HMMM…..
STUFF
TO T
HINK A
BOUT!
IT IS
OUR “B
AGS FLY
FREE” M
OMENT IN
TIM
E
Innovation
Entrepreneurship
Marketing/Brand
Strategy
Leadership
Sustainability
Trends
People
Hmmm…..
PEOPLE
Tomorrow’s Workforce Flexible Multi-Functional
Value Oriented
Does the credit union business model reflect the attributes of your staff?
HR IN THE FUTURE
Business Focused
Strategic In Nature
Data Centric
Analytical Skills
Aligned
PEOPLE ARE THE DIFFERENCE
Necessity vs Difference
Transaction vs Relationships
Create Experiences
Think WOMP
SUSTAINABILITY
A non-negotiable requirement
Balance Sheet vs. Income Statement
Using the “Coop” model to leverage shared value
Is the credit union biz model a 5 yr., 10 yr., or longer (or shorter) solution?
AVOID A “SIX-PACK” OF MISTAKES
900 lb. Gorillas Eat 800 lb. Gorillas
Relationships Matter
Stop Believing Your Own Press Releases
Expense Mgmt. On Steroids
Board Independence Is Essential
Grow Market Share…Never Be Satisfied
HMMM…STUFF TO THINK ABOUT
Supply Chain Efficiency Is Difficult To Achieve & Cost-cutting Kills The Culture & Brand
As A Result…Revenue Production Is Essential
What Is “The On-Margin” versus “Off-Margin”
COMMON PRIORITIES TO BUSINESS
Access To Capital
Reasonable & Certainty of Taxes
Certainty & Efficient Regulation
WITHOUT…Fewer Companies Drive Fewer Jobs
THE NEW PRICING PARADIGM?
The Social Network Has Hit Its Stride
In The Past , Biz Made The Decision on Pricing
Now…
Consumers
Government
Media
Consumer Financial Protection Board (CFPB)
SUSTAINABILITY IN THE LONG TERMRetain existing members and attract new members to optimize revenue
and achieve scale.
Develop new offers that quickly result in a profitable return on investment - ROI
Increase productivity and employee accountability in order to optimize work performance to achieve greater scale specific to labor costs.
Enhance cross-functionality to minimize hiring.
Improve member service and risk mitigation processes to optimize efficiency and reduce operating expense.
SUSTAINABILITY IN THE LONG TERM
Enterprise-wide focus on critical mass to best utilize capital and human resources.
Insure operating expense as % of asset remains efficient in growth.
Work diligently to grow loan activity to increase Net Interest Margin and Top-Line Revenue.
Net loan spreads and funding mix should reflect risk tolerance while maintaining profitability that exceeds investment opportunities.
Continue expansion of payment systems and transaction processing as a means by which to grow non-interest income.
INNOVATION
Cultural paradigm
Re-ignites growth curve
Create energy and change minds
Using this “destructive force” to better your credit union’s competitive position?
Energy
Does It
Stick?
Ramp It Up
Execution
“Tossin’ It
Around”
Time
Innovation Map
GREAT BIG IDEAS TO INNOVATE
I. People Before Profit
II. Stakeholder Value Provides Brand Boost
III. Service On Steroids
IV. Opportunities To Grow The Biz
V. Don’t Be Satisfied With Satisfied
VI. Speed…A Competitive Advantage
THREE CATEGORIES OF CUS
Winners
Survivors
Losers
The Risk Of The Unknown Becomes A Big Problem For Many Credit Unions
What Business’ Didn’t Exist 15 Years Ago?
THE ULTIMATE GOAL
A Leap In Value Rapidly Earns Buzz & Loyalty… And Dare We Say Growth
BIZ PLAN DISRUPTION
GROWTH
VALUE
Disruption
DisruptionWindow
Innovate
Disruption = Competition, Legislation, Regulation, Financial, Macro Economy
HMMM…STUFF TO THINK ABOUT
Innovation is more necessary than nice. Immediate ROI usually works against innovation.
THE “ALCHEMY” OF GROWTH
CUs need 3 different “Horizons of Investment”
Current…Today’s cash flow (up to 12 months)
Near Term…Today’s revenue + tomorrow’s cash flow
(12 -36 months)
Future…Options on investment beyond the current horizon ( 36+ months)
THINKING LONGER TERM
Horizon 3
Horizon 2
Horizon 1
Time
Today’s Cash Flow (0 – 12 Months)
Today’s Revenue & Tomorrow’s Cash Flow (12 – 36 Months)
Future Growth R & D/Cap. Exp.(36 – 72 Months)
HMMM…STUFF TO THINK ABOUT
We need “functional & planned obsolescence” in our products that creates a new buzz. “Product driven” companies do this .
Think P & G…New & Improved
Think Auto Industry…New model years
P&G AND CAR COMPANY MENTALITY
Keep the product fresh and compelling
Planned obsolescence assists in achieving product differentiation
HMMM…STUFF TO THINK ABOUT
Ask staff to uncover member needs that leads to innovation which creates elasticity for your products because they’ll be better and more economical. As a result, your product penetration improves, your members are dazzled, the brand is strengthened, loyalty increases, sales grow, profits grow and you increase & create more jobs.
CREATE “REAL GROWTH”
Create new categories or sub-categories for which competitors are not considered
MARKETING/BRAND
Be significant in your members’ lives
Life Stages; Life Styles; Lifetime
You must be more than service
Member participation and collaboration co-create brands & build bonds with the membership.
WHAT ABOUT THE CURVES WITHIN THE CURVE
WHAT CURVES ARE HIDDEN BELOW THE FANCIAL “WHAT’S BEHIND THE “S” W CURVE
Check Your Market RelevanceCheck Your Distinctive Capabilities
Check Your Strength of Talent
STRIVE FOR “PSYCHIC PIZZA”
Compare CU to a “stellar industry” (not banks)
Design to “head off” the problem
Turn up all of the “unpleasants” that member encounters
HMMM…STUFF TO THINK ABOUT
Members who have a problem with your CU instantly become more sensitive to the prices you charge, the rates you pay, the convenience you offer, etc. etc.
STRATEGIES TO AVOID MEMBER ISSUES
Pro-active Education: (warn the member about the problems they may encounter)
Have a Flexible Response: (across all channels) describing why you do what you do
Aggressively Seek & Solicit Complaints: (once you have education & channels of “why” in place)
THE REAL PROBLEM WITH MEMBER SERVICE
Inertia leads to complacency within the organization which results in member boredom which leads to member & credit union taking each other for granted
MAXIMIZE PROFITS
Member
Sales Marketing
Service
Interconnectedness Is Key Understand Your Costs Of Acquisition
ENTERPRISE WIDE UNDERSTANDING
Have a unified picture of what the member experience should look like
LOYALTY/BRAND INTEGRATION
Normative
Affective
Cognitive
Hard to imitate
Hard to deliver
Most meaningful
“Lifers”
Emotional/Spiritual/
“The Thing To do”
Make it Personal
Both functional & emotional …benefits are readily visible
Easy to Deliver
Easy to Lose
Easy to Imitate
TRENDS
Economic Dilemmas
Increasing Regulation
Changing Members
Get your handle around the impact of emerging trends that will effect your credit union over the next decade.
PARADIGMS FOR THE DECADE…
Is Our Wealth Formula OK?Is This X & Y’s Life Event…Delayed Purchases,
etc.?Will Pricing Elasticity Increase?Emerging Tech Trends?Marketing The Ol’ Fashioned Way?Branch Paradox…Is It Real? Strategic Planning Is Not An Event?Risk Management Changed Forever?
THREE CONCERNS OF MEMBERS
What lessons did we learn from the financial crisis
Federal deficits and what needs to be done
The current unemployment situation
WHAT DID CREDIT UNIONS LEARN ?
Misguided Comfort
Misunderstood Risk
Short-Term Choices
WHAT CUS CAN LEARN FROM THE FED DEFICIT
Raise income
Gain operating efficiency (Note: Not “cut” expenses)
Control future expenses
WHAT CUS CAN EXPECT FROM UNEMPLOYMENT
Monetary & fiscal policies aren’t helping
Housing isn’t leading the recovery
Households are retrenching
Uncertainty weighs on business decisions
The “hour-glass” of jobs
AMERICA’S WORKFORCE
Base Is Largest @ 15/1%
Middle Class
Low-Skill Low-Pay
High-Skill High-Pay
RICH GET RICHER
$180,810 95th Percentile
9X
Largest Gap Since Keeping Records - 1967
$20,000 20th percentile
JOB PICTURE
High
8.3%
Unemployment
Low
Less Greater
GDP
GDP (2011)+1.7%
Projected @ 2.5% Annualized 1st Qtr. 2012 GDP @ 4%
RETU
RN
RISK
Treasury Bonds
Efficient Frontier Matrix
• A combination of assets, SLCCU’s loan and investment portfolio for example, is referred to as “efficient” if it has the best possible expected level of return for its given level of risk.•Risk, in the case of SLCCU’s earning assets, broadly represents credit and interest rate risk.
HIG
HLO
W
LOW HIGH
Bank/CU CDsGSE Bonds Prime Auto Loans
Private-Label CMO
Prime Unsecured Loans
Non-Prime Auto Loans
Non-Prime Unsecured Loans
GSE MBSGNMA MBS
GNMA CMOGSE CMO
Investors look for!! Efficient markets push down Return for this level of Risk
Capital will not flow here!! Efficient markets price Risk accordingly and push up Return
STRATEGY
Agility and nimble
Quickly adapt
Anticipate and Lead change
Develop deep differentiating capabilities that enables the credit union to separate from competition and “shape-shift” as the market changes.
TWO TYPES OF PROFIT
Good
Bad
Know The Difference?????
The Wrong Choice Kills The Brand
LEADERSHIP
Tap into “Values Behaviors”
Understand the myths & cultural norms that are cultural drivers
New, flexible, fluid management systems
Be visionary, be smart, empowering and supporting of a great “talent pool.”
THREE (3) THREATS TO THE BUSINESS PLAN
Imitation…Creates Cognitive Loyalty
Operational Slack…Productivity Inefficiency
Substitution…Products That Reduce Our Value
PLANNING SESSION DISCUSSION
Who Is Your Member?
What Does The Member Value?
How Do We Deliver Value @ An Affordable Cost?
What Is Our Profit Formula?
What Are The Key Resources Used?
What Key Processes Are Employed?
ENTREPRENEURSHIP
Launching Products
Create a Credit Union with meaning beyond the sum of its parts
Profit should not be only goal
Success comes from maintaining an entrepreneurial culture no matter how big or small.
THREE TIERS OF CONSUMERS
Close To You…Cognitive Level Of LoyaltyRefuse To Use You…Unacceptable OfferingsNever Thought Of You As An Option…Assumed They Belonged Elsewhere
Go With The One That Provides You The Greatest Amount Of Potential
Make Sure You’re Profitable & Sustainable
A COMPLETELY FRESH PERSPECTIVE
See it from a fresh angle
Don’t be anchored
Reinvent the value proposition
Understand what your CU really does
Do you know what you’re really selling
ENTREPRENEURIAL TRAITS
Vision
Passion
Drive
Integrity
Innovation
Risk-Taker
Resilience
Pro-active