Sun Tzu Helps a Bank Defeat Its Competition
by Kelly Coughlin, BankBosun CEO,
Kelly Coughlin is CEO of BankBosun, a management consulting firm helping bank C-Level Officers navigate risk and discover reward. He is the host of the syndicated audio podcast, BankBosun.com. Kelly brings over 25 years of experience with companies like PWC, Lloyds Bank, and Merrill Lynch. On the podcast Kelly interviews key executives in the banking ecosystem to provide bank C-Suite officers, risk management, technology, and investment ideas and solutions to help them navigate risks and discover rewards. And now your host, Kelly Coughlin.
Hi this is Kelly Coughlin. I am the CEO and program host of BankBosun. Today, I am not going to have a guest today but I’m going to introduce a screen play that I wrote, it’s titled: How Sun Tzu and a Harvard Professor Helped a Community Bank Crush its Competition.
Here is the Play Summary: The play tells about how the board of directors and shareholders of a community bank, frustrated by an ongoing loss in revenues to big banks, financial advisors and non-bank competitors, threatened Joe, the bank CEO, to turn it around or the board will sell, merge or close the bank.
Let me start by introducing the setting: It is 2016. Main Street Community Bank is a middle market bank with $ 1billion in net capital. The bank’s board, CEO and CFO lose sleep over the Three Rs: Risk, Revenue and Regulation. His Big Bank Competitors compete against them on product and price. And they can pay their execs more compensation. The big banks drive regulatory change, partly because of their own major screw ups, and partly because of their access to and, influence of, the regulatory and legislative banking ecosystem; and partly, and perhaps simply, because they have more money to spend to buy influence and effect change.
Joe also competes with non-bank financial companies who compete on technology and mobile access making them very attractive to the millennial market.
His wealth management and trust areas compete for deposits and investments with financial advisors, CPAs, independent brokers and wire-house brokers.
It’s a dismal setting and many are projecting and predicting that the community banking ecosystem will no longer survive, dying a slow death like travel agencies, video rental companies, and bookstores.
The board tell Joe to either fix it or they will either sell, merge or close the bank.
Let me next introduce the characters: Joe, CEO, Main Street Community Bank. Joe is accountable to his board of directors, his investor/shareholders, regulators; directly to his CFO and other officers; and indirectly to every employee at the firm. And of course, he is accountable to all current and prospective customers, both business and individuals. He gets pressure to hire and retain professionals, and even more pressure to keep tight controls on expenses.
The next main character is Sun Tzu. Sun Tzu was an ancient Chinese military general, strategist and philosopher, who is believed to have written the famous “The Art of War”.
The third main character is Michael Porter. One of the many business case studies I read in business school at Babson College in Massachusetts was written in March 1979 by Michael Porter, a very smart Harvard University professor, titled, How Competitive Forces Shape Strategy. And another one was written in January 2008, The Five Competitive Forces that Shape Strategy. I would encourage all banks C-Suite execs to read these articles. Contact me if you have any trouble locating them.
And finally, the fourth main character is me, Kelly Coughlin. I am a CPA and the CEO of BankBosun. I’m also an independent consultant for Equias Alliance. I have been working in the banking ecosystem since I was 23 years old. And that was over 20 years ago….alot over 20 years ago…ok, it was over 30 years ago. I have had senior and executive experience at PWC, Merrill Lynch, Lloyds Bank and was CEO of a financial technology and investment company for over12 years.
The Three Act Play:
The classic way to tell a story…or write a screen play… going all the way back to Aristotle I think, is to have a beginning, middle and end…or in screenplay vernacular, the Setup, the Confrontation and the Resolution.
So with that in mind, here is Act 1, The Beginning, The Setup:
Joe knows that if he continues to try to compete for customers on the existing playing field, because of their capital, regulatory and human resource constraints, he will lose.
Joe knows he needs a change in his business strategy and create new tactics to implement that strategy or he will fail.
Act 2, The Confrontation
Act 2 is where the playwright demonstrates a loss so painful, a failure so great, that the protagonist (Joe) must confront his reality and status quo and either continue in this miserable, wretched state or change his state and condition.
In my Act 2, change in business strategy and tactics” is the change is the confrontation. And for my play, I introduce Sun Tzu and Michael Porter.
In act 2, we have Sun Tzu meeting with Joe and sharing his ancient wisdom with ideas like:
But two of my favorites are:
I’m going to repeat that:
And here’s my second favorite:
So the idea here is the advice and wisdom of Sun Tzu leads Joe to think clearer and more strategic about confronting his dilemma, which requires him to confront his enemy and his competition. And to avoid his enemy’s strengths and attack their weakness and change the field of battle to a location and venue where his enemy cannot effectively compete.
And then to help our protagonist identify where this field of battle is, I introduce Michael Porter with his brilliant Five Force Analysis. These forces are:
Joe is introduced to Michael Porter, who helps him bank understand that his real competitive advantage exists in three primary areas: 1) location: he has a physical presence in his customers’ local community; 2) security: he has brand image of safety, permanence and security; and 3) service: a live person, not simply a phone contact or email contact, but a live person with whom he can speak. And while his direct rivals, other community banks in his footprint, are certainly direct competitive threats because they also share his competitive advantages; his biggest threat are other substitute competitors – big banks, internet financial companies, who do not share that competitive advantage.
Joe now begins to see his wisdom. But he fears he does not have the budget to spend on fancy and sophisticated consulting ideas.
And now we introduce our final character, Kelly Coughlin, CEO, BankBosun, that’s me. I introduce Tactical Ecosystem Marketing for Community Banks.
Kelly explains that the terms tactics and strategy are often confused. Strategy is the overall plan; tactics are the actual means used to gain an objective, the end goal. Strategy helps you understand the question “What is our goal and objective? What are we trying to accomplish?” Tactics help you answer the question, “How are we going to accomplish our goal and objective?”
Kelly describes how Tactical Ecosystem Marketing is a cost effective marketing tactic that requires Joe to do a couple basic things compete effectively with his direct rivals and substitutes on a playing field they simply cannot or will not compete:
Finally, Act 3: The Resolution
Joe’s bank is now thriving and he is recapturing market share. And most important of all Joe’s kids think that their dad is the smartest, coolest, most sophisticated dad in the world. Why? Because Joe’s on iTunes and Google Playstore. And they’re not. And Joe’s board of directors loves him. That’s it for now. Thanks for listening.
We want to thank you for listening to the syndicated audio program, BankBosun.com The audio content is produced by Kelly Coughlin, Chief Executive Officer of BankBosun, LLC; and syndicated by Seth Greene, Market Domination LLC, with the help of Kevin Boyle.
Video content is produced by The Guildmaster Studio, Keenan Bobson Boyle. The voice introduction is me, Karim Kronfli. The program is hosted by Kelly Coughlin.
If you like this program, please tell us. If you don’t, please tell us how we can improve it. Now, some disclaimers.
Kelly is licensed with the Minnesota State Board of Accountancy as a Certified Public Accountant. Kelly provides bank owned life insurance portfolio and nonqualified benefit services to banks across the United States. The views expressed here are solely those of Kelly Coughlin and his guests in their private capacity and do not in any other way represent the views of any other agent, principal, employer, employee, vendor or supplier.