Articles:
Strategic Planning and Marketing: Building Business Velocity
Written by Robert C. Kramer, CMC, President, Visionary Strategic Consulting

Exclusively for Bank Marketing Magazine (To Be Published November ’99 Edition)

Banks are similar to airplanes in many ways. Like airplanes, different kinds of banks perform different functions. Both banks and airplanes have diverse configurations and utilize different equipment and instrumentation to measure results. Collectively, however, like airplanes, all banks have one fundamental purpose in common. They are designed to get from a starting point to a destination, on schedule, using known and quantifiable resources.

Continuing with the analogy, like airplanes, thriving banks combine two common elements, which in physics is known as the principle of "velocity" or forward movement. Velocity has two components, speed and direction. For banks, the component of direction (similar to the function of a compass) is created through the strategic planning process. The component of speed is developed through a sound marketing strategy which includes effective execution. Using this perspective, it’s easy to understand why successful "flight" for banks today involves learning how to create and properly "marry" direction and speed. It’s the authors purpose to amplify and provide useful insights on this vital relationship.

The Environment

Business "velocity" is particularly crucial in an era where change has become the essential nature of business. For example, consider the economics of globalization, deregulation, population shifts, declining birth rates, leapfrogging technology, Internet disintermediation, new patterns of spending money as well as the changing fundamentals of the work itself. Change is a constant. To a large degree, the increasing frequency of mergers and acquisitions prevalent in the banking industry is driven by many of these underlying forces for change.

With change as the unrelenting business condition, two crucial questions are posed. First, what methods are available in the current organizational "toolbox" to create "Velocity?" Second, how should those tools be used to maximize "Velocity?"

Dispelling a Myth

In a very real sense, "velocity" represents the synergistic relationship of the overall strategic planning process wedded with the marketing plan. It is precisely this synergy that creates the market-winning, customer-attracting dynamics of a business. However, the traditional organizational structure of banks (sans marketing and sales departments) does not facilitate adaptation to changes in the customer base. Bank survival requires rethinking their fundamental purpose and the essential nature of their relationship with the customer.

Contrary to popular notions, a company’s strategic competitive advantage has much less to do with its unique product and service offerings and much more to do with differentiating itself through its fundamental values, organizational culture and overall commitment to customer service. Accordingly, banks, large and small, have been slow to recognize their strategic direction and competitive market positioning opting instead for consolidation, large size, and financial muscle. This is a high risk short-term strategy that makes big banks more vulnerable to rapid market shifts and encourages commoditization through continuous "salting" of the market with new products and services in their quest for increased market share and dominance.

Using the Compass

Pilots know their landing destination and file a flight plan. That is, they know where they are going and how they are going to get there. By following the flight plan they are able to measure their progress toward their final destination. Profitable and growing businesses know where they are going and follow their plan too. These are the "fast companies" and market leaders whose goal is to be different, be the best at what they do, adding value and striving to continually delight their customers. These market leaders understand that decisions made today, before "takeoff," are responsible for where they will land, who they will be and what they will become in the future. Planning and strategy are the primary tools of successful business "flight." Oddly, few businesses choose this enlightened method of thinking. Many appear uncommitted to the rigid discipline required to invest their time, people and dollars in a long-range vision and strategy that will guide and direct their daily decision-making.

As we approach the new millennium, Peter F. Drucker affirms the necessity for strategic planning in his article, "The Discipline of Innovation," from the book, Leader to Leader. He states, "We know that we need a clear focus or mission. We need to define what results we are after, and to assess and stress what we're doing and how we're doing it constantly to make sure that we put our scarce resources of people and money where we get the most for them. Good intentions are no longer enough, we have to be result-focused and opportunity-focused."

Ironically, executive reasons cited most often for not investing in strategic planning and establishing a clear direction is that the pace of change is too rapid for any meaningful planning to be accomplished. This false notion is precisely the mental "trap" that makes businesses a victim to reactionary management and "tyranny of the in-basket." Without a clear sense of purpose and direction, organizations are constantly pulled to what is currently urgent rather than what is strategically important. Without a carefully thought-out and documented strategic plan, banks, and others businesses, flounder aimlessly in the ocean of uncertainty, change and risk.

Reading the Compass

Results-oriented strategic planning requires the business (financial services or otherwise) to answer six crucial questions:

Where are we now? (This involves assessing and evaluating both internal strengths and weaknesses and opportunities and threats in the external environment)

Where exactly do we want to go? (This is usually a five to ten year plan depending on the industry)

How do we intend to get there?

When will we arrive?

Who is responsible?

How much will it cost? 

Can we afford it? 

How will we measure success or failure?

The answers to these questions form the strategic plan. The strategic plan, however, is not a singular event on the annual calendar. Strategic planning should be a continuous leadership and management closed-loop decision-making process of thinking, planning, deciding, doing, evaluating, and refining. It is a continuous loop. The Japanese refer to this process of continuous incremental improvement as "Kaisan."

A major dilemma confronting the banking industry today is growth and size. In large measure, the banking industry is undergoing massive consolidation and simultaneous downsizing. This is an outgrowth of the strategic imperatives of achieving profits and building shareholder value. The mistaken belief is that gargantuan size will facilitate capturing greater market share. The giants strive to become the "be-all and end-all" of financial service one-stop shopping. A classic case is Newark, New Jersey-based First Fidelity Bank corporation. First Fidelity followed the conventional wisdom of increasing shareholder value by cost cutting and operations reengineering. After the bank was "fixed," little if any capital remained to develop new products and establish a firm market position. The result was a takeover by First Union, a far more aggressive customer-focused bank.

Traditional thinking leads to the belief that size, high technology, downsizing, globalization, being in the right industry, and having a brilliant strategy, are all critical success factors. Current banking philosophy shows an overwhelming predisposition to accept and practice this line of thinking. Instead, Jeffrey Pfeffer, in his book, The Human Equation, explains why conventional wisdom is dead wrong. Pfeffer’s empirical studies conclusively demonstrate that none of the aforementioned factors are important as a source of success and profitability across most industries. Pfeffer convincingly argues that long-term success and profitability are most highly correlated instead with highly committed, trained and motivated people presumably resulting from strong leadership and a compelling organizational vision and strategy.

As such, more than a mere mission and statement of values, effective strategic planning involves continuous organizational learning with the intent of transformation of the attitudes, beliefs and norms of the behavior of the people within the organization. The strategic plan details the values and long-range stretch goals of the people within the organization. Moreover, it details how the organization will communicate its unique values to the marketplace, and what strategy it will use to do so. In its ideal form, the strategic planning process encompasses and involves every person at every level within the organization. Commitment, belief, "buy-in," and changing behavior are the output of effective strategic planning and the key dimension of sustained success and profitability.

Starting the Jet Engine

Just as the strategic plan acts as a compass defining the direction and scope of change, the marketing plan can be thought of as a jet engine, driving the organization forward at a certain speed on a defined flight path. The strategic plan and the marketing plan are not mutually exclusive. The strategic planning process is largely anchored in a rational, logical, sequential, and probabilistic thinking process. By contrast, the marketing plan follows the reasoning of the strategic plan, but draws heavily on experience, intuition, judgment and something called "market feel." At its core, marketing is about attracting customers, keeping customers and ultimately, continuing to delight customers over the long-term. For this reason, successful marketing is widely considered a high art form.

An effective marketing plan consists of these key elements:

An overview of the business, products or services and benefits

A market analysis, target market, niche market, and market share

A competitive analysis and strategy

Sales and revenue targets

Marketing strategy, tactics and programs

A marketing budget

Monthly timetable including budget, sales and revenue projections

Monthly tracking of actual expenditures, sales and revenues

Marketing evaluation methods and their time frame

Philip Kotler, one of the world’s leading marketing authorities, in his book, Kotler on Marketing, says that there are five basic steps to effective marketing. First, companies must thoroughly research the market opportunity. Second, companies should target only those segments where they can win and win big in terms of their future goals. Third, companies should exploit the marketing mix of product, price, place and promotion. Fourth, the company should aggressively implement the market strategy, i.e., producing it, pricing it, distributing it, and promoting it. Fifth, the company needs to control the marketing effort by measuring its results and taking corrective action to refine the activity to achieve better results.

Another clear distinction between the strategic planning process and the marketing plan is the difference in time and market perspectives. The strategic plan views the environment in macro-terms. It identifies who is playing the game and what games are being played, and it assesses alternatives as to what are the "smartest" and most profitable games in which to play. The marketing plan’s micro perspective looks inside the game. It identifies who the key players are, how the games are being played, what are the best ways that the game should be played, and what rules can be changed to put the institution in a position of strategic advantage in the game. Most importantly, the micro-perspective of the marketing plan seeks to convert all of the "spectators" (potential customers) to play on or, at least, "root for" the friendly team.

Banks without a marketing department or that do not see marketing as an integral part of how they do business would do well to rethink their way of doing business. Successful marketing requires specialization. If it is to be effective, the "marketing department" can not be an extra duty function of an already overloaded and unprepared branch manager or their assistant. Marketing is a highly competitive environment with highly educated specialists applying sophisticated marketing techniques. As compared to other industries, traditional bank marketing and promotion has often been regrettably low on the effectiveness scale.

In the ideal case, the role of the marketing department - the "jet engine" of the grand strategy - is crucial for strategic execution. While the strategic plan focuses on the future, it is imperative that the marketing plan deals with the reality of the here-and-now of the consumer. The marketing focus is on current and future markets, market segments, customer demographics and psychographics, shifting of customer preferences, customer alliances, customer distribution channels, and the allocation of resources to target specific segments and target markets.

The marketing plan links four key dimensions to the strategic plan. First, and most important, is the alignment of marketing objectives to the strategic goals developed within the framework of the strategic plan. One recurring problem is a faulty alignment of the marketing plan with the strategic direction of the business. This misalignment results from the difficulty of shifting from the status quo into the "new" strategic direction. Second, contrary to popular belief, the marketing plan should not be used primarily as a method to sell products and services. Again, Kotler clarifies this issue by pointing out that selling is a part of marketing but that marketing includes much more than selling. He says that marketing's responsibility is to discover unmet needs of the market and promote resolution of those needs in such a way that little or no selling is actually required. Third, the marketing plan defines the characteristics of the target market and what tactical activities the organization will use to address unique customer needs. Fourth, the marketing plan projects the probability of increased revenues by establishing revenue benchmarks reflecting a keen understanding of the market size and degree of penetration necessary to achieve the targeted levels of success necessary to support the strategic plan.

Tuning the Jet Engine

Unfortunately, a bank can be competent at strategic marketing and tactical execution of the marketing strategy, and yet fail miserably in their efforts. The remedy for this is for banks to be equally competent at what Kotler calls "administrative marketing." This means recognizing the need to address all of the following:

Brand

Product category

New product

Market segment

Geographical market

Customer base

In each of these cases, there should be an annual marketing plan AND a strategic plan. Both plans must be synchronized for resource allocation and the timing of promotional value.

Fueling for Propulsion

Where marketing is the jet engine, sales are the fuel of business process. The marketing plans focus on both short-term and long-range goals derived from the strategic plan. The marketing department is the kick-starter for the commitment and momentum of the organization to achieve immediate results within the first ninety days of execution of the marketing plan. Confirmation of the initial success of the strategic plan is usually measured by percent increase of sales revenues. As a rule of thumb, the first ninety days are crucial to "proving" the viability of the strategy. Achieving immediate results usually points to a high-performance relationship between marketing and sales. When immediate results are not achieved, top management invariably starts looking for someone to blame? What can and does occur is a type of guerrilla warfare between marketing and sales. Marketing accuses sales of lack of commitment and/or poor execution. Sales personnel accuse marketing of ineffective strategy. To avoid this condition, marketing and sales must be fully invested into a collaborative effort of planning and implementation of the marketing and sales strategy and tactics. To do otherwise is an invitation to breakdown in cooperation, in-fighting, and significant loss of resources and opportunity.

Regrettably, the traditional structure of banking places little emphasis on outside selling and sales activities. Traditional marketing mentality says that, "if we create it and advertise it, they will come to us and buy it." In this regard, the banking industry requires a new paradigm of business along with a new awareness for the type of people who should be hired to fulfill the sales function. Specialized hiring and training or outsourcing the sales operation may be a strategic alternatives.

Sharing the Vision

The number one leadership challenge of strategic planning process is sharing the process as widely as possible with as many people as possible from the President/CEO on down. Strategic planning is a change LEADERSHIP process. The number one reason for business failure to fully implement their strategic plan is the inability of leadership to understand and overcome internal resistance to change. In his best selling book Leading Change, Harvard Professor, John Kotter explains that as much as eighty percent of change efforts fail. At that rate of failure, there are better odds of success in Las Vegas and yet, the major change efforts are proliferating.

Although there are a myriad of reasons for failure, in large measure, they are explained by leadership’s lack of inspiration and clear and continuous communication to their people who are responsible to implement the change. Most importantly, the President/CEO and the executive leadership have to be the purveyors of the strategic planning message of "the hows", "the whys" and "the whats" of the vision. Each individual and their work function must "fit" into the vision and have an important role to play. The vision, then, becomes the compelling pathway for the organization. In an important research study of over 800 company Presidents and CEOs surveyed by Quinn and Hart in Robert Quinn’s book, Deep Change, overwhelmingly, the most profitable companies were those that were lead by long-range visionary leaders. When an organization is fully aligned, people with strategy and policies and systems with the customer, there will be dramatic increases in all-important areas of profitability and growth.

People: The Competitive Edge

"Feeling" the market is an uncommon quality that some organizations possess because they use their entire organization to assess the market. The degree to which the organization can recruit, train, maintain and release this "emotional intelligence" in its people becomes the sustainable long-term competitive advantage of the organization in the marketplace.

In addition, the field of industrial psychology teaches that each person in the organization comes there to perform, contribute, and excel in some meaningful way. While the "new workforce" searches for meaning and context and cultural "fit", what is certain is that the workforce is working far below their individual and collective potential. The critical role of leadership and management is to unleash capabilities and to tap the potential of individuals and teams to contribute to established goals and objectives. This occurs when the corporate culture and climate encourages and celebrates the willingness of people to take personal and professional initiative and risks to achieve breakthrough innovation and productivity gains beyond that expected. The goal of strategic planning is the transformation of the organization and its culture by tapping the potential of its people. Tapping workforce potential is where the organization truly gains a superior and sustainable competitive market advantage.

National Vs Local Bank Mentality

In the mature stages of the banking industry, there is a fiercely competitive environment. Fragmentation and competitive forces have led to major bank consolidation nationally. There is also competition due to the major differences between a national bank and a local bank mentality. In this era of consolidation and largeness as the ultimate goal, most banks have lost or are losing their regional community focus. These banks are everything except market-driven. The customer does not seem to matter as much as profitability and promotional offerings that beat the competition. In other words, banks are choosing not to be "close" to their customers: their needs and desires and delighting the customer in every way. They tend to lose market share and to spin off other products and services that are more mass focused, such as credit cards.

There are examples of banks that are performing the role of both. Banc One is a superb example of a highly successful brandname national bank, but acting with mentality of a local bank with 1,900 branches in fourteen states. What’s the magic for Banc One? Some say it’s the visionary leadership of John B. McCoy. But, McCoy would say that it’s his choice of people and their absolute commitment to their customer. In a recent Wall Street Journal article, McCoy saw the rapid encroachment on the market from financial-service companies. Not willing to give up significant market-share, McCoy threw total resource support behind a new strategy towards a cyberspace banking institution, WingspanBank.com. McCoy dismisses the significant risks, expressing that Wingspan is just one more way Banc One can demonstrate its commitment to stay close to customers who prefer this mode of convenient banking. As one of the nation’s largest banks, Banc One’s success is built on the principal of being big but thinking and acting small and entrepreneurial. Their culture is built on empowerment with accountability, strong entrepreneurial values and the philosophy of staying close to and personal with their customers.

Avoiding the Pitfalls

As in any dynamic process, there are pitfalls implicit with implementing the strategic and marketing planning processes. With the completion of the strategic plan, the organization shifts into a higher gear, moving faster and farther with greater emphasis toward the future. At the same time, the daily business of the organization is ongoing. There is pressure for short-term results from a management structure that remains guided by incentives of the "old" system. New requirements and new issues have been mandated on the organization throwing it into a degree of confusion and ambiguity about what are the priorities. The key issue is when do we stop doing what we have always done, and when do we start doing what we should be doing?

Another pitfall involves an uncoordinated sales effort. Products and services are changing and are aimed at a new marketing segment. Marketing has a mandate to make the new strategy work and to achieve revenue targets within the short-term. It is a tall order for the sales force to capture all of this and execute flawlessly. What often happens is a guerrilla war syndrome between the sales and marketing departments.

Third, organizations that don't set benchmarks nor have appropriate benchmarks fall into a trap. Oftentimes the organization may have unrealistic expectations due to a lack of understanding of the dynamics of change. And, while the leadership and management want to push everybody, their expectations usually exceed the capabilities of individuals and teams to change direction in thinking and behavior.

Lack of discipline, training, and commitment of the workforce is still another pitfall that affects the strategic and marketing planning process. Often in the zeal of implementing the new plan/product/service, it is assumed that all in the organization have shared in the details involved with creating the new vision. Every individual in the organization needs to be up-to-speed. This may require a needs assessment of what must be done internally with personnel to bring them current.

Flying into 21st Century

As the business world focuses on the millennium and beyond, banks must realize that their "flight plan" and means of propulsion and stability need to be radically different than business as usual. The ability to adapt and lead change is ever more crucial for survival. The velocity required for growth and sustained success will be exponentially greater. A plan for the creation of more products and services will suffer the consequences of market disinterest. Banks must rely on their ability to create resonance, meaningfulness, and relationships with their customers. As the popular Smith-Barney commercial touted, banks must "EARN" their position in the hearts and minds of their customers through direction and speed, always mindful that people, and only people, are the difference between profit and loss and success and failure. In Robert Tomosko’s insightful book, Going For Growth, he expresses that the bottom line for any organization is how well it prepares, positions and develops its employees for growth. If organizations shape the way people think, feel and behave, perhaps the one of the more useful strategies for successful banking in the new economy is to consider changing the fundamental way people interact with their customers.

About the Author:

Robert C. Kramer (Bob), MBA, MA, is Certified Management Consultant (CMC), and the Founder and President of Visionary Strategic Consulting (VSC), a leading-edge management consulting firm specializing in executive leader strategic development for transformational thinking and learning to achieve the highest levels of profit, growth and satisfaction. VSC is an affiliate with the Howard Consulting Group, Inc that provides turnkey solutions in the areas of IT, M&A valuations, financial litigation support, and management overlay. Bob has consulted with over 150 diverse businesses in a wide variety of industries. He is an active participant in world-class executive development programs at Harvard, Stanford, Berkeley, UCLA, Wharton and University of Michigan Business Schools. For more information please call (831) 622-0109 or contact the firm's Web site at HYPERLINK http://www.visionstrategy.com  or kramer@visionstrategy.com