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 firstname.lastname@example.org.
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 email@example.com or visit the www.cubi.pro website.