KEY BISCAYNE, Fla. -
"You can't be everything," he said. "You have to make a choice. Choose something. That's the hardest thing to do. You have to pick one. You can be top at one thing, good at another thing and average at everything else."
In choosing that "something," a credit union is taking a step toward developing real loyalty among members-the key to decommoditizing a credit union's business.
"There are members and there are members-loyal members, not just those doing transactions with us," said Steve Williams, principal, Cornerstone Advisors. "Credit unions have small balance accounts with high volumes. Credit union frontline staff have pricing guilt. Retail banks continue to unbundle to go national."
Williams said that another challenge credit unions face is that CUs have a lot of staff, which may not be very profitable.
"Credit unions have a lot of small accounts with a lot of handling," he said. "They need to figure out how to make that profitable."
Williams said that in order to ensure the future of credit unions, the group of consumers that should be focused on are those in Generation Y.
"It's a market that could really do something unpredictable," Williams said.
Something else important to keep credit unions strong, Williams said: "We have to start lending value to the customer."
"What does your credit union's investor presentation look like," he asked, focusing on features including: branch expansion, organic member growth, product and service growth, expense control and mergers.
2008: The Year Of Soul Searching
Williams stressed that credit unions really need to start thinking about their future.
"To me, I think 2008 is a year of soul searching," he said, adding that it's also a time to think about strategy.
"Strategy is all about finding a way to be different," Williams said. "Avoid a laundry list of strategic planning. You have to pick a place to compete. Our seg used to be our focus. That's changed because of competition. Now we're wide open."
Williams said that a credit union can be "top" at one thing, "good" at another, and average at everything else, but that the importance of picking one thing to be the top is critical.
"What are you building your organization around?" he asked. "Product, price, access, service or experience?"
Williams took a vote of the about 70 credit union leaders present at the session. Of those, 10% answered product, 7% price, 14% access, 40% service and 29% experience. "There is not a right answer here," Williams stressed.
"Product is a really tough for a credit union, I think," Williams said, going through each item from the list. "If you're going to compete on product, this is where collaboration kicks in. How do we collaborate better?"
"Price is also tough," he said. He then posed another question for voting to the group of attendees.
"In terms of loan rates, my credit union's strategy is to be:" he said, asking participants to fill in the blank.
From the people surveyed in the room, the results were:
1) best in the market -2%
2) best 10% in the market -33%
3) top third in the market -31%
4) right in line with market averages -33%
5) slightly worse than market rates -0%
As far as access, "Can we really compete on convenience?" he asked. "We're still not where our competition is."
"In the next five years, our credit union plans to expand its branch system by:" he then asked the audience to fill in the blank.
From those asked in the room, 15% said by more than 50%; 20% said 25-50%; 31% said 10-25%; 15% said 0-10%; and 10% answered 0% or less.
"It's an interesting question," Williams said. "I bet if I asked this a year ago, the numbers would have been higher."
For the subject of "service," Williams used the example of Nordstrom.
"They have key aspects of a real service culture," Williams suggested. "Hiring and orientation. Training and development. Performance management. Process and quality management. Service measurement. Accountabilities and incentives. Branding and communication."
The Quest For Service Excellence
He then turned the question to the credit union leaders in attendance again asking them to fill in the blank: "In my quest to become a best-in-class provider of service like the Ritz-Carlton or Nordstrom, I would say my credit union ..." The answers he received were:
1) has finished this journey -2%
2) is getting close to being an industry leader -12%
3) is more than halfway there -59%
4) is less than halfway there -24%
5) What's service? -2%
For the topic of "experience," he said it's difficult for financial institutions to "play in the experience economy," the way Starbucks or ESPN Sportszone does. "Going to your financial institution is like doing laundry. It's something you gotta do," he said.
Perhaps the most important thing to do to ensure the future for one's credit union is through technology, Williams said.
"The Internet is fast becoming the computing platform," he said. "Software as service becomes the norm. Social networking will grow up. Collaboration will become the new way of knowledge work," he added, through things such as wikis, blogs and tagging. "And social networking drives GenYers," he said. "This will drive a lot of behavior in financial industries 10 years from now. Online tools and information will play a key role. Someone in your marketing department needs to come through, researching this."
In order to really be able to decommoditize, credit unions need to do a combination of many of things he discussed throughout the session, Williams said, not just one.
"You need to make choices," he said. "Get serious about 'How are we different?' You can get there by having those heart-to-heart conversations. Let's really be honest about where we are in the marketplace."
