In a recent Super Community Bank Forum, Thomas K. Brown of Donaldson, Lufkin & Jenrette shared his ever-evolving and always insightful advice for bank executives. Here is what Mr. Brown is saying:
The industry is undergoing dramatic change. We must not underestimate its magnitude and its pace. The difference between winners and losers will be excellence in engagement and execution, as well as achieving economies of speed versus economies of scale, because most companies are changing much too slowly.
Deregulation, demographics, globalization, financial-market innovation, and the move from the industrial age to the information age are reinforcing continuing business trends. Depository institutions continue to lose profitable market share. Meanwhile, consolidation accelerates and intensifies as management teams consider the magnitude of the challenges lying ahead, and often throw in the towel.
Retail and small-business banking continue to be the greatest growth opportunities in our business. There are also opportunities to make money from investment and savings products because baby boomers are turning into savers. The implications for bank managers are clear:
Winners must excel in engagement. They must have a clear vision and a tremendous sense of focus which they repeatedly and consistently communicate to their team members. Employees need to feel that it matters what they do. They must be empowered to achieve success. The word "empowerment" has been overused and underimplemented.
Engagement means that employees' spirits do not die at the door every day. It means that all team members are engaged every day in getting the job done and bringing the company to the next level.
"Customer-centric" is not just a buzz word. Customer-centric organizations look to create value for specific customer segments that are particularly valuable to the shareholders. They go for volume that also generates value, not just volume at any price. To achieve that, companies need to overhaul marketing programs and start attracting the kind of employees who can create value for high-value customers.
Retail equals detail. Our business is about blocking and tackling, every single day. The best information systems will fall flat if employees do not use them properly. The sales process needs to be used on every customer. Its effectiveness greatly depends on information-based marketing.
A good salesperson can use information to follow up on direct marketing through effective interactive marketing. Customer knowledge gained through continuous testing and refinement, and executed through an effective sales force, is a critical, sustainable competitive advantage.
Accelerate the change process. The life cycle of the sneaker is six weeks. It takes us too long to bring our products to market. We have to learn from Nike and from other premier companies that have reduced time to market. Being nimble and implementing change in a flexible fashion are essential.
Properly define your competition. Our competition is not just the banks, thrifts, and credit unions. Just because we can't measure the quantitative impact of Merrill Lynch, the Money Store, and Countrywide, it doesn't mean that they are not true competitors that cannibalize our customers every day. Properly defining the universe of competition is the first step toward identifying competitive advantages and effectively dealing with competitive thrifts.
Focus, focus, focus. "Diversification is protection from ignorance," says Warren Buffett. And "you've got to understand what you're doing better and mercilessly focus on it," says Andy Grove, chief executive of Intel.
Success depends on the ability of diversified companies to deliver monoline intensity in every line of business and distribution channel that they own. Creating too-complex visions or uncrisp goals is a prescription for failure.
Focus, engagement, and meticulous execution will deliver sustainable competitive advantage.
