I haven't slept well since September 2008. Around the time the financial crisis began, the Filene Research Institute was holding its annual Big Bright Minds meeting in Portland, Ore. The normal buzz of BlackBerry prostration grew to a fury when the news hit that all types of financial firms were on the edge of a complex, terrifying precipice.
Although credit unions were far from the bustle of Wall Street, we all knew the contagion would eventually hit our niche. Change and pain were coming.
Since that fateful month, Filene has taken the medicine prescribed by the many academics we work with and which we share with credit unions on what to do when a business model is under attack. Specifically, we recognized the global financial services market, including credit unions, were about to experience what UCLA strategy professor Richard Rumelt calls a structural break, "the moment in time series data when trends and the patterns of associations among variables change." In the words of a business person, structural breaks are when the poop hits the fan and all bets are off.
Examples of a structural break include the rapidly growing influence of the Internet on traditional advertising models or the rapid disappearance of land line telephones in consumer households. In structural breaks firms can do three things: nothing, tweak the operating model, or try things that are fundamentally different. Filene chose the latter.
The burning platform of change was clear to Filene from the start. We rely on charitable donations from credit unions to conduct research and innovation programs. Once the financial contagion reached credit unions, we suspected that many struggling credit unions would consider their annual Filene contributions line item discretionary.
Not surprisingly, due to the economic climate, 25% of support from credit unions evaporated this year. A 25% hit can do interesting things to an organization. In retrospect, the "do things dramatically different" decision was prescient. You may notice Filene's different model in the next several months. This is where the "burn" comes in: Filene is in the middle of an 18-month experiment to build on our traditional research and launch applied research and innovation when credit unions need it most.
For more than 20 years our model has been to take credit unions' donations and turn them into relevant policy analysis, operational research and innovation programs. This remains our soul. But at this structural break we are taking the opportunity to develop services and products to help credit unions apply the mounds of research and innovation work we've accumulated.
One recent example of this strategy is the release of an i3 project called Debt in Focus. In 2008, a group of credit union executives, focused on the needs of the hurting American and developed the idea for an online, anonymous debt management tool.
This simple tool had obvious potential, so Filene facilitated a beta test with more than 200 credit unions and 150,000 consumers. We enhanced the tool and now are offering it for sale to credit unions. After one month in its public release, more than 150 credit unions have purchased a license to Debt in Focus. Filene will put these funds toward future innovation work on behalf of credit unions.
We have a variety of other tactics to walk this applied research path, including advisory engagements around topics we've researched extensively: young adult outreach, social media strategies, consumer behavior and strategy development.
We feel the burn from these activities much the same way athletes feel the burn when trying a new exercise regime. The burn, though, is better than rubbing a rabbit's foot and hoping that things go back to "normal."
The new normal requires all organizations to rethink their operating philosophies. It's been fun and exhausting the past 18 months to apply the very research we do on behalf of credit unions in our own organization. Although success is not guaranteed, I sleep a little bit better knowing that we are looking out the windshield not the rearview mirror, We are charting a way through this structural break not just for Filene but for credit unions and the members they serve.
Even if it burns.
Mark Meyer is CEO of the Filene Research Institute. He can be reached at?608-231-8554 or markm@filene.org
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