Banks should target one specific area of service or performance if they intend to hold their own against nonbank competitors, according to one noted expert on market leaders.

Michael Treacy, a consultant who has worked with a number of banking companies, including Banc One Corp., recently co-authored a book that says many financial institutions can improve their marketshare by narrowing their strategic focus.

"The Discipline of Market Leaders," by Mr. Treacy and Fred Wiersema of CSC Consulting, sets forth the idea that it will be easier to succeed by "being good at one thing" than by deploying a wide array of strategies.

"Banks define themselves as soup-to-nuts providers," Mr. Treacy said. "They're trying to do everything and in doing that they've succeeded in nothing."

Mr. Treacy said financial institutions looking to improve their margins should pursue one of three strategies: concentrating on being a hassle-free service provider, offering leading-edge products, or tailoring products according to specific customer needs.

Nonbanks, such as Charles Schwab, have already made serious headway in providing hassle-free services, according to Mr. Treacy.

Emulating the tried-and-true tactics of consumer industry giants like McDonald's and Federal Express, financial institutions in this category centralize their operations, standardize their products, and generally run a tight ship.

On the other hand, banks like Citicorp and nonbank financial institutions like Fidelity Investments have tied their fates to their products, which are often based on innovative technologies.

These risk-taking institutions place a great emphasis on invention, a fast product development cycle (six to nine months as opposed to the average 18 months), and nationwide distribution of new products and services.

The final bracket of banks - those that excel in "customer intimacy" as Mr. Treacy called it - includes Chemical Banking Corp. and Shawmut National Corp.

These institutions tend to place a great deal of importance on the front line, with product units available to serve account managers, who advise customers in much the same way as classical private bankers.

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