NAFCU Journal March April 2021

33 THE NAFCU JOURNAL March–April 2021 E very institution benefits from focus, and focus comes from plan- ning. The purpose of strategic plan- ning is to recognize the manner by which the credit union competes for business and the comparative success achieved by pursuing its selected strat- egy. This fundamental understanding of strategy dictates the actions required to navigate headwinds and effectively address threats and opportunities. Competitive Positioning and Executional Effectiveness Consumers and businesses alike make purchase decisions based upon a price- value continuum. A pricing advantage is revealed by examining overhead or cost structure. The ability to compete on a dif- ferentiated basis articulates a value prop- osition that is demonstrated by margin. As a result, the landscape—dichotomized simultaneously by overhead and margin— reveals four competitive postures: Institu- tions that compete on price, on value, on both price and value or on neither price nor value. The selection of a strategy, in and of itself, does not guarantee success. Ultimately, earnings offer testimony to every credit union’s effectiveness at executing the strategy selected. A tactical plan that is well executed guarantees the success of a given strategy. Evaluating Performance With a path to recognize both strategy and executional effectiveness outlined, objectively evaluating performance is enlightening. When examining financial institutions with less than $10 billion in assets, the popularity of a competitive positioning platform is revealed and the success at executing the selected strategy is uncovered. Competing on Price and Value: 25 per- cent of financial institutions are on firm footing owning advantages in both cost structure (overhead) and value (margin). Because of this positioning, each possess the financial flexibility to compete on either price or value, accelerating organi- zational growth and producing superior financial performance. Competing without Price or Value: In contrast, one in eight financial institu- tions operate without a strategy and possess no discernable means to com- pete. Each operate with cost and margin CREATING COMPETITIVE ADVANTAGE By Tom Long, principal at The Long Group LLC No Price No Value Price Value Price Value Strategic Positoning Value – Net Margin Price – Overhead © The Long Group All Rights Reserved MANAGEMENT INSIGHT