By Ted L. Thames, CCE
Last week in part 1 of this series, I introduced a list of critical questions credit union leaders need to be asking themselves. I hope the discussions they elicit will breathe more life into your strategic planning. Because planning is not an event. And strategy and execution cannot be separated. They must be integrated into ongoing management dialog. This week we'll take a look at the first three questions in a bit more detail.
1. Does your organizational purpose or vision continue to be relevant and energizing to management, staff and board members?
According to Peter Drucker, the only legitimate purpose of any business is to create an ongoing customer relationship based on satisfying a set of targeted needs, identified around the realities and values of the customer. "This demands that business define its goals in terms of satisfying customer needs and its rewards in terms of the contribution it makes to customers," wrote Drucker.
It follows that "common vision, common understanding, and unity of direction and effort for the entire organization require definition of what the business is and what it ought to be." The statement of purpose or vision must provide this essential definition.
The clarification of purpose is demonstrated by more than just a written mission statement. It must be a set of simple strategic themes that flows through all contact with members – a clear idea of how the credit union is perceived as different and better than available competing providers.
Michael Porter, perhaps the most well respected author and teacher related to competitive strategy, believes there are only three basic strategies. These are based on product innovation, cost leadership and market niche -- focus on the particular needs of a specific segment of the market.
All credit unions started out with a very clear market focus, sponsored by a specific employer, military base, school district or industry. In recent years, with the accelerated expansion of community charters, it has become more difficult to maintain that clarity. But it is crucial to continue to do so. To focus on everyone is to focus on no one. The more specific the data and accurate the profile of the desired customer, the easier it is to move to the second-level discussion related to value proposition.
2. Does your organization have a clear member value focus?
The definition of value to be delivered is one of the least developed components in management dialog and written strategic documents. The components of value and how they interact in the mind of the member are not well understood. The organization must have a clearly defined focus on the components of value that matter most from the members' perspective.
These value components include product utility, price, access or convenience, service functionality and member experience. Not all carry the same weight with members, nor can all receive equal management attention or resources. The key is ranking the components' importance and the institution's performance in each category by customers. It is essential that the credit union match its capabilities and focus on the components most valued by its members and potential members. The only way to get this right is by talking to them. Clear understanding and management agreement related to the organization's approach to these value components will help to identify and prioritize strategic initiatives as well as infrastructure and staffing investments.
3. Is your credit union's business model aligned with the value focus?
The business model discussion centers on clarifying how your credit union generates the necessary earnings and capital to continue to grow and fund strategic initiatives. A simple way to look at credit union operating models is to identify the past choices that have driven growth, financial results and member expectations over time.
A clear understanding of the drivers of the business, coupled with the identified needs, wants and expectations of members, can add clarity to where changes could be beneficial. But changes take time. No large ship can be expected to fully turn in one year. Thoughtful, multi-year planning and clear accountability for execution are required for changes to bear fruit.
Ted Thames, CCE, is owner of Q10 Resources, a strategy development and planning firm dedicated to the growth and success of credit unions. He is also a credit union strategic planning specialist affiliated with Cornerstone Advisors, Inc. Ted can be reached at 903.343.1176; tthames@q10resources.com or tthames@crnrstone.com.
Read Part 3 of this series.
