So, in what seems like a complete 180 from an earlier post about not making things more complicated than they need to be, I am writing today about something very complicated. Bear with me as I make the connection between these two seemingly conflicting positions.

First, I still believe that we make the management of credit unions and banks more complicated than they need to be by creating executive positions over micro-functions instead of using a more supervisors and managers to oversee production while executives serve the roll of strategic managers with the CEO focused on the two major functions of the organization…Supply (Supply and Distribution) and Demand (Marketing, Sales & Service). See my previous post for more on this concept.

However, while I feel we make the management of the financial institution more complicated than it needs to be, the forces we are managing are indeed very complicated. What’s more, building and maintaining a business engine that harness forces in the most efficient way possible is very much like rocket science. For those who are sticklers on the details I will make it clear that there really is no such thing as rocket science…there is aerospace engineering which encompasses the various engineering disciplines needed to build spacecraft. There is a great entry on aerospace engineering on Wikipedia if you care to know the history of the field but I won’t go any deeper here.

So while aerospace engineers work to meld together the solutions to various challenges in aerodynamics, propulsion, avionics, fluid dynamics, materials, structural design, fuel chemistry, etc. to get a spacecraft off the ground and safely into space, bankers face a similarly complicated mix of challenges. For instance, we face the challenge of providing consumers with convenience (through a growing number of channels), value (in an ever growing number of definitions) and stability (no more financial meltdowns please) while providing members/stockholders with strong growth and financial results. Consider that engineers had to work out how to ignite an extremely dangerous mix of chemicals in a jet engine to produce 32 million horsepower safely to propel a capsule holding human beings into space I feel confident think that the great minds in banking can figure out a way to adjust to the new world we have before us.

To do so however, we all need to come to a realization…and a big one at that (here is where I meet up with my earlier post). WE CAN NOT BE ALL THINGS TO ALL PEOPLE. There, I said it and I feel better for it. Say it a few times out loud and I think you will to. Just as engineers need to understand the purpose of their craft before they design and build it, you need to understand who you are building your bank or credit union for…as specifically as possible. Yes, the market you target needs to be big enough to be viable (and hopefully a growing market so it provides for long term growth), but you need to get out of the mode of targeting an entire community.

Just as the F-35 has run into serious problems in testing as the weakness of designing for agility, range, aircraft carrier and vertical takeoff and landing (just Google “F-35 problems” for a long list of issues) and is now projected to cost much more than originally envisioned, banks and credit unions that have tried to serve everyone are struggling. Why should that be? Shouldn’t a larger market provide more opportunity? Yes…as long as that market has a specific group of needs that you can meet in a substantially better way than any competitors.

Think about it this way…people don’t need a checking account. What they need is a safe way to spend the money they have. Thinking about how do you help them do that better than anyone else is just the beginning of targeting a market. First you have to understand how a 25 year old rising professional spends money compared to a 25 year old who is employed part time and living at home.  Or how these two compare to a married 45 year old with kids. Or a 65 year old nearing retirement. This is just a small part of how ONE product needs to be examined to see who it serves best and how it can be modified to serve a different segment.

Better than that…decide which aspect of your market you want to serve and design your entire organization to serve them. Verity Credit Union is making great progress in transforming themselves into a credit union that serves moms (yes, women with children) better than anyone else. What a great market to go after…there is a good amount of similarity in needs, the market is always being refreshed, and, best of all, no one else is going after it!

So when you sit down to begin your strategic planning this fall…think about who you serve and who you should be serving. A great place to start is to look at your current customer base and finding out what is the common thread among your best customers/members.

  • Who has the most products and services (your most loyal customers) and what do they look like demographically?
  • Who are your most profitable customers? Why are they profitable and do you like what makes them profitable?
  • Who are your most unprofitable customers? Why are they so unprofitable? How are they different from your most loyal customers?

With answers to these questions you can begin a great conversation around who you serve best and who you want to serve…and how you should serve them. Just like an onion, these questions will create more questions you will want to find answers to. Eventually it should become a lot clearer what kind of spacecraft, I mean financial institution, you want to build.

I’d love to know if you use these questions and how the conversation goes!