Do You Have a Strategy to Survive the Next Competitive Storm?
By Michael Cochrum, CUBI.Pro
Years ago, when I was serving in ministry at a local church, an old preacher shared a story about misaligned expectations. Here is how I remember it:
After days of torrential rain, an old man found himself
stranded by rising waters, so he climbed to the roof of his house and began
praying. The man prayed that God would
save him from the imminent flood. After
an hour of waiting and watching the water rise, some first responders came by
his house and offered to move him to higher ground. The old man refused their help, confident
that God would save him before the water got too high. After another hour, the water had risen to cover
the first floor of his house when a man in a boat came by and offered to give
the man a lift to higher ground. The old
man refused, again, confident that God would save him from the flood. After waiting another hour, the water had
reached the eaves of the house and the man began to worry, but the old man
remained confident that God would save him.
At that very moment, a rescue helicopter hovered overhead and called out
to the old man to see if he needed assistance.
Again, the old man responded that help was on the way.
Unfortunately, just a few minutes later, the water overtook
the old man’s house and he ultimately drowned.
When the man arrived in heaven, somewhat disappointed, he asked God, “Why
did you let me drown when I prayed that you would help me?” God looked back at the man somewhat perplexed
and said, “When you asked me to save you from the flood, I sent three teams to
rescue you, one on foot, one by boat and one by air, but you refused them all.”
So, what does this story have to do with credit unions? Just the other day, I sat with a credit union
CEO discussing data strategies for his credit union. He looked back at me and said, “I like what
you are doing here, but I’m really only looking for solutions that increase my
ROAA at the point. I really can’t afford
to invest in data transformation.” I
have been talking about data-driven decision cultures within credit unions for several
years now and listeners always nod in agreement and say they look forward to a
day when they can make that investment.
Unfortunately, with a plethora of data management tools available, many
credit unions still have not taken the first step to create a culture conducive
to using data to better inform decisions.
In the meantime, our financial services competitors, who are using data
in decision making at increasingly higher rates, have much higher returns than
credit unions. In fact, since the early
nineties, commercial bank ROAA has exceeded credit unions every year except two
and coincidentally, this is about the time in history when information
technology and the collection of data became more accessible by the average
business[i]. We must recognize the impact that technology
has had on business decisions and that better, faster, and more accurate
decisions can be a competitive advantage.
For financial institutions, the struggle to grow net income
is real. Let’s face it, it is difficult
to differentiate a checking account at one financial institution from a
checking account at another. Banks and Credit
unions can play with interest rates and loan pricing, but 25 bps here or there
is not compelling enough to capture the average consumer’s attention. In fact, it has been proven that credit
unions, who already benefit from tax exemptions, by and large, have better
product pricing and provide larger dividends than their for-profit competitors.
But credit unions still lag behind their
competitors in returns for their efforts.
The key to creating excitement about inherently
underwhelming product offerings remains in personalized service
enhancements. Accurately personalizing
product offerings and improving service requires a strong ground game. In other words, there is no magic wand that
will miraculously turn your credit union’s CD’s in to something remarkably
different than the bank down the street.
But personalizing that product and experience or making the offer at the
time when the consumer is most likely to respond to it, is where the magic begins. To be able to make this magic trick work,
however, the credit union must have available, accurate data and be in a
position of making decisions using that data.
There is no better time than now to begin to focus on starting a data
transformation journey.
You may have heard of credit union cohorts who have invested
in their data journey but have been stalled at some point or may have even
given up. One of the main impediments to
success while attempting to transform to a data-driven culture is a lack of
strategy. A Data Transformation Strategy
helps the credit union leadership to build a roadmap to success and properly
set expectations across the organization.
Like our old man in the story above, we can often be guilty
of hyper-focusing on what we believe is the single, ideal solution to our
challenge. However, if the man had a
strategy for surviving the flood that included the consideration of all
possible alternatives, he would have been better prepared to take action when
the opportunities arose. If you would
like more information on creating a Data Transformation Strategy for your
credit union, please contact me a michael.cochrum@cubi.pro.
About the Author:
Michael Cochrum is CEO/CDO of CUBI.Pro, a company that specializing in working with financial institutions on data transformation projects. Michael has worked in the financial services industry for almost 30 years and with, or in, credit unions for the last 20 years. He holds a B.S. in Data Analytics and earned his MBA from Texas A&M – Corpus Christi. You can email Mr. Cochrum with questions at michael.cochrum@cubi.pro or visit the www.cubi.pro website.
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