This is speaker circuit season. Rock-tober. Time to knock down some castles.

Last week I was before an audience quoting Drucker, “It’s not necessary for a company to grow bigger. It IS necessary for a company to grow better. ”But what of “economies of scale?” asked a gentleman in the front row.

I keep hearing this more and more as the cause of whacky name changes, unnecessary mergers and the dreaded conversion to a mutual savings bank charter.

We need to get educated QUICK about what that phrase means. I started where all good bloggers do: wikipedia.

As I read that, if your goal is to be “full service” (or trying to be all things to all people) economies of scale will help. But that is but ONE business model. And, in my opinion, not a smart one for most credit unions.

At $100 million in assets you probably should NOT have 43 products and services that range from investments, to mortgages, to business lending.

At $7 billion in assets you still have the challenge with that menu of being competitive in all categories. There’s not a business school around that is going to advocate that model.

When you change your field of membership from a target to a territory you have to declare a target within that territory or you’re toast. Target audience is THE hardest thing for me to discuss with credit union boards. Somewhere along the way we replaced a common bond (employer) with lives, works, worships in eight counties and decided to just grow grow grow and it’ll work itself out. Well, that’s just stupid.

Consider this. If your credit union is pondering getting into business lending (and by that I mean loaning money TO a business model – not just putting a second mortgage on someone’s house) the “full service financial institution/trusted financial partner/community credit union” model would never qualify for a business loan.

Imagine sitting across the desk from a business lender. Telling them that you used to serve only employees of BIG EMPLOYER. Now you’ve decided to expand your business to every man, woman and child in a 100 mile radius. What is your product? Savings, CDs, Free Checking, Auto Loans, Home Equity, Courtesy Pay, VISA, PayDay Lending, Business Lending, Lifestyle loans, etc. etc.

How are you different than the 50 plus financial institution in that same market? Um……service? And what proof do you have that you will make your competition irrelevant with that differentiator?

We did a survey two years ago………..knocking down castles.

More on service tomorrow – I gotta get on a plane.