How the Geek Way helped Allica Bank become Britain's fastest-growing company

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0:41We look forward to seeing you there. And my definition is two-part. For me, a geek is somebody who gets obsessed with a hard problem and is willing to embrace unconventional solutions. And for me, the patron saint of geeks is probably Maria Montessori, who about 100 years ago got obsessed with the problem of how do you educate young children best and came up with the Montessori educational method, which is this radical departure from the industrial scale model of schools that was dominant then and sadly still dominant now. So think about Maria Montessori when you think about a geek. Okay, so there's a definition.

1:21And then how do you define the geek way that you're talking about in the book? What is the GeekWay? So the particular geeks that I got excited about that led me to write the book were not educational geeks like Maria Montessori. They were business geeks. They were a group of people, you know, concentrated but not exclusive to the West Coast of the U.S., who got obsessed with this problem of how do we run a company in an age of really fast technological change and lots of uncertainty? And in particular, how do we avoid some of the classic dysfunctions of the Internet era? And the GeekWay is what they've come up with.

1:53It's the business model or the culture or the set of norms that they've settled on to try to accomplish that really hard goal. That's Andrew McAfee talking about his book, The Geek Way, to Harvard Business Review. The Geek Way offers a playbook for how to run a company. It suggests that technology entrepreneurs like Mark Zuckerberg, Jeff Bezos and Reed Hastings at Netflix are not just technology geeks, but business geeks who have studied business stories from the past in great detail to understand how to run their own companies. The book says that these technology companies are actually misunderstood.

2:32They've learned not just how to build great tech, but how to improve running a business. I was recommended the Geekway recently by the chief executive of a UK company who said he had learned a lot from it. What makes the recommendation particularly interesting is that he is the chief executive of the fastest growing company in the UK. So he's clearly doing something right.

3:03I'm Graham Ruddick and this is the Business Leader Podcast. In this episode, we speak to Richard Davis, the chief executive of Alica Bank, the fastest growing company in the UK over the last few years, according to a collection of different reports that track this. Alica Bank is a digital bank for small and medium sized businesses in the UK. Davis arrived as chief executive in 2020. He arrived to what was effectively a blank sheet of paper. Alica had just won a banking license from UK regulators, and it had investment from venture capital firms. But its founder had departed, and Alica had loaned just£5 million to businesses.

3:44Davis had had a fascinating career up to this point. He had worked for established banks such as Lloyds, Barclays, and HSBC, but he'd also worked for fast-growing startups. He'd been the chief executive of Oak North Bank at its launch, and was then Chief Operating Officer at Revolut, where he worked as number two to the founder and chief executive Nikolai Storonsky. To give you a sense of the growth of Alica Bank since Richard Davis joined, its 2024 annual results showed that revenues had more than doubled to£191 million. It's gone from£5 million of loans on its balance sheet in 2020 to more than£3 billion in 2024.

4:25that's why Richard Davis book recommendation is so fascinating

4:32I definitely sound kind of a bit of a magpie so love to kind of see what others have done may have experienced it firsthand or may have sort of been able to know someone's been there or read about what they've done so yeah I think big believer in how you try and assemble what best practice looks like probably also a big believer that that often doesn't look like traditional company or traditional management theory i think a lot of that stuff is wrong and the last decade of companies very rarely have followed traditional management practice in how they've built the company for us we've probably tried to get a bit more of an all-round culture and sort of skill set than someone like revelry who's very very heavy on sort of engineering and data and we do deeply value that but i guess because we're often touching into sort of fairly complex domains from a sort of customer and banking point of view and we do kind of believe in sort of the human relationship model as well as tech it's it's how do you blend the skill sets right so a couple of my folk here have said it's it's by far the most diverse place that works yes you've got that 26 year old engineer that's come out of a completely different sector very skilled in engineering.

5:49But you've also got that 55-year-old that's spent their whole career in Lloyds Bank and NatWest Bank before that and has a really deep domain of the customer and the products. When you talk about traditional management practices there, what do you think over the last decade has proven to be either wrong or not right for this new generation of tech companies? yeah i mean probably the best summary book i've read on this is i think called the geek way uh it's sort of a good study of like a lot of tech driven companies that have been very successful and what's powered that and uh kind of one of the things i've published a blog on this 11 ffs sites recently i one of the things i think a lot of large companies get wrong but also many startups get wrong is execution is such an important thing and iterative execution is like super crucial so the view that you can get decisions right via lots of upfront analysis and brainstorming i think is fundamentally wrong you're generally best off sure do some work up front something none you need reasonably high sort of accuracy of decision but that could be gut feel it could be research, it could be whatever, but get the thing live, get it working with some clients, then iterate it very fast with those clients to develop it.

7:17And so that ability to execute, to get something live, to get feedback, to iterate is, I think, often what sets companies apart. And it's very different to the classic process of ivory tower thinking, ivory tower design, right, and slide decks are us everywhere. so yeah i sort of have a very very big belief that sort of that execution cycle of seeing something working out what you can do about it doing that thing and then learning for what you've done and go through the cycle again and repeat that across your product and service set as fast as possible is how you build competitive advantage over time how hard is that to adapt to for some people this could the fundamentally obviously involves the idea that you put something out into the world that is not polished, is not necessarily to the highest standard that you think it can get to.

8:06How much adapting does that take for people? Yeah, I think that's a particularly interesting question, right, in what is a highly regulated environment of banking. And so when I talk about putting something out there, we will try and think really hard, right, about ensuring that that service is suitable for the customer and is compliant. We don't compromise on that. but you can often though have a fairly small set of functionality day one versus trying to build the whole thing or you can have a lot of the back end be fairly manual not fully scalable day one because frankly what you need the service for the customer changes a lot the automation you might build in the back end is likely to have to change anyway it's wasted work so it's that kind of classic how do you get 5, 10, 15 live use cases, learn very hard about that and then as you take that from 10 to 100 to 1 ,000 you build the scalability, the automation behind that.

9:08One of the challenges for a new bank is winning customers from the established players. Bank customers, whether they are a consumer or business, tend to be really entrenched and have little interest in switching. Alica has set about trying to change this by building products it says are so good it becomes irrational to ignore them. To date I'd say we're really doing a dramatically better version of what already is out there which I think is somewhat a low bar right I think just sadly this space has been vacated by most of the major banks and no matter what their PR says right It's just not true.

9:48They've been cutting back on all the client-facing staff, haven't really invested properly in the digital services for this segment. They have for consumer, but not for this. And so I'd say part of the reason we've seen such fast growth is the bar's fairly low, right? We think we can do a lot more than what we've done already in terms of the long-term vision for the services. I mean, it's not that we haven't done some stuff that's better, but the sort of things I think we're looking or thinking we can do dramatically better is, for example, the speed of decisioning. Like on a loan, that tends to matter a lot.

10:26We're really quite a bit faster. Our average is about two days. Typically, it's many weeks, but a combination of existing machine learning models and some of the sort of AI for ingesting unstructured data, we think we can move quite a portion of that to sort of immediate, which is quite a step change in the experience from weeks. We're very interested in how working capital, so the sort of not that long term loan, but that sort of money that sort of is needed as you sort of as you grow your own business to finance the purchase of stock or the fact you've got some growing number of debtors as your business grows, which classically was done overdraft.

11:08My overdraft is collapsed, right? It's 60 % reduction in smaller business overdrafts over the last 15 years. Complete market failure from major banks. We would love to play a role in solving that as we go forwards. And then also on deposits, I won't say too much because we're about to launch this next month. But for some sectors that have large deposits, we're going to bring in an innovation that's around the security of that money that's not been seen before. You've touched on that there and you started the answer by saying to date. Does that mean that in the future you are looking at doing things that haven't been done yet?

11:48100%. I mean, that deposit one's probably a great case of point, right? We're going to launch that for certain sectors, really sectors that look after larger amounts of other clients' money, right? So a solicitor or a pension firm or whatever. And going to launch an innovation that we don't think has ever been seen in the UK market. I don't know about beyond that, but that sort of gives the clients government level protection for their money, for all of their money, not just for the£85 ,000 that's covered by the Financial Services Compensation Scheme. How ambitious are you for this business? What can it become?

12:26Very, I guess. So I mentioned earlier that we'd love to be a 10 % plus share of the market over the next couple of years. and if you can get there it's unlikely you stop at that point we'd love to be providing some form of service or product to at least 15 20 of the this market in the midterm which at which point you are really shaking up the market right you sort of you look at what's happened in consumer banking with the aggregate market share of Revolut Monzo Starling I mean that really shook up the consumer current account market and you saw massive investment from the major banks in their mobile apps their web apps to respond and they're now pretty good and honestly i guess from our purpose point of view which is to try and give drumasky better service to this segment we'd kind of love to see it happen right we'd love to be the people that force investment from the major banks because even if we're 20 of the market in the future which would be amazing it's still 80 And so we'd love the whole market to be pushed upwards.

13:34That bar that's been too low to be raised significantly. Given Alica Bank's work with established businesses in the UK, Richard Davis is ideally placed to offer his thoughts on the UK PLC and the opportunities and challenges ahead for businesses. Don't do like a business survey. People do like the Federation of Small Business and British Chamber of Commerce. I think, sadly, they're generally finding sentiment has been some of the worst since COVID on record. We do, I guess, our own sort of indicator of that would be things like lending demand month to month. And sadly, we did see around the budget quite a drop there, which I think was indicative of, I think we'd over-talked down the economy and I think businesses were concerned about some of the changes that were coming.

14:28I'm pleased to say that seems to have gone away like February versus January, December, November it's a lot better in terms of lending demand so it does feel like maybe some of that confidence is returning but certainly a big believer that we have to sort of talk up the economy and talk up small business confidence goes a long way in business and we have to be thoughtful about what policies do for small business i'd love to see more focus on that as we go forwards the uk has been pretty good at a place to start a business venture capital funding ideas talented people but not great at then turning those promising businesses into large companies why why do you think that is one of the biggest challenges facing those businesses so i know people talk a lot about capital i don't know if it is that because i mean if you look at alak's own investor base our first investor was was british fund called warwick capital sort of came in during the license process and has invested more since the other two investors atlaya capital and tcv which is a silicon valley growth fund atlaya new york based tcv is is california based so there is yeah you can raise capital as a uk firm from non-uk investors so i i think it's like weak excuse to say that that's necessarily a barrier you've just got to prove you're a great company right to raise capital that's the hard thing right is how do you prove the metrics fast enough to to have the capital um i don't think that changes in different jurisdictions um i guess there is a bit of a market size issue on the uk right like clearly us is a massively bigger market than the uk and california itself is much larger economy than the uk as are i think at least three or four other states in the US.

16:23So in terms of your ability to scale like US or China or India you have just a massively bigger domestic market and I do personally think the reduction in access to EU has hurt right. I mean Revolut benefited from that. Revolut used pre-Brexit the ability to passport into all European countries to scale very quickly and has a very large European customer base i think that would be harder today so uh that i think is something that we have to solve for right by trade agreements uh because ultimately if your domestic market is the size of a u.s state you have got a disadvantage on that and if you can't spread globally more easily that that that that will hinder things a bit there's also a stock market question people talk about for longer term and some people list on on uk or so they go to nasdaq maybe european one like amsterdam um and maybe a bit contrary on this i think a lot of the talk is lazy about the uk stock market the uk stock market has very few growth companies on it so you are taking a bit of a bet to list on the uk stock market because they're mostly traditional x growth companies but it's not wise seems to have done pretty well actually with the uk stock market this thing um and i know as a very international investor base so the like international investors will come to london stock exchange right for great companies and equally nasdaq right if you're sub maybe 10 billion dollars you're pretty damn small cap in the us market so like you're unless you'll have a big US presence, you may get lost there.

18:06So I think a lot of the chat's a bit simplistic on this front. What do you think Gallica will do? I don't know. I mean, clearly I follow it, but we are in the fortitude position. We're not thinking about that sort of thing right now, and there's probably a whole bunch of fintechs in the UK that will do something first, right? Yeah, I mean, not a minute. It's going to be my follow-up question, because it's interesting, because none of them have done it yet. I mean, five years ago, you probably would have sat there and said, surely in five years' time, one of Starling, Monzo, or Revolut will list.

18:40And none of them have. And they all seem very happy with that. And is that partly because the venture capital market has evolved so much that you can now get so much bigger privately and raise money privately before you even need to consider whether you want to list in the stock market? I think that helps for sure. Yeah, as in you can stay private for a very long while. and so Reveille you've seen them do some secondary to allow liquidity for early investors without any IPO I guess clearly the interest rate rising did create some shock to tech markets I guess probably may have delayed some people's IPO thoughts certainly when you look at it seems okay-ish right now And I'd say the rumors you see or hear, the sort of hiring you see or hear, when you hear people are hiring lots of investor relations people, right?

19:37It's probably a clue in that. It does feel like some people are prepping, right? For the next 12 months or so. I think I love the government's growth mission. I think that's really important. I do think it's too much sort of about big business right now, right? It's let's go and listen to big business and see what they want. I'm not sure that's where true growth comes from. I do think that's the small and medium-sized companies that actually should power growth, right? And I guess we would talk about a few things, right? One is, I mentioned overdrafts earlier, that it's kind of some big market failures have happened in SME finance over the last 15 years.

20:15And I think those need addressing because it's sort of what I call productive credit for small businesses, I think has reduced, sure, there's credit, but I know someone buying an existing property asset of someone else which is useful, but it's not really growing the economy's capacity. And things like when capital finance and finance that helps companies to grow is, I think, paramount. There's more of that. So one thing in particular we are strong advocates of, there's actually a really good scheme called the Growth Guarantee Scheme that has a government guarantee that takes some risk and then a lender takes some risk to help support businesses that don't otherwise have security alone.

20:59And you look at the UK economy, it's 80 % service sector now, tech and also other services. Those guys generally don't have the traditional security of a factory or a crane. And so I do think that's a really important problem to solve. And I do think the collapse in some areas of productive SME credit relates to that growth of the service sector. We'd love to see the government get on the front foot with that growth guarantee scheme and expand it. Because from our research, we see that scheme is three to four times smaller than Germany, France, US, relative to the size of the economy. So it does feel like we're missing a big trick there that other countries are much further ahead on.

21:48So we'd love to see that changed and improved. And the other thing, it's going to come out shortly, but there's a consultation on the deposit insurance scheme threshold for small business that is currently aligned to consumers. It's£85 ,000. It's not been revised since 2010. It's been a tiny bit of inflation since then. We think that needs serious revision because, I mean, the average customer that's not a microbusiness, the average sort of established business is holding well over that level. and we think that constrains competition for those savings and as a result of that these businesses are getting really poor value we publish research on this every month and we estimate there's about nine billion pounds a year being missed out on in interest by these these businesses so we think that should be addressed because that's money that should be going into those businesses local economies rather than just obviously going into large bank profits

22:52You've been listening to the Business Leader Podcast with me, Graham Ruddick. Our producer is Anushka Tate. For more business case studies and masterclasses, please check out businessleader.co.uk.

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