Profiting from Flexibility
As Mike Bushore listened to a presentation by Jeremy Rifkin at Wharton's Advanced Management Program, he began to rethink the structure of his own organization. Rifkin was discussing ideas from his book The Age of Access. This provocative work explores the shift from a world of ownership to one where people pay for access to resources and experience.
Bushore, chief innovation officer at Coast Capital Savings, recognized ways to apply these insights to his banking business. Coast Capital is the second-largest credit union in Canada, with 380,000 customers across the Lower Mainland and Vancouver Island regions of British Columbia.
From Ownership to Access
In the past, every branch managed its own staffing. If a branch had three mortgage lenders and one resigned, it would have to hire a new employee to maintain its volume of work. If business expanded at one branch, it would need to increase its headcount.
Bushore and colleagues recognized that there might be staff with idle time at other branches. Instead of hiring another person at the first branch, they could connect to staff across the company. Instead of buying talent branch by branch, they created a system for providing access to talent across the entire business. This "distributive network" model helped the bank better utilize capacity and distribute its workload.
"The notion of access struck a chord with me at Wharton," Bushore says. "It changed the way we look at managing our resources. The branches became nodes of a network. It shifted the way we look at access and reconceptualized how we organized our business."
Coast Capital moved P&L responsibility from the branches to headquarters, encouraging collaboration across the system. "We couldn't run a bank in the same way we had always run it," Bushore says. "The old encapsulated branch banking model is broken. We created a brand new business model."
Accessing Global Financial Markets
Bushore said they also used the concept of access to build deposits and tap into global financial markets more efficiently. As retail banking has changed in recent years due to shifts in capital markets, banks found that they had more assets than liabilities. Assets were growing at 15 percent, driven in large part by rapid home appreciation, compared to just four percent growth in liabilities.
"The balance sheets of most retail or commercial financial institutions became increasingly imbalanced, so assets exceeded liability growth by an order of two times," he says.
To rebalance its portfolio, Coast Capital Savings created initiatives to build deposits. It was the first full-service retail bank in Canada to offer free checking. Coast Capital also employed a more effective funding strategy, using an "age of access" mindset to tap into global investment pools more efficiently.
Tangible Results
The new approaches produced tangible results. With cost savings in staffing and other areas, Coast Capital cut its non-interest expenses about 20 percent over the past three years. Its expenses run about 12 percent below its peers. This is a huge gap, particularly as margins are squeezed in a tough economic climate.
"These changes saved us at least $12 million in expenses and enhanced margins over the past few years," Bushore says.
Bushore also valued other insights from Wharton, including planning under uncertainty and "Blue Ocean" strategies. In fact, when he returned to work, he spent several days teaching core concepts to several hundred managers at the bank. "We basically put them through a three-day mini-AMP," he says. "We taught them how we make money in this company. With this new awareness, we have been able to more effectively match supply of talent to the demands of the customer base. The AMP was a hugely valuable experience."
