Strategic Planning in the Banking Industry
Dr. Robert L. Underwood
Associate Professor
Department of Business & Accounting
Furman University
July 20, 2015
Overview of Strategy: Differentiating
Within the Banking Industry
Enhance your understanding of strategy fundamentals
leading to the discussion of the Balanced Scorecard
• What is Strategy?
• Strategic Positioning/The
Delivery of Value
• Value Types; Achieving a
Distinctive Competitive Advantage
2
Overview of Strategy: Differentiating
Within the Banking Industry
• The Discipline of Market Leaders
• Most Common Strategy
Mistakes
• Applying PESTEL to the
Banking Industry
• Differentiate or Die: Strategic Musts
for Banks in the Digital Age
3
Corporate vs. Strategic Five, Ken Favaro,
Senior Partner, Booz & Allen
4
Real Substance of Strategy
• Making deliberate and decisive choices
• Where to play (markets/industries)/Positioning
• Foundation for decision making and resource
allocation
• IBM – Lou Gerstner 1993
“The last thing IBM needs right now
is a vision.”
5
IBM Turnaround - 1993
• Redefined Business Boundaries (Computer
hardware to hardware, software and services)
• Value Proposition (Best products to corporate
solutions)
• Essential Capabilities (Selling to IT to selling to
the C-Suite)
6
What is Strategy?
• “Competitive strategy is about being different. It
means deliberately choosing a different set of
activities to deliver a unique mix of value.”
Michael Porter
7
Peter Drucker on Marketing Strategy
• “Marketing is so basic that it cannot be
considered a separate function. It is the
whole business seen from the point of
view of its final result, that is, from the
customer’s point of view… Business
success is not determined by the
producer but by the consumer.”
Peter Drucker
8
Marketing Strategy
• Determining the needs and wants of target
markets and delivering the desired
satisfactions (value) more effectively and
efficiently than competitors
• Distinctive Competitive Advantage
9
The Delivery of Value
• Customer perspective:
o Value is the ratio of costs (price) to benefits
(utilities)
o Value proposition includes the whole bundle of
benefits the firm promises to deliver, not just
the benefits of the product itself
10
Types of Value – Strategic Competitive
Positioning
•
•
•
•
•
•
•
•
Low Price
Price/Quality Ratio
Superior Customer Service
Dependability/Assurance
Authenticity
Status
Self Concept Enhancement
Superior Product Quality
11
Types of Value
•
•
•
•
•
•
•
Product/Service Innovation
Availability/Choice
Functional Performance
Location
Convenience
Social Responsibility
Timeliness
12
Foundations of Economic Performance
The Value Chain
Firm Infrastructure
(e.g. Financing, Planning, Investor Relations)
Human Resource Management
Support
Activities
(e.g. Recruiting, Training, Compensation System)
Technology Development
(e.g. Product Design, Testing, Process Design, Material Research, Market Research)
M
(e.g. Components, Machinery, Advertising, Services)
Inbound
Logistics
Operations
(e.g. Incoming
Material
Storage, Data
Collection,
Service,
Customer
Access)
(e.g. Assembly,
Component
Fabrication,
Branch
Operations)
Value
a
Procurement
r
g
Outbound
Logistics
Marketing
& Sales
After-Sales
Service
(e.g. Order
Processing,
Warehousing,
Report
Preparation)
(e.g. Sales
Force,
Promotion,
Advertising,
Proposal
Writing, Web
site)
(e.g. Installation,
Customer
Support,
Complaint
Resolution,
Repair)
i
n
What
buyers are
willing to
pay
Primary Activities
• Competing in a business involves performing a set of
discrete activities, in which competitive advantage resides
13
"The Discipline of Market Leaders" by
Treacy and Wiersema
14
"The Discipline of Market Leaders" by
Treacy and Wiersema
• Operational Excellence
Wal-Mart, UPS
• Product Leadership
Apple, BMW
• Customer Intimacy
Nordstrom, Publix
15
Most Common Strategy Mistakes
(Understanding Michael Porter: The Essential Guide to Competition and
Strategy by Joan Magretta)
• Competing to be the best, going
down the same path as everybody
else and thinking that somehow
you can achieve better results
• Confusing operational effectiveness with strategy
• Confusing marketing with strategy. Importance of the supply
side of the equation as well as the demand side
• Overestimating Strengths
16
Most Common Strategy Mistakes
(Understanding Michael Porter: The Essential Guide to Competition and
Strategy by Joan Magretta)
• Getting the definition of the business or the
geographic scope wrong
• Not having a strategy at all
17
New Product Idea – Class Exercise
• Consider a frequent consumer situation in which
you are frustrated with how business is
conducted.
• What value is not being
delivered in this situation?
• How could you deliver value more clearly and
consistently in order to better satisfy the
marketplace? Discuss the fundamentals of your
idea.
18
Impact of Macroenvironment
• “What we need to do is always lean into the
future; when the world changes around you and
when it changes against you – what used to be
a tail wind is now a head wind – you have to
lean into that and figure out what to do because
complaining isn’t a strategy.”
Jeff Bezos
19
Macroenvironmental Factors: Let’s Discuss
the Impact of Each on the Banking Industry
20
Differentiate or Die: Strategic Musts for
Banks in the Digital Age
• “In a 2012 study by global brand consultant, Clear,
financial brands ranked as some of the lowest when
rated along statements such as ‘a brand I feel
attracted to’ and ‘a brand that matters to me.’ The
data also confirmed what we all intuitively know
about banking brands: they are virtually identical
in consumers’ eyes. Every bank in the study was
seen as being highly ‘organized’, ‘serious’ and
‘sensible.’ It’s rare to find a bank that stands for
much else.”
Simon Clough, Clear
21
Differentiate or Die: Strategic Musts for
Banks in the Digital Age
• “…the brutal truth is that most banks lack
strategic capital – the combination of brand,
innovation, culture and unique ways of doing
business that will ensure future relevancy.”
Jim Burson , BAI.org (July 2014)
22
Differentiate or Die: Strategic Musts for
Banks in the Digital Age
• Enhancing the Digital Environment
o Digital transformation is at an inflection point
McKinsey & Company study (Jan 2015)
o Digital Laggards could lose 35% net profit
o Digital Winners may realize a 40% profit increase
23
Enhanced Digital Capabilities Create Value
for Banks - McKinsey & Company
• Digital technologies increase a bank’s
connectivity (customer, suppliers, employees)
• Digital draws on big data & analytics to extend
and refine decision making
• Digital enables straight through processing
• Digitization is a means of fostering innovation
across products and business models
24
Additional Strategic Musts
• Enhancing Customer Service to Maximize the
Customer Experience
o Financial Power of Customer
Loyalty
• Developing and Facilitating the Omni Channel
Experience
25
Additional Strategic Musts
• Developing a Brand Culture that permeates
the entire organization and is reflected with
each and every interaction with customers
26
Thank You, Now On to the Balanced
Scorecard!
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