Strategic Choices in Banking Year One – Chief Retail Officer Perspective Dr. Robert L. Underwood

Executive Banking School Roadmap GROWING Capability Confidence Courage YEAR THREE Chief Executive Officer Perspective YEAR ONE Chief Retail Officer Perspective YEAR TWO Chief Financial Officer Perspective

Executive Banking School Roadmap GROWING Capability Confidence Courage YEAR THREE Chief Executive Officer Perspective YEAR ONE Chief Retail Officer Perspective YEAR TWO Chief Financial Officer Perspective

Year One – Chief Retail Officer Perspective Retail Strategy Curriculum Leadership Communication Leading the Retail Line of Business via a Balanced Scorecard Discovering Customer Segments & Consumer Behaviors Successfully Communicating & Advertising in Retail Banking Developing and Pricing Profitable Bank Products Modernizing & Optimizing Delivery to Meet Customer Requirements Facing Ethical Dilemmas in Banking Applying Concepts Learned to Today’s Market Chief Retail Officer Perspective

Year One – Chief Retail Officer Perspective Retail Strategy Curriculum Leadership Communication Leading the Retail Line of Business via a Balanced Scorecard Discovering Customer Segments & Consumer Behaviors Successfully Communicating & Advertising in Retail Banking Developing and Pricing Profitable Bank Products Modernizing & Optimizing Delivery to Meet Customer Requirements Facing Ethical Dilemmas in Banking Applying Concepts Learned to Today’s Market Chief Retail Officer Perspective

This Session’s Critical Topics What is Strategy? Strategic Positioning/The Delivery of Value Types of Value The Discipline of Market Leaders Most Commmon Strategy Mistakes Strategic Decisions in Banking Porter’s Five Forces Macroenvironmental Factors

What is Strategy?

What is Strategy? Our Approach Today Recognition of variance in experience/ understanding among CBA students Begin with a broad understanding of strategy and narrow it down to a focus on banking Consider industry trends/issues, discuss strategic options

Ken Favaro, Senior Partner, Booz & Allen What is Strategy? Corporate vs. Strategic Five Ken Favaro, Senior Partner, Booz & Allen

Starbucks Mission Statement & Values What is Strategy? Starbucks Mission Statement & Values MISSION: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. VALUES: Creating a culture of warmth and belonging, where everyone is welcome. Acting with courage, challenging the status quo and finding new ways to grow our company and each other. Being present, connecting with transparency, dignity and respect. Delivering our very best in all we do, holding ourselves accountable for results.

BMW Mission Statement & Mercedes Value Statements What is Strategy? BMW Mission Statement & Mercedes Value Statements BMW Mission Statement “The BMW Group is the world's leading provider of premium products and premium services for individual mobility.” Six values that "drive" Mercedes-Benz USA The audacity to reject compromise The instinct to protect what matters The commitment to honor a legacy The vision to consider every detail The foresight to take responsibility The ingenuity to outperform expectations

Real Substance of Strategy What is Strategy? Real Substance of Strategy Making deliberate and decisive choices regarding resource allocation Where to play (businesses, markets, industries)? Positioning (competition) within those markets & industries? Value proposition? Target market? Capabilities essential to deliver the value proposition?

Strategic Positioning/Delivery of Value

Strategic Positioning/Delivery of Value “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. The essence of strategy is choosing what NOT to do.” Harvard Professor, Michael Porter

Peter Drucker on Marketing Strategy Strategic Positioning/Delivery of Value 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

Marketing Strategy – All About Value Proposition Strategic Positioning/Delivery of Value Marketing Strategy – All About Value Proposition Determining the needs and wants of target markets and delivering the desired satisfactions (value) more effectively and efficiently than competitors Distinctive competitive advantage

Types of Value

Superior Customer Service Dependability/Assurance Authenticity Status Types of Value Types of Value Propositions – Strategic Competitive Positioning Low Price Price/Quality Ratio Superior Customer Service Dependability/Assurance Authenticity Status Self Concept Enhancement Superior Product Quality

Types of Value (continued) Product/Service Innovation Availability/Choice Functional Performance Location Convenience Social Responsibility Timeliness

The Discipline of Market Leaders

"The Discipline of Market Leaders" by Treacy and Wiersema

Operational Excellence Amazon, UPS The Discipline of Market Leaders "The Discipline of Market Leaders" by Treacy and Wiersema Operational Excellence Amazon, UPS Product Leadership Apple, BMW Customer Intimacy Nordstrom, Publix

Strategy and Value Delivery – Essential Capabilities The Discipline of Market Leaders Strategy and Value Delivery – Essential Capabilities Costco Warby Parker

Common Strategy Mistakes

Confusing operational effectiveness with strategy Common Strategy Mistakes Understanding Michael Porter: The Essential Guide to Competition & Strategy by Joan Margetta 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 Failing to recognize the importance of the supply side as well as the demand side Overestimating strengths

Getting the definition of the business or the geographic scope wrong Common Strategy Mistakes Understanding Michael Porter: The Essential Guide to Competition & Strategy by Joan Margetta Getting the definition of the business or the geographic scope wrong Not having a strategy at all

Strategic Decisions in Banking

Segue to Banking: Strategic Decisions Strategic Decisions in Banking Segue to Banking: Strategic Decisions Financial products and services? Customer segmentation (Who do we target?) Demographic, Geographic Psychographic, Behavioral Product and service delivery? Brand communication?

Strategic Decisions in Banking Strategic Differentiation: A Magnified Challenge for the Banking Industry “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

Strategic Decisions in Banking Strategic Differentiation: A Magnified Challenge for the Banking Industry “…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)

Porter’s Five Forces

Applied to the Banking Industry Porter’s Five Forces Applied to the Banking Industry

Macroenvironmental Factors

Current Factors Impacting the Banking Industry Macroenvironmental Factors Current Factors Impacting the Banking Industry

Questions?

Year One – Chief Retail Officer Perspective Retail Strategy Curriculum Leadership Communication Leading the Retail Line of Business via a Balanced Scorecard Discovering Customer Segments & Consumer Behaviors Successfully Communicating & Advertising in Retail Banking Developing and Pricing Profitable Bank Products Modernizing & Optimizing Delivery to Meet Customer Requirements Facing Ethical Dilemmas in Banking Applying Concepts Learned to Today’s Market Chief Retail Officer Perspective

Executive Banking School Roadmap GROWING Capability Confidence Courage YEAR THREE Chief Executive Officer Perspective YEAR ONE Chief Retail Officer Perspective YEAR TWO Chief Financial Officer Perspective