Who will win the super bowl? Is Florida/Miami truly the college
national champion? Everyone wants to be number one. No one wants
to come in second place. Just ask Al Gore.
Except credit unions in their business strategy. Almost all managers
and boards would describe their goal as being a ''fast follower''
or second-to-market. Very few credit union CEO's want to be on the
leading edge of the financial services business.
Being # 2 Has Worked
There are a lot of reasons why being #2 in business strategy makes
sense. The tradition of credit unions is to offer new products long
after their appearance in other financial services firms. Both regulation
and resource constraints made this so. Credit unions ''invented''
virtually none of the consumer savings and loan products or the
delivery strategies or marketing techniques used today. Yet the
collective credit union track record since deregulation is as good
as if not better than other depository institutions.
Credit unions often lack the market opportunity or scale to make
innovation feasible. Moreover boards and managers receive no personal
benefits from devising new business solutions. And if they fail,
the downside could result in job loss or in some cases credit union
failure. Why take a chance when you don't have to is the philosophy
that guides many credit union business strategy decisions.
Being # 2 Still Has Key Success Factors
But the strategy is not as simple as follow-the-leader and everything
will work out OK. Moreover it does not mean that credit unions cannot
come out winners. Microsoft in many ways is a second-to-market company,
and it dominates many aspects of its industry. What are the conditions
for success when using a fast follower strategy?
The first key success factor is identifying which leaders to track.
What organization is setting the pace? Do you look inside the financial
services industry or outside? Many business consultants have pointed
out that industry-changing innovations have come from the outside.
Often these are small or start-up firms. Established companies are
more interested in protecting their markets from new innovations.
Should a fast-follower track an innovative credit union or look
at a leading part of the financial service industry such as on-line
brokers? Should leaders be sought by looking at new delivery channel
innovation coming from mail order, telephone-centered firms or new
marketing approaches from the leading consumer brands businesses?
In addition to the issue of who to track is the question of what
to track. Should a credit union be looking at a product or technology
innovation or should they be looking at new organizational capabilities.
Nowhere is this distinction clearer than in reaction to Internet
based solutions. Some have embraced the new delivery channel believing
that the strategic advantages are self-evident. Others believe that
the secret to Internet success is to incorporate the Internet's
requirements across all of the firm's existing business processes.
Member Focus still Required
A second key success factor once a firm identifies who and what
to follow are keeping in touch with members. Often second-to-market
can bring a better member experience, not just a new way to doing
something for the member. But which segment of the members should
be tracked. Should we follow Tom Peter's philosophy of identifying
our best customers and staying close to them no matter what happens?
Or should we be looking at the non-user member or the emerging segments
that may be critical to future strategy, for example the emerging
A similar choice is often debated today when decisions are made
about changing rates on savings which benefits the older, higher
balance member versus lowering loan rates, which tends to benefit
younger members who have fewer established household relationships.
However the strategic issue is more than segment selection. It also
entails providing a better experience for the member. For example
is Internet ''account aggregation'' merely technology bringing
convenience for members to view numerous financial realtionships?
Or is account aggregation intended to help the member improve their
financial well-being and decision-making. The challenge for credit
unions which adopt account aggregation as a second to market service,
is to bring a superior member benefit.
The firm that not only deploys new technology but also uses it
to enhance the member's overall satisfaction is likely to be the
winner for long lasting relationships. For what current or potential
member group are we trying to provide a superior experience-the
member who comes to the branch, uses the phone center, or prefers
Strategy In Context
Another requirement of successful strategy is to evaluate it in
the context of broader market forces. The dominant change affecting
all companies is the Internet. But there is a distinction between
operating in an e-business environment and having an e-commerce
strategy. E-commerce is frequently the integration of the Internet
with an existing product and market presence. This channel expansion
is certainly a requirement, but it may not suffice for strategic
advantage once every firm is routinely Internet enabled.
E-business is a broader concept that looks at how the firm will
connect in a networked world. The net alters access paths to the
customer. The challenge is to identify where the credit union wants
to be in this online universe. For example do we want to be a destination
site or a portal? How does a credit union get on the network? What
kind of partners with what kinds of ''connectedness'' is
the credit union choosing? If the credit union's Internet business
partners, whether these be Internet home banking providers, ISP
hosts, or even core data processor do not have an Internet strategy
compatible with the credit union's business requirements, then the
credit union may not be effectively positioned to compete in the
What are we fast in?
To be a fast follower, also entails some organizational ability
beyond tracking leaders. When strategy shifts to implementation,
what is it that the credit union must be good at to be successful
in a second-to-market context? This capability may entail partnering
skills with other suppliers or firms. Or it can require technology
implementation with new interfaces and data integration capability.
Or it may entail new sales skills with the staff.
To be able to go as fast as member needs require in a second to
market strategy depends on organizational capabilities to implement
change effectively once a direction is identified.
Second to Market But First in Implementation
As the rise and fall of dot.com firms illustrates, first to market
with a good idea is not a sufficient strategy. Second-to-market
can be viable if a firm is aware of the key success factors. For
an organization can be second conceptually in introducing an innovation,
but first to implement successfully.
Credit unions have significant advantages in the implementation
challenge. We have a ''common bond'' target market within
which we can move and change quickly. There is access to scale,
providing shared risk and learning if cooperative networks with
key partners are built.
However if second-to-market is seen as a ''me-to'' effort,
merely following the crowd, then there may be much less advantage
to this strategic position.
The key is to identify who appears to be heading in the direction
your credit union needs to go. Who are the individuals and organizations
that you believe will make a difference this year in creating new
strategy successes? Identifying those ''leaders'' could
be your most important strategic decision for your credit union
not just this year but for many years to come.