Moving over to WordPress

After thorough research and heavy deliberation, I've decided to move my blog to WordPress. For the latest entries, view them here. There are several advantages; the main ones being the ability to categorize entries, and the ability to integrate it into our main web site in the future.

National Branding Campaign: Counterproductive?

The following letter to the editor appears in this week's edition of the CU Times:

I read with great interest Paul Gentile’s column in January, calling for a national credit union branding campaign. However, I would argue that such an effort is actually damaging to the credit union movement, and especially hurts smaller credit unions. That is true for statewide cooperative advertising campaigns as well.

I’ve had the great pleasure of talking with many credit union marketing professionals across the country, asking them what sets their credit union apart from the one down the street who serves exactly the same geographic region. Surprisingly, the answers I get are nearly always the same – we have friendlier, more personal service, we’re convenient, and we offer all the same products and services as every other financial institution.

Well, guess what? Every other bank and credit union is saying the same thing. I know that someone is making stuff up because it’s impossible for EVERY institution in an area to all be the friendliest, with the most personal service, and be the most convenient. And it’s NOT a point of differentiation that an institution offers all the same products and services as every other one.

A national branding campaign, or a statewide co-op advertising program, simply perpetuates the myth that all credit unions are the same. If they are all the same, then why isn’t there just one national credit union serving the entire country? It seems like that is where the world is headed—we’ll be left with just one giant mega-bank, and one giant credit union.

By definition, a national or statewide campaign can only paint a generic picture of credit unions. It doesn’t have the opportunity to point out the special differences of different credit unions – what makes them unique and truly distinctive.

The other problem with a national or statewide campaign is that it helps the bigger credit unions disproportionately to smaller credit unions – which is exactly the opposite effect that is usually desired. Why is that? Here’s why: Say you are a consumer who is actually motivated by the commercial to switch your bank accounts over to a credit union. (In our focus group research across the country, we have yet to find someone who has actually switched because of an ad—it’s always through family, friend, or colleague referrals.) But say you do decide to switch. Where are you going to switch to? One that you’ve heard of before, which is going to be one of the larger ones in the region who can afford to do their own additional advertising.

What credit unions don’t realize is that the exclusivity of their original charters WAS their strength and point of differentiation from all other institutions. People are comfortable with people they have something in common with. Now that that difference has disappeared from most credit unions, we need to find other meaningful ways to differentiate. And those CUs that remain “pure” must hold on to, and crank up their exclusivity to the max.

Large and small credit unions alike need to differentiate themselves or lose relevance in today’s world. And each credit union needs to hone and refine their own unique brand, and strengthen the emotional connection it has with its members. And it doesn’t require a big advertising budget to do it. When you have a great story, and you tell it well, word will spread, and that’s something more valuable than any advertising campaign.

The Many Downsides of Outsourcing

Credit unions have traditionally always outsourced significant and core aspects of their business. The reasons for this, especially in the area of core data processing are very clear and straightforward. Even though a credit union's day-to-day transactional processing is vital to its existence; the cost for a single institution to create and maintain it's own complete infrastructure is substantial. In fact, the cost is so great that most credit unions would not exist if they had to go this route themselves.

Outsourcing has become so commonplace in today's business world, and has become such an accepted part of everyday business thinking, that I am taking a few minutes to argue the other side of the coin, and point out the myriad drawbacks to outsourcing vital business components. The benefits of outsourcing are well documented, and usually enumerated in cost and time savings.

Here are several very important downsides to outsourcing:
• Lack of innovation
• Competitive parity
• Lack of integration
• Dependency mentality

Lack of innovation

The first drawback is a lack of innovation. Increasingly in today's business world, a company's only true competitive advantage in the marketplace is its ability to innovate. When you are at the mercy of third-party company to improve or differentiate your offering, you are stunting innovation possibilities for improving your offering to your customers.

Let me get specific about what I mean in the preceding paragraph. I am talking specificially about credit unions and online banking adoption in the late 1990s. Because online banking is intimately tied to core data processing, many credit unions decided not to even offer online banking and bill paying until their core processor offered it, a severe competitive disadvantage.

Competitive parity

The lack of ability to innovate is directly related to another major downside to outsourcing core operations, and that is competitive parity. When many organizations are using the same technology provided by another company, and then offering that to the public, there is no differentiation to the customers.

Again, I will use online banking and bill paying as an example. Many credit unions and banks serving the same geography have chosen the same online banking third-party provider. In today's technologically advanced society, there are many customers who would like to make their choice of financial institution based on their online banking system. These customers will have different criteria for what constitutes the best online banking system. Some will value simplicity. Some will value speed. Some value comprehensiveness. Some value flexibility. Some value personalization. Some value phone support. All of these different types of people have absolutely no basis on which to make a decision when the online banking experience is identical across multiple institutions.

Lack of integration

In credit unions, working with a conglomeration of disparate vendors is practically a way of life. Reaping the benefits of service and products that would otherwise be cost-prohibitive is nearly always the reason. However, there is another price paid by utilizing such a practice, and that is a lack of integration. Answers, balances, and synchronization which OUGHT to be transparent and seamless to the customer become confusingly disjointed. Deposits made via one method (such as ATM) are not available on other systems, such as online banking and bill pay, or for debit transactions, until a frustratingly long interval.

Dependency mentality

Another insidious drawback is the creation of a dependency mentality within the entire organization. Because it is assumed that no innovation is possible with the outsourced system(s), it creates a culture whereby innovation is stymied. This creates further dependence on the third-party, and can possibly lead to stifled creativity within the credit union in general.

The upside of self-created technology

We here at EverythingCU.com faced all of these questions when we had a decision to make about brining webinars to our membership. We could have continued using a third-party provider after initial webinars let us know that it was a viable service to offer our membership. But there were many advantages to developing our own. And those advantages are exactly the opposite of the outsourcing disadvantages. Our webinars technology is: Innovative. A competitive advantage. Completely integrated. And we can continue to innovate, increasing our distinctiveness and competitive advantage. In the arena of competitive advantage, we developed our webinar with a few simple principles in mind. The main principle, besides providing engaging distance learning at a reasonable price, was to make the experience as interactive, and as close to actually being in the room with the presenter as is reasonably possible. Toward that end, we created the ability for the participants to simply Raise Their Hand. The presenter can "see" exactly whose hands are raised, and call on them, and/or take a head count in response to a question. This very simple premise is one that has yet to be copied by any other webinar provider, nearly three years after we've been offering webinars.

And, in the realm of integration, this may seem to be again, a simple thing, but the benefits are great: There is no additional sign-in or password required to access the visual portion of our webinar interface from the main body of our web site. Also, all data is synchronized between the webinar and every other aspect of our web site, including member photos. Having member photos creates that much more of a personal, intimate experience for presented and audience alike. Without integration, it would not be worth it for people to upload them every time they attended a webinar, even if such a thing were made possible by a third-party provider. Again, I know of no webinar service provider that allows participant photos to be uploaded.

It was a big decision for us to create our own webinar technology compared to using an outsourced third-party. It was a very large investment in time, energy, dollars, and resources to develop our own. We've had our share of hiccups along the way. But it has given us all of these advantages AND has actually saved us a very large amount of money.

We haven't regretted the decision.

Technology is such a vital part of today's business. Think twice before outsourcing any aspect of it. Are the advantages worth the drawbacks?

Earthquake rocks financial industry

Did you feel the earth change on Monday, February 6, 2006? Feel the tremors?

As of this date, the financial world has been forever changed. The world of borrowing and lending has now been transformed by the power of the internet, the power of peer-to-peer networking, upon which companies like eBay and Napster have been wildly successful. (Napster counted 60 million users at its peak).

Zopa is a peer-to-peer lending network in the U.K that has existed for a little while now. They want to someday have a U.S. presence. Well, another company has beaten them to it.

There is now a U.S. based internet peer-to-peer lending network: Prosper.

And they even have Groups that look eerily like credit union's original field of memberships or SEGs. People are already talking about the pros and cons of Prosper.

What does this mean for credit unions? Time will tell. One thing is for sure: technology has fundamentally changed the way the entire world works over the past ten years. This new peer-to-peer technology, now applied to the financial industry, has the power to transform borrowing and saving forever. Zopa, and now Propser, have in a certain sense, snuck in the back door. While credit unions have been focused on growth and offering more services, a non-credit union company has come in to fill the void left by credit unions taking their eye off their fundamental reason for being: pooling savings to make loans to people with a common bond. Why didn't a credit union develop this new Prosper-type network? It is because they were too busy trying to compete with banks and become more bank-like? Or too internally focused to take the time to figure out a way to use the internet to create a radically new way of doing business?

Today is T + 5 days and counting.

So that's the bad news for credit unions. Is there any good news? The good news is that there is still something to be said for face-to-face transactions, no matter whether you are a borrower or a saver. There is still a certain degree of security knowing that professionals are handling your money and screening borrowers (if you are a saver), and that you can talk to someone and explain yourself if you are a borrower. Not to mention that your money is backed by the full faith of the United States government. There is still opportunity for smart, savvy companies to find their own unique niche in the marketplace. If you are a credit union, have you found your niche yet? Do you have an unbreakable emotional connection with your best members?

Thanks to Trey Reeme's Open Source CU blog for making me aware of the launch of Prosper.

More incredible results with Scott Olson

As if the previous testimonial from Scott Olson, CEO of Cities Credit Union about our initial branding consultation wasn't enough, I was delighted to see the following email leap into my inbox this morning:

Hey Morriss;

I just got back from the White Bear Lake Chamber of Commerce meeting. It was an incredible experience. We had an opportunity to talk about our business, but also say where we'd like our business to be in 6 years (it is the 6th Anniversary of the Chamber, so 6 is the number on their mind).

I got up and told them our "story". This was only the second time I've been to a Chamber meeting - last month was our first time. Usually there's always a little reservation from the Chamber members. I'm sure they've seen a lot of businesses come and go. I told them who we were, who we are, and who we hope to be. I told them of our total commitment to the WBL area and that we're not in competition with the banks and mortgage companies that were in attendance. I told them that no one does car loans like we do. Suddenly, it was like a door was opened. Everyone started nodding and I think that if we were in church they would have shouted "AMEN!"

They thanked me and I sat down. After that, people started repeating our story. They used our story to promote their own business. One gentleman said he sent his buddy here for a car loan as we had "that reputation". He said that what I said was exactly right...we do car loans like no one else. After that, someone else "used our story" and they said that Cities Credit Union does have a car loan niche. Like our niche, they have a niche in Financial Planning.

People were telling our story. It was easy, natural and as long as they knew I wasn't trying to step into their territory, they were huge fans of us. I even got invited to lunch with an area banker (the guy that sent his buddy over here) and I also got invited to a Chamber "non-compete group". There is a bank that is part of the non-compete group, but since our story didn't compete with theirs, they saw no reason why I shouldn't be part of the group.

What you've found out about us and what you've taught us to do is exactly correct. It really works!!

Scott R Olson
Cities Credit Union

Wow! I'm still just giddy that we've been able to help this credit union in this way! I'm so excited our continued branding work with them and for the heights that I know this dedicated credit union team will reach!

What Credit Unions are doing right

There are several attributes that all great brands share in common. Tonight, my focus is on one of the very most important attributes, and that is, drum roll please... Customer Centricity.

All great brands have a relentless focus on their customers. Great brands are never distracted or side-tracked from focusing on their customers. They don't worry about their competitors (great brands have no competitors!). Credit unions, by their very DNA, are focused on their members. Which is wonderful. Which is worth talking about. But we can't get sidetracked by issues that take us away from our relentless pursuit of genuinely helping our members. One of the biggest temptations for getting sidetracked is our own ego. Sometimes we take our eye off the member focus and worry about how we look to our peers. Nothing could be more dangerous for derailing our credit union. Another danger is that we get lulled into a sense of complacency. We feel that if we just follow the procedures, that will be enough to keep on track. But in today's world, that's not true anymore. Every company, every industry is now open to being cataclysmically changed by a disruptive technology or innnovation. We are no longer "safe" if we just follow the rules. The winners in today's business world are the ones who innovate the fastest in serving the customers' needs the best.

Credit Unions have had this advantage over thousands of other companies that do not have this customer-centric focus eminating from their DNA. Many other companies would kill to have what credit unions naturally have. So my admonition is to continue to keep this member focus. Crank up your member focus -- conduct focus groups with your best members every single year. It's the best money you'll ever spend. Take a member out to lunch every day. The insights you'll gain are invaluable. You can't put a price tag on that kind of first-hand experience.

3 Things Every CU Executive Should Know

I just had the most fascinating discussion with a credit union marketing professional regarding the major concepts that their strategic planner had with their credit union. One of the themes coming from their strategic planning session was "protecting ROA". Protecting ROA? Last time I checked, protecting ROA is not a strategy. Great ROA is the result of great strategy executed brilliantly. So what is the strategy to "protect ROA"? Build a new branch. Well, that is a very interesting tactic. But guess what? It is not a very good strategy -- especially when you don't understand your brand. It's not a good strategy when you don't know why your best customers do business with you. When you don't have a good answer to the question "Why should I do business with you, and not the company next door to you?" The decision if, when, and where to build a new branch MUST be a brand-driven decision, otherwise it's doomed for disappointment.

From what I understand, this credit union's new branch is going into the "hot" and growing part of town. Well, that's all fine and well. But who is going to go to this branch? Why should they do business there? Does this credit union have credibility with this population there? Or is that new population indifferent to the credit union and what it has to offer? My guess is that people in this other part of town already have a relationship with a financial institution, probably a bank. What does the CU's current membership have in common with people in the new branch location? This credit union can not answer this fundamental question. (Which can only lead to headaches in the future.) This is a mistake which I find credit unions repeating over and over again. Maybe the new branch will be successful. Maybe not. Just being there, will not be enough to get people streaming in the door. Is this a risk a credit union can afford to take? Without getting a good pulse of its membership and desired new membership first?

Most credit unions do not realize that their strategic business advantage is not low rates, nor superior products, but in serving people with a common bond. Knowing your audience intimately, and serving their unique needs. Credit unions often think that it's all about efficiency and geography. Other consultants try to boil everything down to these two factors. Well, efficiency and geography can't explain why people will drive past a myriad of financial institutions to get to the one that they want. People will drive by five pizza shops on their way to THEIR favorite one. What motivates people to do this? Well, for different institutions and constituents, the reason is different. What works for one bank or credit union won't work for another right up the street. Because their fundamental business DNA is different. Because their members/customers are different. And discovering those differences, codifying them, and cranking them up is what our branding work with individual credit unions is all about.

If I could wave a magic wand, and impart three pieces of knowledge to every credit union executive in the country, they would be these:
• With the aid of an experienced facilitator, conduct a focus group with your best members. I guarantee it will expand your mind and change your life.
• A credit union with $320M in assets, and a marketing budget of half a million dollars, had never been heard of by a random sample of people in its general community.
• You'd be surprised why your best members love you and do business with you. (What are you doing to solidify that relationship?)
• When a credit union expands its FOM, or builds a new branch without a clear plan, reason, or commonality with existing members, it is diluting its brand. And that can lead to a diluted ROA.
• Building a branch never leads to as much new business as management anticipates. I've seen this over and over again. Why? Because consumers have more choice than ever. Thanks to the internet, consumers are now informed more than ever. And most consumers don't care about half a percentage point one way or another. Surprisingly, many other factors are more important. Usually management can not clearly and succinctly state the reason that someone should do business with them compared to another financial institution in terms that are meaningful to the CONSUMER. If you can't fulfill this RULE NUMBER ONE, do nothing else until you can answer it. Most especially, don't build another branch.

Okay, so that's four things, but these are important points! I could add much more, but I'll save them for future rants....

(Here are earlier rants, on the term "human resources" and on-brand visual identity.

Branding as best decision from CEO Scott Olson

I am so thrilled to have such an impact with a credit union. I am fortunate to work with such a great team, and we are so honored to be working with Scott Olson, Koren Kent, and the rest of the Cities CU team on developing and refining their brand. Here's what Scott had to say after our initial branding work with them:

"Cities Credit Union is a smaller credit union located in a suburb of St. Paul, Minnesota. Up until three years ago, we were a totally SEG based credit union serving the area’s telephone company employees. Because of phone company consolidation and other cost cutting measures, we felt it best to apply for a community charter in order to diversify our membership base.

After receiving a community charter, we began advertising through a variety of media including: direct mail, newspaper ads, business visitation and even television advertising. We were under the impression that we were doing the right things to promote our credit union. We had some success, but we knew that we were capable of achieving so much more. It was at that time that we sent our Marketing Officer to an EverythingCU.com conference in Portland, Oregon.

Our Marketing Officer came back from this conference totally changed and totally focused on Branding. After hearing and reading what was taught at the conference, we decided that what was lacking in our business plan was a Brand Strategy.

We began our Branding Company search in the fall of 2005. We considered several local companies as well as ones that were nationally recognized. The one company that seemed to “stick out” was EverythingCU. EverythingCU not only taught, but lived their own unique brand in the fact that they deal exclusively with credit unions. After all, we say credit unions are unique, but do we act that way with our business practices? EverythingCU was a testimony to that uniqueness.

The decision to choose EverythingCU to find our unique brand was one of the best decisions I’ve made as the President/CEO.

EverythingCU took the parts of our business that we had a competitive advantage in and showed us how we can emotionally connect that with our membership. We found that:
• Our advertising was doing very little or nothing in making us known in our community.
• That we had only a product driven marketing approach.
• While our current members liked and trusted us, they likely would not recommend us to a friend or family member.
• Our competition was not other credit unions, but large banks.

We also found that even the very large credit unions in our area (who have a marketing budget in the millions) are still virtually unknown. This to me was amazing!

We’ve only gone through the beginning stages of our Branding process and I’ve already seen a huge change in our staff, our members, and our community outlook. Our staff is engaged, excited and ready to tell our story. Our members have already commented on the positive changes they’ve seen and felt as well. They seem to linger a little longer in our lobby and chat. They’ve also started telling others.

I am anxious and excited for the rest of our story to be discovered. Even if the process stopped right now, our credit union has been forever changed. Not only will we be successful in telling our story, but we’ll have a fabulous time doing it. That’s what the credit union movement is all about!!"

--Scott Olson, President/CEO, Cities Credit Union, St. Paul Minnesota

Good news from Jen at Cities

The reverberations from our initial branding trip to Cities CU are still being heard. Here's the latest update from Jen Edlin, Vice President.

"We are having a wonderful day. We're still in a bit of a glow from our successful board meeting last night - Koren was fabulous of course. The BOD was surprising receptive - I actually thought we'd have more splaining-to-do-Lucy however the questions they asked about the whole process led me to believe they support the direction we're going in. I think they missed that "credit union difference" more than they have admitted to.

And if that wasn't enough, we had a great staff meeting this morning. Koren reviewed the progress so far and gave copies of our "story" as it stands now. The staff has been talking about nothing else ever since. One person said she'd always read about the difference between credit unions and banks but has never "felt" the difference - and now does. She has definitely had her "ah-ha" moment and so has the rest of the staff.

I'm sure you're sick of us saying how much we are enjoying this, how much we wish you could come here earlier, how interesting and enjoyable you and your coworkers are....so I won't say it all again. Saying "meow" would be an understatement - it's an all out purr-festivus for the rest of us."

Jen - Cities

Purging the term "Human Resources"

We need to eliminate the term "Human Resources" from our vocabulary. I can not think of a more derogatory term for people. After all, people want to be, and deserve to be, treated as people, and not as widgets. Smart businesses have already eliminated this term from their culture. For example, Southwest Airlines has a "Vice President of People". Southwest Airlines says that as a company, it is all about the people, and not about the planes. It's the people and their unique culture that is its biggest competitive advantage.

Do you realize where this term "Human Resources" comes from? It comes directly out of our industrial age, when machinery and capital investments were more important than blue-collar workers. People could be easily be replaced. So what if they worked in horrible conditions? Worked in factories for 10 hours shifts, six days a week, for a dollar a day? Or even died on the job?

Well, it's time for companies to wake up and get with the program in the twenty-first century! The leading successful business thinkers of our time realize that instead of "Human Resources" being the least important part of a successful company, it's actually the very very most important. There is no greater role for a CEO than to make sure the right people are in the right positions in the company. Just ask Jack Welch. In his writings and interviews, he acknowledges that that was his primary responsibility as CEO. And for further proof, read the book Good to Great by Jim Collins. He and his team researched what made the difference between a good company, and a company that made a transition to greatness. And the major conclusion of the book is that the first thing you do is get the right people on the bus. Then you figure out where to drive the bus. But getting the right people on the bus comes first!