In my last two blogs, I described why credit unions should dominate their competition and local retail markets and why growth for growth’s sake will get them to the promised land.
For those who may have missed my unconventional thoughts and views, let’s summarize the Key Findings in each:
Let’s talk about the how.
Strategy, culture and deep organizational alignment is the how. It’s difficult but attainable.
All it takes is uniquely brave, forward-thinking leadership, an aligned/accountable team, and a deep understanding of how to create a strategy that’s different from for-profit institutions while running the institution as an aggressive business in a highly competitive, ever-changing, commoditized retail environment. That’s all.
Oh yeah, one more thing – everything in the CU world works against these growth principals; this often including our Boards and C-level teams. This is the brave part – If you want to test this out ask a simple question. What level of growth do our best performing market competitors (banks, FinTechs and BigTechs) consider productive and then how do we compare? You may have noticed that I didn’t ask you to compare your credit union to local credit unions. First, they are normally not your competitors as they hold as low a market share as you do and by definition are a risk, and thus, growth adverse.
Key finding – just because it’s hard and others don’t think you should do it doesn’t mean you shouldn’t attack the opportunity. Has any great thing been accomplished by listening to those who didn’t change?
Key finding - Compare your credit union to the best non-CU competitors. To be the best, compare yourself to the best!
Breaking out of slow growth requires market research, reviews of balance sheet risk, segmentation analysis, competitive research (rates, service, products, etc.), cultural analysis, channel competition, product profitability, etc.
Key Finding – Strategy is difficult and is a constant process of research, analysis, reaction, and change.
A material and sustainable advantage for community institutions is understanding the local market better than any super regional, FinTech or global bank. If you understand the market, you can attack products and prices as long as your credit union is ready (strategically aligned for growth) and you act with urgency.
Key Finding – the creation of a credit union strategy has many variables and aligning those to create exponential growth takes significant effort and a consistent planning process. Once-a-year planning and facilitation will not cut it in today’s ever-changing competitive world.
Current State Evaluation
Initially, evaluate your current state and compare it to strategies that have been very successful in similar markets for similarly sized community institutions.
This evaluation should cover:
After obtaining a thorough understanding of the current state, carry out an assessment of how proven strategies can be used to grow market share in your community or within your SEGs.
Key findings – Strategy has to be based on hard facts, research, and risk-taking (not avoidance).
Applicable Best Practices Assessment & Research
Member Value Proposition (MVP)
We believe CUs can dominate their markets through a combination of price leadership, world-class service and convenience (digital or branch). BIG has helped CUs who doubled their size every 5 years in highly competitive markets by identifying the mix of service and price that creates a winning MVP. Never forget CUs have a material and sustainable advantage in lower costs (no taxes and no stockholders) and that commoditized markets are won by those with the lowest costs.
Community and SEG Assessment
Our view is that a growth strategy for a Credit Union likely entails an equal emphasis on community and SEG growth. We have found that Credit Unions who emphasize both memberships sustain better growth. They leverage a monopoly position in the SEG world, while simultaneously developing a brand in the community. Both sets of Membership feed each other over time.
Segments and Market Analysis
Your winning strategy cannot be everything to everyone, but it can be everything to some. If you understand the local market opportunities, define segments with which you can be successful and provide a unique value proposition (even in a commoditized market). You will win every day.
Team, Culture and Skills sets
People and skills drive strategy and growth. Culture always defines winning. You will need to honestly assess the entire culture (Board to the part-time teller), understand how to communicate to it and motivate it, and by doing so you will create a winning environment (winning really matters and it matters more in CUs than for-profit institutions). A key driver is creating an agreed upon accountability system that provides outsized rewards for oversized accomplishments. This isn’t risky if a balanced (balanced scorecard) and measured approach (credit union bonus pool is created from above budget performance) is taken. It’s also how all high performing companies operate.
Operating your institution as a Business while behaving like a CU
We have found that believing in Credit Union principles AND operating an organization with highly tuned financial services skills, is key in differentiating your CU against the money-centered banks (Bank of America, Chase, Citi, and Wells Fargo), FinTechs and other Credit Unions. Banks/FinTechs cannot compete with the MVP strategy/member ownership and most CUs do not operate or execute like a for-profit business. If you get the balance right, you will always win.
You will need to evaluate which financial drivers and decision filters would be most appropriate to propel your growth. They will consist of goals aggressive enough (this is the absolute key - finding a goal that motivates your culture to performance in the same manor share price motivates a bank) to ensure your Team is learning, changing at the market required speed, adapting, and are reaching for the market share that your plans call for. Yes, you can double your size every 5 to 6 years!
If you get this last point right, everything else will follow but it has to be aggressive enough to motivate change. Heck if you don’t like doubling your size, aim to be number one or two in market share for key products, choose the absolute best rate vs the top 10 banks every day – but for goodness sake pick something that will drive you to make urgent and aggressive decisions.
That is why growth for growth’s sake is so important and can propel our industry forward to a dominant market share position.
Chief Strategy Officer
Best Innovation Group
Strategy & Growth, Digital Transformation, Lending, Payments
Caveat emptor. Let the buyer beware.
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