The key elements of community banking success are first addressed in the strategic/business planning function. Often, de novo banks are formed to fill a business need within a community. There are many opportunities in banking available, but those opportunities must be analyzed to identify the strengths or weaknesses of each. A simple matrix can be used to guide this analysis, serving as a framework for making solid planning decisions. For example, when introducing a new product at the bank you must clarify the reason for the product introduction (e.g., to keep up with a competitor down the street?) and analyze the anticipated success of the product. When entering a specific market area, you must analyze and plan all of the issues associated with branch development: finding a location, recruiting management, clarifying the customer base, introducing a new delivery system. The bank marketing plan as developed by management will depend on this information as bench marks to measure its success. A matrix can be used for all of these tasks; even the analysis of the bank's Asset/Liability portfolio can be driven through such a matrix.
Using the Bank Business Planning Matrix
The rows of the matrix are used to categorize the item being analyzed as an opportunity or threat. In the most simplistic sense, an opportunity is a program that will potentially meet or exceed the bank's profitability targets. For example, a bank may be considering offering remote capture for deposits as a new service. In analyzing the feasibility of offering this service, the bank will have to look the volume of checks being deposited by its business customers, as well as the cost associated with installing the system, including the training and compliance. Considering the costs involved relative to the revenue potential, the new service may end up being categorized as a poor opportunity/threat.
Next, the bank will want to analyze the strength and weakness of the idea. For example, how does it position the bank in the marketplace and among its competitors? Is there a need for the service in the market? Will businesses pay for the extra service or does the bank have to offer it for free to be competitive with other banks? A project that is deemed to be a break-even opportunity may be worth pursuing if it provides strong competitive advantages.
Plotting the analysis results in the matrix will provide some general guidance to management and stakeholders on what the bank needs to do. There are, of course, always options. The analysis may show a weakness the bank has, which will require monitoring and thus create an opportunity for improvement. Even the worst potential box "retreat" may, in certain circumstances, be redefined as "retool." With work and effort, it is possible to turn a weakness of an institution into a strength. The first step in making such a turnaround, however, is recognizing the weakness.
While this matrix is admittedly very simplistic, it is a means of initiating dialogue among the stakeholders of the community bank who must define the various aspects of building a bank strategy/business plan. Click the link to obtain additional information and to obtain a FREE Bank Market Profile.
Business Planning Matrix