Belgian companies that want to stay relevant need to think about extending their business abroad. KBC Corporate Banking helps them with their international strategy. Conversation with Senior General Manager Corporate Banking Wim Eraly and Chief Economist Jan Van Hove. ‘The human factor is often underestimated.’
The Belgian economy is a traditionally open one: in a small country like ours, any company with ambitions to grow is more or less obliged to look beyond the border. For that reason, a lot of mid-caps face the same challenge: any firm wishing to remain relevant will have to internationalise sooner or later.
KBC Corporate Banking has been the runaway winner of the satisfaction surveys held amongst Belgian businesses for the last three years in a row. What’s the secret of this special relationship with our local mid-caps? A smart network and international expertise, but most of all a strong and personal relationship with the client.
What developments have you seen in this internationalisation in recent years?
Jan Van Hove: ‘Things have definitely speeded up. Competition in the European market is intensifying, which means that as a Belgian entrepreneur, you virtually have no choice any more. The countries Belgian businesses are moving into are evolving too. Although we have a long tradition of international trade in Flanders, this can occasionally clash a little with Flemish culture. Lots of businesses like to keep things very local. The first generation of a family business, in particular, almost always focuses on the local market. Internationalisation happens only tentatively, which means firms initially look primarily to northern France, the Netherlands, Germany and Britain. That tendency is beginning to shift: we’ve noticed in recent years that Flemish businesses are increasingly looking towards markets further away too. Flemish firms are doing remarkably well in Central Europe, for instance.’
Wim Eraly: ‘We’re seeing a greater orientation towards exports in our other home markets, too: Bulgaria, Hungary, Slovakia and the Czech Republic. But Flanders is a leader when it comes to international trade. Internationalisation is still largely in its infancy in our other home markets. If they evolve in the same way as Flanders in the years ahead – and we expect that they will – there are huge opportunities for local mid-caps there too.
What’s the biggest challenge for firms taking the first step abroad?
Jan Van Hove: ‘There’s the human aspect, the psychological hurdle. Leaving your own market is a big leap. You shouldn’t underestimate that. And then there’s obviously the economic challenge: where do you start when it comes to developing an internationalisation strategy?
You have to invest to enter a new market: you need a network, financial muscle and information about the market in question. The government can help – Flanders Investment & Trade does some great work, but there are limits to their support. Obviously the government can’t provide financial advice or supply financial products to support international expansion. That’s where the services offered by financial institutions come in.’
KBC Corporate Banking boasts an exceptional network.
Wim Eraly: ‘When internationalisation is such an inherent part of business life, you have to know what’s going on abroad to advise your clients properly. I don’t believe you can support Belgian mid-caps in their international activities without the help of people on the ground. Companies with international ambitions need local expertise in the markets they’re looking to enter. What’s the legal situation? How do we finance transactions? How do people do business? How do you find appropriate staff? That’s what your international network is for.’
‘We’re obviously not the only bank with a network abroad, we make a difference through the smart way ours has been designed. We’re present in the markets that really matter to our clients here. If you look at the ten most important export markets for Flemish businesses, you’ll find us in seven of them. That’s no coincidence: we realised, for instance, that Italy had become an important market, so we followed our clients there and opened a new branch this year in Milan. And although the European market is still the most significant one for Flanders, we’re gradually shifting that centre of gravity towards Asia, where we’ve been active for over 20 years. We don’t bother with markets that aren’t relevant to our clients.’
Jan Van Hove: ‘By making smart choices, we can build our know-how faster. Some of our competitors have opted for broader networks, but that means you lose your specialisation in the markets that are important to Belgian companies.’
Wim Eraly: ‘The focus of our people on the ground is even more important than the locations where we’re present. They work exclusively for firms that operate in our home markets. Belgian clients see that as a major difference compared to other big banks, whose international networks work on behalf of businesses throughout the world. To them, Belgian clients are just a number. Not to us.’
‘KBC is the only major bank with a Belgian decision-making centre and an international network focused on home market clients. That means we can quickly align ourselves with our clients.’
In addition to that smart network, you have a Belgian decision-making centre. How does that benefit Belgian businesses when it comes to providing advice?
Wim Eraly: ‘Our decision-making centre in Belgium means we can align ourselves quickly with our Belgian firms, including when they make the step abroad.’
‘We take a close look at the businesses and give them an idea of how far they can jump. You obviously have to know the firm in question very well to do that. The fact that we work close to the decision-makers in Brussels means that we can offer our clients rapid and maximum support.’
‘We extend those close ties with the client to our international branches. Whether the client turns up at a branch in Brussels, Hong Kong or New York, we know precisely who they are, what they do in Belgium and precisely what they need. Local expertise and strategic advice are only meaningful in so far as they’re accessible to the client. Some banks develop into conglomerates, with foreign branches employing thousands of local people. We deliberately work with small teams who know their clients personally. That’s what we mean by our slogan, “doing business in your language”. Our international staff not only speak Dutch, they also know the client and their needs. You don’t find the same combination of an international network and anchoring in the home market at any other major bank.’
What does that mean for the client?
Jan Van Hove: ‘When you deal with a conglomerate, you’ll find it is perfectly capable of assessing a local market. But that’s only half the story: those people don’t know your business specifically. It’s something you often see with firms whose international adventure goes wrong: they try to enter a market under their own steam, but fail to correctly estimate their own productive capacity or financial muscle.
KBC knows the context of the clients in the Belgian market, which means it can look for the perfect match abroad. It’s precisely that element of customisation that is important for a realistic international strategy.’
Wim Eraly: ‘The way we work enables firms to change gear quickly. One of our clients came to us, for instance, with a takeover opportunity in the United States. Before the day was out, we’d discussed a financial construction and put the client in touch with the relevant KBC people in America. Because our decision-making centre is in Belgium, we don’t have to send files abroad for consideration, we can sort everything out quickly. Short lines, local expertise and accessible contacts. The same client could also have worked with an American banker, of course, but that would have been more difficult. It feels more distant: there’s a cultural difference. And it’s slower too. Firms don’t want to have to keep telling their story over and over.’
‘Competition in the European market is intensifying, which means that as a Belgian entrepreneur, you virtually have no choice any more’
That takes a streamlined organisation behind the scenes.
Wim Eraly: ‘KBC’s strong integration, here and abroad, certainly didn’t happen by itself: it took hard work, including on the so-called ‘soft issues’. Teams have to be able to work together optimally, so we had to deal with a whole lot of bottlenecks. Today, all 800 of Corporate Banking’s employees share a common goal and have completed the same team training. It makes no difference to us whether a client takes out a loan in Kortrijk or Hong Kong, so as they are happy. We take that a pretty long way: when we evaluate figures, for instance, we no longer look at separate branches but at the whole. It wasn’t always like this. Someone in New York, for example, might say, “fine, but that transaction is too small for us”. Or someone else could insist that a transaction had to take place there and nowhere else. All that’s gone now: the big picture is what counts. It means the client has no internal hurdles to negotiate. “One bank, one team” is how we put it and that’s how we work.’
‘We also put our client as centrally as possible in operational terms. We use a ‘pitstop’ model: as soon as a client comes in, they’re surrounded by a team, just like a Formula One car having its tyres changed. Our staff form a complementary team, because they can take over one another’s tasks when necessary. The team is driven by the client’s needs, and everyone is jointly responsible. We don’t have back office people saying, “not my problem”. Even the physical set-up of our offices is geared to this: no cubicles or traditional departments, but teams grouped around particular clients. We’ve worked hard to achieve that mentality, which is now embedded in each staff member’s DNA. It’s the client that counts.’
To conclude, KBC Corporate Banking’s watchwords are ‘close, personal and smart’. What precisely do you mean by that?
Wim Eraly: ‘We talk about being close, because it’s our ambition to serve our clients better than anyone else. Our relationship managers and our sales force have to do their homework. Not only about the business itself, but also the eco-system in which they operate. We don’t just want to know about their finances, but also what makes them tick, what their digital plans are, their challenges and their opportunities in the future. So that we can support them at each of those stages.’
‘Personal means that, although we’re firmly committed to innovation (which you’ll read more about in the next few days), we’re convinced that the personal link with the client remains essential. At every level. I myself, for instance, see at least two or three clients a week on an individual basis. Why do I do that? You can’t be a commercial organisation if the senior people don’t know the clients and what they’re all about. Hence the emphasis on “personal”.’
‘Smart, lastly, is primarily a statement that we don’t sell standard products or strategies, but that we offer higher-level advice. We do that based on the thorough knowledge we have about each client. We’re certainly not describing ourselves as smarter than anyone else, – it’s more a commitment to the principle that we and our clients together can be smarter. It’s through effective collaboration that we achieve the best results.’
The financial challenges of IBA
those wishing to export expensive capital goods to such markets.