or her specific needs and desires, when in fact all that the company was doing was creating a digital buffet for them to serve themselves.
In the financial services industry, this constituted a profound change in approach. Historically, financial services was dominated by large banks, large brokerage houses, and large insurance companies that told you what you were getting, how you were getting it, when and where you were getting it, and the price you had to pay for it. Customers reacted to these big companies with emotions ranging from apathy to distaste. But if I didn't like the way my bank was treating me, I didn't have any real choice. Then the world was flattened and the Internet came along. Consumers started to feel that they could have more control, and the more they adapted their buying habits to the Internet, the more companies-from booksellers to financial services-had to adapt and offer them the tools to be in control.
“Sure, the Internet stocks blew up when the bubble burst,” said Caplan, whose own company's stock price took a big dip in that market storm, “but underneath, consumers were getting a taste of power, and once they tasted it, things went from companies being in control of consumers' behavior to consumers being in control of companies' behavior. The rules of engagement changed, and if you did not respond and offer customers what they wanted, someone else would, and you would be dead.” Where once the financial services companies acted big, now they strove to act small and to enable the consumer to act big. “Companies who prosper today,” argued Caplan, “are the ones who understand the self-directed consumer.” For E*Trade, that meant thinking of the company not as a collection of individual financial services-a bank, a brokerage, and a lending business-but as an integrated financial experience that could serve the most self-directed financial consumers. “The self-directed consumer wanted one-stop financial shopping,” said Caplan. “When they came to our site they wanted everything integrated, with them in control. Only recently, though, did we have the technology to really integrate all our three businesses-banking, lending, and brokerage-and pull them together in a way that didn't just deliver the price, not just the service, but the total experience they wanted.”
If you came to the E*Trade site just three or four years ago, you would see your brokerage account on one screen page and your lending on another. Today, said Caplan, “On one page you can now see exactly where you stand in terms of your brokerage in real time, including your buying power, and you see your bank account and the scheduled payments for your loans-what is pending, what is the balance on your home mortgage, and [what is your] line of credit-and you have the ability to move seamlessly between all three to maximize the benefit of your cash.”
While Fadi Ghandour coped with the triple convergence by taking a small company and devising a strategy to make it act very big, Mitchell Caplan survived by taking a big company and making it act very small so that his customers could act very big.