Me-too Me-too Me-too Me-too
Posted by Doug True on June 16th, 2008
Is there an echo in here or is it just me? Brent was kind enough to ask me (err, desperate to ask me?) to write a short post on what was on my mind right this minute in credit union land. Well, three things that are related and at the risk of sounding like the CU Skeptic, here they are:
One
“Being comfortable in our business is very, very dangerous” – Daniel Lamarre, President of Cirque du Soleil
Credit unions crave comfort and shall I say are built for comfortableness. Yes, I love credit unions and how they are structured so you can hold your angry comments. However, let’s dissect the structure real quick – a volunteer board of directors who at most credit unions love their role and have no incentive to rock the boat – a CEO that just might be approaching retirement (the statistics show that this is common in credit unions) who have no incentive to be innovative (come on, the regulators will grill us if we launch something new – so many questions) and a management team that is wearing so many hats that they can’t find the time to look at the long view. I base my assessment on my travels in speaking with other credit unions from all over this country.
On a personal level, I don’t experience this at my credit union – we have a progressive board of directors that keeps us challenged and stretching for the next milestone, and a CEO that expects innovation – not just curious, but expects it – big difference. I know there are many progressive credit unions out there doing amazing stuff.
My point with this first item is that there are numerous credit unions that I want to see stay around and they need to wake up to stay around. I have a belief that unless you have an idea how to solve a problem then don’t bring it up. So, my only solution to this is to drive paranoia and innovation from within – it needs to be driven from within ourselves. The current tough times in the economy present us with an opportunity to feel this sense of urgency and do something about it.
Two
Okay, so a credit union starts to feel paranoid and uncomfortable and they react instead of being proactive. Yes, react as in copy something verbatim in the spirit of “me-too ”. Folks, we can’t offer “free’er” checking. In my opinion, there is too much cookie cutter product offerings that are copied and launched with very little thought on what your members want or how they will see the new offering as relevant. Too many times a credit union simply just buys a new product from a vendor and launches it – differentiation is almost non-existent from the beginning and if it does exist it quickly disappears.
Going back to point #1 – we need to challenge ourselves to find niches (not just one but many) that we can serve in our markets with unique products and solutions. In today’s business world, things are moving at a record pace. It used to be that a company would find a new market and eventually would reach a success tipping point and then niches would be filled around this new market. Well, the business world no longer sits on the sidelines for the tipping point before niches are defined. Peer-to-peer lending is a real world example of this. Solution: look outside the financial services industry for inspiration, look and listen for local market opportunities where you can make a difference, and experiment in trying to fill these niche opportunities.
Three
Blogosphere friends – don’t take this the wrong way, but we need more voices in the conversation. It does feel like an echo chamber sometimes. We need more paranoid, uncomfortable, proactive experimenters coming to the forefront to tell us their stories (both the successes and the failures) so we can learn from them. Plus we need challenges to our own thoughts and actions.
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With all of that being said, I do want to let you know that I have been in my credit union career for 20 years now and I have never been as excited about the future as I am now. I just see so many opportunities – the hard part is prioritizing them and figuring out how to best seize them. I say we go make it happen and learn from each other – are you in?
Doug is a co-founder and President of FORUM Solutions, and SVP of FORUM Credit Union in Fishers, IN. He is a credit union lifer who is paranoid and uncomfortable with the status quo.
Great post, Doug. Give me a few more weeks, and I hope Citizens Bank of Canada (an online bank owned by Vancity credit union) will be joining the conversation more actively on the blogosphere (I’m their bank evangelist.)
Thank you Doug.
That needed to be said to me and just about every CU employee out there. Such a great post to start a week off with.
I hope in 17 years when I’ve put my 20 years of time into this industry I can look back and say that I was and still am an agent of positive change/innovation in our industry like you.
So again…......thanks.
How many credit union vision statements have the words “PFI” (Primary Financial Institution) in them? Recently, I heard “OFI” (Only Financial Institution). That’s an easy thing to say but is higly unlikely in my humble opinion.
Transactions, rates, and location are table stakes but information is where the niches are at. Three words come to mind….Integrate, Integrate, and Integrate.
@Doug – Count me in old friend. Our pains exist within the number of layers between us and our members. GOAL: Reduce the degrees of separation. We’re developing some technologies that address that. Stay tuned…..
Doug,
Nicely done. I’m going to make sure this is required reading for every planning session I facilitate this year.
I was speaking with a CEO last week about all the mergers in CU land. Well, he said, this is a tough time for a credit union. I reminded him that the Depression was tough too – yet we survived that!!
Where’s our cooperative spirit?? Now more than ever we need to act like a real financial cooperative.
The peer-to-peer lending sites have shown us that our old values still have relevance.
Cheers!
Great post Doug! Yes a number of credit unions do need to “wake up”. But there is the other side that also needs to ‘wake up”. The other side being those who are this 3rd level of the CU system. We have the members, we have the credit unions and then we have the centrals, leagues or national associations. These are the organizations that were created to serve the CUs and its members. What I see happening in these organizations is a breakdown in realizing what is happening in each CU branch on a daily basis. The 3rd level should be asking themselves, how can we better serve the members? I don’t always see that. And so as we attempt our innovations we run into an unmovable mother-ship. Our innovation and attempt to change is hampered with the larger system partner, who are key in moving innovation, can’t or won’t.
@ Nancy… let us know when you are up and running
@ Matt… thanks for the kind words
@ Cam… wow, and I thought PFI was difficult to attain. I am with you on reducing the layers. Check out www.threadless.com – they have eliminated some layers in the t-shirt and art business.
@ Denise… thank you – tough times = awesome opportunities. Can’t we use some of the capital that is all saved up to make some noise right now?
@ Gene… I am with you on the 3rd level support. As participants and stakeholders in these 3rd parties we need to hold them accountable to deliver relevant services. Trying this on a small scale with our ignite program at the Indiana Credit Union League. The ignite program is run by the participants with facilitation from the League. Intended to be a win-win.
Enjoyable conversation… keep it coming.
Great points, Doug. Here’s what I can’t help but wonder (regarding point #3): Why aren’t there more voices in the conversation?
Two reasons that come to mind are: 1) insecurity, and 2) insecurity. As in insecure about saying something “stupid”, and insecure as in fearful of reprise from “upper management.”
Reason #1 is regrettable, but understandable. Reason #2 is real, and inexcusable.
Personally, I don’t think the cause of reason #2 will be overcome with the current generation of CU execs. I believe it will take the next generation.
And listen up, Gen X and Yers who represent that next generation: THIS is the kind of positive change you can bring to organizations. An environment where people feel free to express their opinions. That doesn’t exist in most organizations today.
One of the interesting things about CU’s is that the results somewhat reflect the goals which some might say are attempts to target everyone and maybe satisfy no-one.
Eg.
“We measure our success in terms of personal relationships, not market share, asset size, or annual earnings. Our committment is to our members, and we believe that it is in your best interest for us to keep things small.”
AND
“Credit unions exist to help people, not make a profit. Our goal is to serve all of our members well, including those of modest means. The average annual income for members of our credit union is $45,000. In addition, we also reach out to members and potential members who are unserved or underserved by offering programs ….. “
I maintain CU’s have the perfect opportunity to innovate, because no-one is expecting more than breakeven business cases. If that isn’t the case for more socially oriented online services, I don’t know what is, and thats in perfect alignment with the CU philosophy.
Innovation would not be on product lines then, which is what Banks’ do, but on service, and relationship lines. CU’s are already exemplars in face to face service, so why not innovate on online, and mobile service. On this, there might well be opportunities to share services between CU’s to minimise cost impacts.
Just some random thoughts …
@ Ron… you are right on, especially about #2. I have spoken with many bright credit union people who have mentioned to me that they would like to participate, but they are concerned about how their boss might take the comments they make. It really is a shame. Too much looking in the rear view mirror.
@ Colin… I too worry about the trying to cater to everyone in the membership and not satisfying anyone. Everyone is talking about the opportunity of collaboration, but I will be honest and say that I hear more than I see.
@Colin – Thanks for quoting something from Mt. Lehman CU but you may be misreading it or I am misreading your comment. Our goal to remain small is not to target everyone. It puts you into the position of a niche credit union. By remaining small we are able to service our members with personal service, we are able to make a commitment to our members to create value by an enhanced relationship which does include but is not the primary purpose of innovative products. What has been positive about this approach is that it is possible to do this by being small. That the supposed common wisdom of business that you have to be big and have to have vast resources to do this is not always true but a generalization that can be challenged @Doug – so true, lots of talk, not much action.
@Gene – Filene recently released a report titled “Credit Union Costs and Consolidations” (http://filene.org/publications/detail/costs-and-consolidations) that measured the average performance of credit unions based on size and found that size is becoming an increasingly important factor in reducing noninterest expenses and increasing member value through economies of scale. This is from the executive summary:
“From 1980 to 2006, noninterest expenses of small credit unions exceeded those of large credit unions on average by 1.12% of assets. This difference allowed large credit unions to charge their members lower loan rates (interest income was lower by 0.59%), to pay their members higher rates on savings (interest expense was higher by 0.44%), and to accumulate more retained earnings (net income was higher by 0.11%).”
My interpretation is that for small credit unions to continue to be relevant (and I hope they do!) they will either need to maintain a value proposition that goes beyond the best rates or achieve economies of scale through collaboration.
Gene—as the CEO of a successful and well-regarded small credit union, I’m wondering what your thoughts are on this. Have you been able to compete on rates? If not, in what ways does your “enhanced relationship” with members provide value to them?
Please don’t take this as a combative comment but as an explorative one. I like the idea of small credit unions, particularly those that act as advocates on behalf of their members, but I also believe that competition and consolidation are valuable mechanisms for reducing costs and increasing customer/member value.
@Gene… Have you read the book Small Giants by Bo Burlingham? http://www.smallgiantsbook.com/
Knowing you, you probably already have. If you have not, I found some nuggets in the book that could translate in to success for credit unions—of all sizes as we are all small in the grand scheme of financial services.
BTW – if I was a Mac user – I would find a way to be a member at Mt. Lehman CU. Enjoyed your recent blog posts on the Apple WDC.
@Matt Since I wrote the executive summary you refer to, I would also like to add another conclusion: scale matters, but it is not the only thing that matters.
Scale matters most if your credit union wants to match the competition and play head to head. Or in the words of Doug “Free’er checking”.
Scale has real but lesser relevance when credit unions decide to go around, under or over the competition. So, when credit unions (or any organization for that matter) decides what they are not going to do/be they make the competition’s actions less relevant. As a result scale/price may not matter as much.
I’ve seen this done at huge credit unions (State Employees in NC) and tiny credit unions (Northside Commmunity in Chicago).
In my opinion, the ultimate eschew’er of me-too-ism is the Co-operative Bank in England, take a gander
Also, if you’d like a copy of the referenced report, you can download it on the wonderfully re-designed filene website!
George—absolutely! The mindset I’m trying to avoid is the one that says that scale is anti-member. A credit union may have its members’ best interest at heart when it decides to pursue merger opportunities, while another may remain intentionally small because it can provide greater value to its members at that size.
@GeorgeH Would you also mind commenting on this statement from the report: “A large fraction of credit unions, as measured by assets, are involved in mergers in any give year.”
What does that mean? What percentage are involved in mergers?
Matt…you are right. Large is sometimes better for the member. An older Filene study looked at how members make out in a merger .
Ron..in 2006 16% of the U.S. credit union asset base was invovled in a merger, either as a targer or acquirer. We are currently expanding research in this area by looking at credit union characteristics pre- and post-merger over the 1984-2007 timeframe. It will be a page turner and give those young ‘uns from Trabian an idea of what was going on in the credit union system when they were still in diapers!
Hi Doug,
When I worked in Credit Union land (for a large CU in Canada) to be honest I found that we were never wanting for new or innovative ideas.
I think the web and blogs have done a good job in providing access to the pulse of the market to those who know where to look. In my observation however most of the CU blogging going on is primarily done by a small group of CU insiders, I would like to see the greater CU community more successfully engaged in the conversation of innovation be it members or internal staff.
I thought for the banking sector Royal Bank in Canada http://blogs.rbc.com/innovator/had a brilliant model, they ran a contest for the most innovative idea and had a competition for a $20,000 grand prize. In essence, they still receieved multiple submissions and innovative ideas for a fraction of what it would have cost normally to conduct independant research.
Again though the issue I feel isn’t lack of ideas I find its more about ‘internal innovation’ around process, people and technology to be able to execute efficiently.
Many CU’s are concerned about day to day lights on activties taking up all of their resources let alone introducing something new into the mix.
At FORUM it sounds like you have a great culture and evironment that fosters innovation – in a future post perhaps you could talk a bit more about this environment and how and why it works so well? That is the kind of leadership and openness I think a lot of CU’s would value learning more about.