Old Biz Model Vs. New Realities
There's a lesson for credit unions to be had in Napster, the famous or infamous, depending on your point of view, music sharing service. And it isn't that people like their music free.
Instead, said Mark Meyer, the Director of Innovation at the Filene Research Institute, what credit unions can take away from the emergence of Napster and other online file swapping services is that the consumer wants to drive the market, not have it dictated to them. While record companies continued to push what they had always known, albums (followed by CDs) of music from one band or performer, consumers wanted as little as one song and to burn their own CDs. The explosion of Apple's i-Pod only demonstrated that reality even more strongly, he added.
"What did the music industry try to do? It tried to protect its business model," observed Meyer. "What about you? Are you still trying to protect your ROA because that's your business model?"
As the opening keynoter at The Credit Union Journal's Best Practices conference, Meyer challenged credit unions to develop a discipline of innovation, noting that "operational excellence is no longer enough. Every credit union does it. Credit unions need new ideas to achieve growth." To emphasize his point, he showed data demonstrating the long slide of credit union ROA.
Filene's i3 Group, which Meyer oversees, is an incubator for such innovation, and he outlined several of the ideas currently percolating or in pilot tests. What is clear, he said, is that "innovation only happens when you show it in the marketplace and demonstrate sustainability.
One sustainable advantage for credit unions is their very structure, according to Meyer, who acknowledged that many CEOs dismiss the cooperative nature of credit unions as having any relevance in the market. "People will say, 'Our members don't care about being member owned or democratically run or not for profit.' Oh, really? That's one of your core differentiators. It's not easily replicated by your competitors."
It is that very issue, along with the experience the member gets, he said, that comprises the member brand. He pointed out that "if a bank with a name like Umpqua" can build a successful following, credit unions can't complain about their own challenges.
The question Meyer said every credit union must ask itself is this: "What do you do so well that your members are out telling the world?"