Thursday, September 27, 2007

Strategic Planning - The Role of Culture


Quite a few executives I’ve met would prefer to treat strategic planning as an inorganic black box that, given certain inputs, flawlessly produces expected outputs. Many people who think this way about strategic planning are otherwise brilliant people with strong quantitative backgrounds – which probably explains the tendency to want to treat management as an engineering problem. Now, to be sure, we can often benefit from the objective treatment of our strategic issues as dynamic systems to be tinkered with, but we must never forget that our strategies, in the end, rely upon the behavior of people.

People are wonderful – at their best, bright, creative, and thoughtful. People are also unpredictable, and in groups, their behavior is rarely as manageable as we would like. Within any organization, employee culture can be either and asset or a hindrance to strategy – so it’s very useful to look at steps we can take to create a culture that works with our strategy, rather than against it.

-Robert

Tuesday, September 25, 2007

5 Choices for Market Segment

Market segments fall into categories such as cash cow, dog, star, etc. Once you’ve identified where your market falls in these categories, you have five different options in taking action. Not every market you are currently involved in should have a strategy to grow and expand, in fact, some markets after close analysis might be best to completely leave. Select one market segment you currently serve and decide which of the following approaches you want to take.

1. Expand

Analysis of the selected market segments indicates this market has great net income growth potential, or could be an under served area with minimal competition. When you decide to expand you want to take an aggressive approach to market share growth and penetration. Expansion in a market means you want to grow your share of the market more so than the growth of the market itself. For example, your market share for this exercise is college students for the university you serve. You have determined that there is great opportunity to grow in good income generating products in this market even though the student enrollment at the university is expected to be stable. The market itself is not growing significantly, but your presence and number of members served can expand significantly.

  1. Maintain

Maintaining market share does not mean ignore it and hope everything stays the same. In fact, market share maintenance might take a vigorous defense strategy if a new competitor has entered the market, if the market segment is shrinking, or if due to lack of effort in previous years your name in the market place isn’t top in the minds of the members. The goal for this approach is to expect to hold steady the current position in the market and at least grow at the same pace as the market is growing.

  1. Contract

Credit unions at times offer products and services with minimal benefits to the credit union or the membership as a whole. To contract would be to shrink product offerings yet maintaining more profitable products and services while increasing new income from the market. Selectively eliminating those products and serves is a scaling back yet still growing in net income.

  1. Milk

To milk a market segment is to say you have reached your maximum growth potential, have a solid return on your investment in serving the market and you simply want to have minimal investment of resources while continuing to maximize your returns. Some markets that have been served for a long time and are going through the maturing process are best served by milking.

  1. Withdraw

Withdrawing from a market is exactly what you think; pulling away completely over a period of time. If you are involved in a market that no longer fits your credit union profile, has no growth potential, or is shrinking fast then the best strategy is to look in a different area and begin the process of getting out. Credit unions are not required to go down with the ship, so to speak, and it is the wise leader who knows when its time to make a choice to withdraw before any significant damage is done to the credit union.

-- Russell

Tuesday, September 18, 2007

Strategic Planning - Process Leadership Checklist

These are the things I think you need to have in place before you start your first strategic planning meeting. Keep in mind that the Simplified Strategic Planning process is structured to require a minimum of preparation, so you may need much more preparation if you are attempting another approach to strategic planning.

First, you must have commitment. There are 3 areas where this is crucial: number one, the CEO or president must be committed to support the process and the implementation of the resulting plan. Secondly, the management team also needs to commit to support the process and implementation, and third, both groups - especially the CEO - need to commit to participation in the meetings following a pre-set schedule.

After commitment, you need to prepare your team. Number one, you need to make sure you have the right people selected for your team. Number two, you must assure that the team is adequately trained to participate in strategic planning (although this may be less important if you are using an outside facilitator who is also able to train the team). Thirdly, you need to select a team leader. This person will have different roles, depending upon whether you use an outside facilitator to run your planning meetings.

Once your team is prepared, you need to arrange for your meetings. This includes setting dates and assuring that everyone on the team can attend on the dates you have chosen. Also, you will want to arrange for meeting space, which should be away from your offices and branches, to help separate the team's thinking from day-to-day tactical issues. Finally, you need to assure that the appropriate materials will be at the meeting site - flipcharts, projectors, books, worksheets, and anything else you feel you might need to conduct a good strategic planning meeting.

So here is the basic checklist, in outline form:

Get Commitment
-CEO commitment
-Team commitment
-Participation commitments
Prepare Team
-Select strategic planning team
-Train strategic planning team
-Select strategic planning team leader
Arrange meetings
-Set dates
-Arrange location
-Arrange for materials

-Robert

Friday, September 14, 2007

Beware of Bright Shiny Objects

On a recent board retreat we found it difficult to stay on task as it was easy for certain board members to get distracted. We would be discussing a topic of importance and in the middle of a comment a board member looking outside would suddenly say “Look a fish just jumped out of the water!” And, this was the person who actually had the floor before he was distracted.

We joked that he is easily distracted by bright shiny objects. So are credit unions executives and boards.

Credit unions executives and volunteers some times forget about the credit union’s strategic competencies and see a service or ad campaign or unique approach a competitor is using in the marketplace and they want to do it as well.

Bright shiny objects (BSO) are those things that distract you from your strategic focus, that take your drive in a different direction from the vision, that consume time that could be better used elsewhere.

The BSO effect happens even more so that we are all becoming somewhat afflicted with Attention Deficit Disorder (ADD). A common practice in credit unions with BSO syndrome is to constantly be adding products, finding the new and unique marketing campaigns regardless of the branding of the credit union, and anytime a competitor adds a new service then we have to add that same new service. This diffuses efforts and focus and makes the credit union get away from whatever it is they do best in the marketplace.

I’m not saying never shift your product mix, I’m saying be sure it fits what you do best before chasing a BSO.

Strategic planning retreats are rife with BSOs. Most retreats are at nice places, with ancillary activities planned for the good time factor we feel we owe our volunteers. The problem with this set up is that most executives and boards are being distracted by the beach, the golf course, the fishing charter, shopping trips and what is happening out the window rather than focusing on the focus of strategic planning.

On one retreat a body builder competition was in town and guys in skimpy Speedo-type clothes we doing a pose down for pictures outside our windows. The meeting came to an abrupt halt, we lost momentum, and the BSO factor was high!

In your planning process be careful not to be distracted by what all services and products you can offer just because either they sound cool or the competition is offering them. Stay focused.

On your board planning retreats work to minimize the BSO factor so people are truly engaged in the discussion and know how important their focused energy is to making the credit union develop along its strategic competency.

-- Russell



Saturday, September 8, 2007

Competition and Strategic Planning

Competition is one of those things that makes strategic planning tricky. Without competition, we could set a strategy to get members and know it would work. But all potential members have a plethora of choices for their financial service needs. What this means for you, as a credit union manager, is that all members - and potential members - will evaulate your offerings in the light of competing possibilities. These possibilities may be other credit unions, banks, or, indeed any institution offering financial services.

Let's take a look at why this will affect your strategies. Let's say you design your offerings, based on extensive (and perhaps expensive!) consumer research, to appeal to the average member. In a competition-free market, this is an excellent choice - your advertising will hit home, market penetration will increase, and your members will be happy.

In any market with competition, however, this strategy may lead to deteriorating financial performance. Why? Because competing institutions are likely to pursue the exact same approach - and have a similar appeal to members and potential members. When a potential member sees advertising, for example, from two different institutions that have the same appeal, his or her choices will be driven by other factors. If you and your competitor are both selling great service, this person may choose to join your credit union because you spent more on advertising, or maybe he will choose your competitor because their rates are lower. The problem, of course, is that almost any reason this potential customer may have for choosing your credit union is going to cost you - and your members - money.

Let's look at this same market, but instead of having two institutions promoting service, let's say you promote greater convenience. If everything else is equal - you spend the same amount on development, advertising, etc., and have the same rates and fees, some potential members will join your credit union because of convenience - and other will join your competitor, because of service. The service-oriented member will prefer your competitor, while the convenience-oriented member will prefer you. This is a much better situation, because you will not be forced to out-spend your competitor in any area - other than convenience. Strangely, consumers tend to prefer this scenario, because it offers them clear, believable choices.

Obviously, this is an oversimplified situation, and naturally, all members want both service and convenience (and great rates, promotions, relationships and a ton of other things!). But there is a very important lesson in this example: you will have lower costs and better performance if you use your strategic planning to be where your competition isn't. The corollary is also true: the more your strategy looks like a competitor's, the less money you will make.

-Robert

Wednesday, September 5, 2007

Action Plans: The Work of Successful Plans

The strategic planning document has been written, the vision established and the mission statement agreed upon; now its time for the work to happen. It's easy to understand a vision, objectives and goals, but the real meaning of a strategic plan, the part that determines whether the plan is a success or not, is how it is implemented. And, this is where most plans fall apart.

Research shows that American businesses typically meet one third of their objectives in a strategic plan. Adding in action plans to the strategic planning process increases that accomplishment rate to about 60%; however, if you closely follow the strategic planning process being outlined here and utilize the implementation process being layout out, you should achieve 80% to 90% of your quality, service, financial and strategic objectives.

The action plan should be no longer than two pages in length with fewer than 30 action steps. The heading of the plan should have the full description of the objective, date of last revision and list all parties involved in the action plan. This is mapping out the road to success for this objective. If you have 6 objectives you will have 6 action plans. The worksheet of the action plan should be divided into columns like a spread sheet. Each column should be clearly labeled. Such as, Action number, Priority, Action step description, Who is involved, Estimated time to complete this step, Money, Starting date, and Completion date.

Be sure action steps don't turn into on-going activities. A step has a beginning and an end and moves the objective forward. Be concise. Instead of saying "monitoring drive thru wait time" write "establish drive thru wait time monitoring system."

Everyone has a full plate of work and adding a full set of action plans and a list of action steps can appear to be daunting and they frequently get shuffled down the priority list. By using an action plan system, it is the best way to incorporate this body of work seamlessly into daily activities. Thus, making it more likely items will stay on course and actually get done properly and on time.

-- Russell