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

Define Your Strategic Competency

A strategic competency is rarely if ever a single thing. It is usually a mix of three elements:

Skills: A skill is any manual or mental activities that result from talent, training or practice.

Process: A process is any manual or mental systematic series of actions that are directed toward some end. Include any significant "know-how" resident in your credit union.

Knowledge: Knowledge includes any information, data, or understanding of facts, or principles resident in your credit union.

A strategic competency must be strategic in nature. For example, if you are the best at how to hold an employee birthday celebration, it doesn’t have much strategic value, because such celebrations are not going to directly improve your relationship to your members, or your competition.

A strategic competency is something that can be used over a long period of time, and it usually knowledge based. It is something that should elevate you above the industry norms and provide an advantage in the marketplace.

A strategic competency must pass four specific tests:

Is it a combination of skills, process and knowledge?
Does it differentiate the credit union from the competition?
Does it create strong value for the member?
Is it difficult to copy?

If you don’t get a resounding "yes" to each of these questions, you should be skeptical that you have a strategic competency.

-- Russell

Why Do You Sell What You Sell?

When I ask this of my clients and their boards of directors, I see a few blank stares, I get a moment of two of silence and then I hear generic justifications. I don’t want justifications, I am asking for you to look at your product and service line and one by one explain why this is being offered to your membership.

This exercise should cause other questions to be raised. Such as:

When did we start offering this and why?

How does this fit with our future direction?

Is this a profitable product or actually a drain of resources?

How well do we sell this?

How well can our front line staff explain the features and benefits?

What percentage of our membership actually uses this product or service?

Do we want more members using this product?

If yes, how do we make that happen, if no, why are we still offering it?

Sometimes in the evolution of a credit union products should be dropped and new ones added. I see many credit unions holding on to products because back in 1982 it was a hit and some of the board members remember those days. That product may no longer apply to the markets you are currently going after.

There is no advantage to offering everything. Strategically, it is much better to offer fewer products and services you do extremely well, than to divide your efforts too thin across areas with minimal return.

One client doing this exercise realized, of the 80 products and services they were offering; only about 35 really were of benefit to enough members that made it justifiable to keep in the credit union. Streamlining your products and services not only help your focus, but makes it easier for your front line employees to be better acquainted with what you are offering so they can more comfortably sell it to help the members with this financial needs.

-- Russell

The Next 15 Years are Only 5 Years Away

It’s 1992. The internet is barely in the public eye, cell phones are still for the rich and famous, the youngest president since Kennedy is taking office, and the recession is about to give way to a booming era of commerce. Looking back 15 years, how much has your business changed?

What shifts have you seen in your marketplace, technological leaps, your member expectations, your employees’ need for information? I think most of us would agree the last fifteen years have brought about a huge amount of change in how we do business. Many credit unions made the correct decisions and projections to still be able to be in business and some didn’t. Some credit unions are barely hanging on to their position they held against the competition fifteen years ago and some credit unionsw have risen to the top of their fields, commanding respect and getting increased market share and profits. How did those credit unions do it?

Three basic factors determined their success and those same factors will impact the success of credit unions over the next 15 years, which will happen in the next 5 years..

1. Accurate projections

The ability to project future trends of the marketplace, members and employees is to have an upper hand on most competition. Typically, when working with credit unions on their strategic plans I ask executives to project fifteen years out what the industry will look like. What changes are required to be successful. And, those projections usually come true…in five years.

The key to effective market projections is to be tuned in. Some CEO’s focus their energies on the day to day, getting caught up in the problem-solving of the organization and lose the bigger view, thus projections are short-sighted and inaccurate because they are not focusing in the correct area of their role as lead executive.

What cutting-edge knowledge are you listening to, accessing, and learning through seminars that keep you in tuned with future trends? Executives need to be retooling their knowledge every bit as much as the front line supervisor does to work with the new generations of workers. Proper projections give you advanced notice (although not nearly as much as you think) to prepare and make the proper developments for the new trends once they arrive.

Making accurate projections, even if they happen in one third the time you think they will, give you the opportunity to be proactive and make advances on your competition.

2. Taking the risk

Once a CEO has confidence in his or her team’s ability to make good projections, action has to be taken in order to make those accurate projections to pay off. This is the gut check. I’ve heard many executives talk about their abilities to make things happen, yet when it comes to putting up the money to make it happen, their confidence heads south and they are filled with excuses for not taking action. Executives need to decide if they are playing to win or playing not to lose.

Assume your projections of an industry shift in fifteen years will dramatically affect your business. Knowing that it most likely will take only five years for this shift to happen, are you ready to take the risk today to be proactive and prepare for that shift? Is your board of directors supportive of this action? If not, do you care if you job is on the line if you are wrong?

The “corner office” is no place for the weak at heart. Confidence is required to take risks. Risks are required to be proactive. Being proactive is required to be at the top of your industry. Take the risk based on confidence your projections are accurate and reap the rewards while the excuse makers continue to play safe and fight fires of their own making just to survive.

3. The luck that comes with preparation

Every successful business has been blessed with a lightening strike of luck at some point along the way. There is no doubting the lucky seem to keep getting luckier. Without going in to the whole law of attraction tangent (which I do believe in by the way) the reason luck comes to those who are lucky is because they expect it and they are ready for it. Preparation for the big windfall is critical in making the windfall a success. Some companies can actually grow too fast when hit with the lucky break to the point of bankruptcy because they weren’t ready for their good fortune. Some companies don’t get the luck because they never saw it coming and never say it pass them by.

The TV show Friends made superstars out of its six main cast members. Were they simply lucky? What about the actors who turned down the opportunity when those roles were offered to them? Simply unlucky or were they unwilling to take a risk for a new type of programming? Those that accepted the roles were prepared to grab at the opportunity. They projected it would be good, were willing to take the risk and were prepared when the opportunity was presented.

Success as an individual or as a credit union requires these three elements to work in harmony to achieve the best you can become. They used to say it takes fifteen years to become an overnight success, at the pace of today’s world; it’s only five years away – if you are ready to make it happen.

-- Russell

Find the Rarified Air for Best Returns

Credit unions have had a wonderful run of being a one-size-fits-all for members, but those times are disappearing just like the credit unions who are still trying to be one-size- fits- all. As the financial services market becomes extremely commoditized, credit unions are typically going after the easiest opportunities. Volume sales with shrinking returns only lead to a point of no return.

The best returns on your credit union strategic initiatives will be from carving a specialization niche in your market place. The harder to reach, the more work required, the less the competition and the greater the rewards. Are you ready to go after the opportunities where you can eliminate the competition?

How are you defining the markets you want to serve, not necessarily the markets you have been serving?

If you've typically had a manufacturing base of membership and your board is populated with those type employees, how flexible are you able to look at changing directions? Sometimes we are afraid of the answers we might find therefore we don't even ask the questions. But if you have the opportunity to ask the hard questions, here are questions that will improve your growth opportunities.

Some hard questions to ask yourself:

Is the foundation of my membership growing or shrinking?
Is the average age of my membership increasing or decreasing?
Is my loan portfolio growing or shrinking?
What is the profile of my perfect member?
How can we serve that perfect member in the best ways?
What changes would we have to make in order to attract and serve the perfect members?
Would the perfect member be willing to pay more for a perfect fit with a credit union? I'll give you the answer to this one -- YES!
Are we able to make the shift to smaller market share, yet a more profitable market share? If so, what would be required?

The credit unions willing to take this hard line approach to the future will in fact have a future that is more about thriving than surviving.

-- Russell

Don't Just Define Your Market: Dominate It

One of the areas most credit unions misunderstand is market segmentation. Having exclusive SEGs or a community charter-type boundary isn’t enough of a market segmentation approach. You don’t just want to be a player in the market you want to dominate a segment of the market.

Important point: You don’t want to satisfy every member and you don't want everyone to be a member.

I'll bet you read that at least twice because you couldn't believe your eyes. You can't be all things to all members successfully. As I mentioned in a blog entry last week I've seen credit unions offer up to 80 different products and services, no doubt in an effort to try and satisfy every need of their members. This is a wonderful idea in giving great member service but it begs the question: How can you be great at all of those products? The real answer is you can't. It's best to decide which products and services you can excel at and hit the market hard in those areas.

Which is better, to be an adequate option on a wide range of products thus making you a commodity, or to be the best at a select number of options where everyone sees you as the best at those things?

If your members shop your credit union as a commodity then they have little or no loyalty and will shop everyone else as well, which means your members only see you as an option.

When you dominate a market segment through proper positioning as the best in those products, your members and prospects will seek you out as the best in this area. Loyalty is high when members seek you out for specific services. This is how you get to be the PFI for those members.

Good market segments are usually made up of members who think about and buy your products and services the same way.

Ask yourself the following questions:

What are they buying?
Who is Buying
Why are they buying?
How do they buy?
How will they use what they buy?

How you answer these questions will point you in the direction of market segments you may want to hone in on so you can be the dominant player in the market.

-- Russell

Strategic Planning for Credit Unions - Thinking About Opportunities

In my opinion, opportunities are the key to great strategic planning. You've never hear of, for example, a company that became great by fixing all of their weaknesses, or avoiding all of their threats - and you never will. That's because great success comes from taking appropriate risks to make great opportunities pay off. Every great business success story is based on this - and yours should be based on opportunities, too!

When you consider opportunities for a credit union, it's helpful to remember that there are many different types of opportunities. Not all opportunities are, for example, going to come from the business development folks. Let's take a look at the main types we have seen in the past.

First, all opportunities can be broadly classified as either "market-based" or "internal". Market-based opportunities are specifically opportunities that will succeed or fail based on the reaction of the marketplace. Classic examples of market-based opportunities are new products (such as a seniors club) and entry into new markets (such as a new employer group or geography).

With market-based opportunities, we can further break down our options into four categories:

1. Current business (current products sold to current members)
2. New product augmentation (new products sold to current members)
3. New market augmentation (current products sold to new markets)
4. Diversification (new products sold to new markets)

Although it looks like a good way to ameliorate risk, diversification often turns out to be the most risky of these four options, because you are giving up your strategic competency in doing what you do for your current member base.

In my next post, I'll discuss the different types of internal opportunities.

-Robert