A Great Time to Be a CU CEO? Apple Is Old School? Say What!
Here's a sentence you don't often hear unless the words "league meeting," "it's raining/snowing out tonight," and "open bar" are also included: "It's good to be a credit union CEO right now."
Yet that's just the observation made by Louis Hernandez, Jr., chairman of Open Solutions, Inc., who made that statement to me recently-and it should be noted we were not at a league meeting, the weather was fine, and we were nowhere near a saloon.
"You no longer have any excuse not to take a fresh, white board approach to differentiation," Hernandez said. "You can look at your core competencies, identify 'why we are different,' and get rid of all the rest."
Hernandez, who started Open Solutions in a garage in Connecticut, helped it grow into one of the largest solutions providers to credit unions and banks, took the company public, then bought it back and took it private, noted that in its early days it had "zero customers and one idea." That "idea" should be quite familiar to credit unions, even if they're better at talking about it than executing it-collaboration.
Indeed, Open Solutions' newest offering, which it calls the Open App Store, offers up a toolbox that credit unions can use to create their own apps that they, in turn, can give away or sell to others (CU Journal, March 22).
But beyond just IT-related issues, Hernandez sees a broader imperative for credit unions.
"The threat of commoditization has given way to consumerization," he continued. "We tell our financial institutions that this is a fantastic opportunity to have greater clarity around why you exist and how you are different. The economic model of how you made money is no longer viable. You have to be careful not to be left with the higher cost, least-profitable pieces of the value chain. Credit unions have a fantastic opportunity. They are forced to realize they can really deliver on the great opportunity in collaboration to get 25% to 50% of the costs out of the credit union industry if it's truly done. That's something banks can't do."
Hernandez believes that the first challenge to both credit unions and the larger financial system, however, is "fixing the regulatory mess."
"The fact is the institutions that entered this crisis and proved they were the most prudent providers are the ones emerging from it in the worst shape," he said. "They entered into this with high capital and after having invested in their communities, but they're worse off. This should be a rallying cry for regulatory reform."
There are a multitude of other cries from within credit unions (and community banks, as well).
"While (credit unions) have been growing as an industry, I feel we are at a crossroads in this financial crisis that was created by the low cost of credit," Hernandez said. "The hangover of the credit party is that it has forced people to unmask the fundamental changes to our business model. Take out growth in fee income and this industry is not around. We've seen spread compression, channel expansion, regulatory intensity, and capital restraints.
"The question I hear most often is, 'How can we diversify our revenue streams?'," continued Hernandez. The answer, he added, includes: creating products that are more relevant to a particular demographic; increasing non-interest income ("which is not easy"); knowing the member better; finding solutions to meet regulatory requirements, and "doing all these things and saving money. That's the big one, and it's the problem."
• In the March 22 issue, Credit Union Journal offered a comprehensive update on the state of credit union marketing, including efforts by many CU marketers determined not to be left waiting at the e-Train station as other providers get aboard with aggressive social media campaigns.
Credit unions have raced to to tweet members and prospects via Twitter, to form new friendships on Facebook, and to ensure the CEO has a blog.
So it was interesting to read this observation by Jonathan Weber of MSNBC.com about a company widely considered to have put the "cool" in cool factor.
"Apple is without a doubt the consummate innovator of the new media era..." noted Weber. "And yet Apple does none of the things that pundits always say you should do to succeed in the Internet economy. Apple doesn't blog; it doesn't Tweet; it does little on Facebook; it doesn't engage with its customer base. It doesn't ask the 'community' for feedback or rapidly iterate based on any such feedback or even respond to criticism. It doesn't give anything away for free, thank you very much-in fact, the company charges premium prices for just about everything. Its customer service is perfunctory. It engages in terribly consumer-unfriendly practices, like making you buy a whole new device when the battery dies.
"And marketing?," Weber went on to write. "I don't know the numbers, but it's hard to think of any technology-related business that spends more money on that most retro of media, the glossy magazine ad...For the most part, Apple advertising is old media all the way. This anomaly could be written off as simply the Apple exception: So much about the company is unlikely in the extreme that it may not be a good example of anything."
Weber went on to say that Apple's "rejection" of so many "contemporary Internet business nostrums" holds a number of lessons, the most basic of which is this old standby, "It's the product, stupid! Apple's success is based on building fantastic products. People like fantastic products, even if the company isn't interested in your opinion about them..."
Frank J. Diekmann is publisher of Credit Union Journal and can be reached at firstname.lastname@example.org.