Virtually every board and credit union executive has engaged in strategic planning, but is this planning of any value beyond helping to demonstrate to regulators that you all take your job seriously? In a nutshell, does your credit union’s business plan dictate your credit union strategy or do your credit union’s strategic objectives shape your planning?
The distinction is a crucial one highlighted in an excellent article in the January issue of the Harvard Business Review, “The Big Lie of Strategic Planning,” by Roger L. Martin. As he explains “virtually every time the word strategy is used, it is paired with the word plan, as in the process of strategic planning. . .” The result, he argues, are plans that typically contain a Mission or Vision statement; list suggested product launches and/or new product initiatives, and convert these goals into a budget plan.
There is certainly a place for such planning but as a tool for developing a strategy it misses the mark; doesn’t force a credit union to make explicit choices or to question assumptions about why it is choosing to do what it is doing. Instead, it is simply looking at the existing balance sheet and making assumptions about what can be achieved based solely on affordability and financial projections.
In contrast, Martin argues, “true strategy is about placing bets and making hard choices.” Next time you have a strategic planning session, try implementing these three rules he identified.
First, have a simple strategy statement that focuses on the key assumptions upon which your strategy is based. Then ask yourself what members or potential members you should target based on that strategy.
This almost always comes down to asking which members or potential members to target and once identified how to create a value proposition that’s attractive to them. This is tougher than it sounds, especially for credit unions because it means asking not only what potential members are within your field of membership but what potential members should be targeted for credit union growth. A branch might be comforting to a thirty year member of a credit union, but if your goal is to attract the next generation of consumers, should that member’s concerns dictate the credit union’s strategy?
Martin’s second rule is to recognize that a strategy is not about perfection but about creating an environment where it is acceptable to take reasonable risks to accomplish a worthwhile goal. Regulators and boards like strategic plans dictated by revenue projections because they are based on quantifiable assumptions. But strategy is about taking chances. In my favorite line of the piece, he points out “as much as boards and regulators may want the world to be knowable and controllable, that’s simply not how it works. Until they accept this, they will get planning instead of strategy.”
Finally, rule three requires that all the key players should make their logic explicit. For instance, if I was on a board I would argue that the best way to attract the next generation of members is to downsize branches and replace them with automated kiosks. In making this argument, I should make explicit my assumption that members want convenient, automated service rather than a traditional brick and mortar branch. Reasonable minds could question that assumption and, as a result, strategic plans can be based on the type of core issues regarding the forces that will shape the industry in the future rather than being narrowly focused on the credit union’s present balance sheet.
Every credit union, no matter how big or small, is competing in a hyper-competitive financial services industry that is being shaped by changing regulations, technology, and economic shifts on a daily basis. Those credit unions that take the time to analyze these forces and develop a strategy for competing under these conditions are the ones that will be around twenty years from now. Those that keep on planning without any real thought to strategy won’t.
