One person in this business whose mind I greatly admire is Reid Nagle, the founder of SNL Securities.

In a recent article, Mr. Nagle and Thomas Humphries warned that many of our industry's best and brightest companies are in danger of becoming the casualties of commoditization. They hypothesize that technological advances will reduce the value of commodity-driven franchises.

The article suggests that new technologies will erode the franchise value of financial services providers involved in the distribution of commodity product - to the detriment of shareholders.

The article identifies the most vulnerable commercial banks and thrifts in this respect. Among them are several super community banks from both categories - banks that are highly profitable and trade at significant multiples to book.

I believe the writers are correct in identifying banking products as commodities. But it is the delivery of these products and services - particularly as packages - that differentiates and decommoditizes them.

I agree with Nagle and Humphries that the greatest vulnerability of financial institutions today is the failure to decommoditize products and services. However, through product bundling and unique delivery, banks can achieve mass customization.

Many banks are committed to creating value-added services that will decommoditize each product they offer. At Roosevelt we have created "happy meals" that add value by adding services to an otherwise commoditized product, such as mortgages.

At other super community banks, such as First Michigan or Valley National, a financial consultant's role is undertaken by the bank representative to create special bonds with consumers and make banking a value-added activity for them.

Banks that do not build a relationship-oriented, value-added program for their customers risk rapidly losing the value of their franchises. Their distribution will be displaced with more efficient, cost-effective, fully commoditized channels, as well as products.

When delivery and product structure provide special value to a customer, that danger is greatly mitigated.

Many other businesses have created such special value. In the airline industry, for example, price differentiation has been displaced in many cases by a different value proposition, such as British Airways' idea of making flight a positive experience, not just a way to get from point A to point B. Or think of Lexus' idea of making car purchase and servicing a pleasant experience.

Creating such value is the challenge to banks today. It is also their biggest opportunity.

Ms. Bird is chief operating officer of Roosevelt Financial Group, St. Louis.

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