Highlight The Cooperative Business Model

To strengthen the credit union marketplace, institutions have to walk the talk.


Beyond being cooperative in the sense of coordinating activity and interactions, credit unions are also cooperatives in the sense of business charter and definition. Cooperative business designs are based on a community recognizing a mutual need for solutions and gaining access to those solutions through ownership and the direct creation of value by peers. If consumers need something, this model allows them to create it, use it, and own it.

When available solutions don’t fit, peers may need to network to get things done. This is the credo of the Internet and the networked world. Take some people interested in new solutions, connect them with speed, access, and visibility to each other and to a marketplace, and voilà! There is value creation at an entirely new pace. Better yet, let consumers invent, own, and share in the creation and there is a consumer revolution – the same kind envisioned when the first cooperative business models were charted.

Two Engines That Drive Success
Cooperatives have two primary engines to drive their development: The member owner engine and the business line engine. A cooperative works best when there is the proper focus on both engines at all times: ensuring that the business intent is consistent with what the members deserve, and is building solutions they will actually use.

The Member Owner Engine
Generally, member owners elect representatives to serve on a board and drive the cooperative health of the organization. The board uses the seven principles of a cooperative to set core thinking for how the credit union should work for the owners.

Through the board, member owners drive their interpretation of cooperative principles into the very fabric of the organization and all its interactions within a marketplace. Their key responsibility is to ensure that walking the talk is the rule for the organization in every task. That includes fostering the continued spirit of cooperative concepts within the member community and the general marketplace. These principles must be alive in the actions, words, and lives of the future members as much as they were with the founding ones.

A cooperative is a consumer-focused model. But to thrive, it must sell the strength of that focus, the tactics that guarantee that focus, and the responsibility of the member in those tactics. Above all else, current member-owners must be focused on the renewal of the leadership pool, the securing of new leaders, and the maintenance of the processes which will push forward these ideals. If a credit union ignores these cooperative functions, it becomes just another business potentially outgunned and underfunded to compete.

The Business Line Engine
This engine drives the development of the products and services that the members will use.

By definition, the business line of a cooperative can be any consumer-focused product or service, such as financial services, groceries, or utilities. Participants in the cooperative come together with the intent to manufacture products and services that yield a different outcome from what is being offered elsewhere. What they want might be a different product, or a different consumer experience, or even just a different sense of control and the right to the distribution of the returns. 

Like any business, the constant struggle for what consumers want is what creates a viable business for credit unions.  Cooperatives are not immune from the changing perspectives of their member base. But one of the key value propositions in a cooperative is that member perspective is baked in through ownership, ensuring these needs remain the ultimate focus.

The leader or leaders might be volunteer member owners, professional staff, or a combination of both. These individuals are significant in driving a credit union as a competitive force to attract consumers and introduce them to concept of member ownership.

As much as they might worry about other technical components like a copyright or a key production process, credit union leaders must take on the responsibility of working with members and their representatives (volunteers and the board) to ensure cooperative health.

In practice, a credit union relies on the same talents, tools, and procedures as any other competing business. But the difference is how this engine uses cooperative health to differentiate its product line and member experience. Credit unions see cooperative resources as a product, an asset to differentiate the business and build an advantage. Good leaders cannot allow such assets to decline, particularly when they are key to the sustainability of the firm and potential advantages in the marketplace.

Focusing On Both Engines
The business line engine can sometimes dominate the agenda in its fever to compete in the general marketplace. Taken too far, that domination degrades the value of the member owners’ intent and pushes the organization into playing the game of its competitors. On the other hand, as a regulated industry, credit unions must also retain the proper level of competence and correctness in their business initiatives.

The members’ intent and the way that intent is crafted as a competitive differential must be balanced in order to tilt consumers and communities toward a cooperative solution.  That’s why business unit leaders must see the advantage in having cooperative principles as the foundation for building tools, building the brand, and building other connections. Good leaders can take on responsibility for encouraging both engines, in business model that embraces and protects the advantages of member ownership.

Why Highlight The Cooperative Business Model Now?
Cooperatives have a natural alignment with today’s business environment. The networked world makes it easier than ever before for communities to get together. In the age of consumerism, customer owners can grab the moment and network together like never before.

That is the idea behind CU*Answer’s Cooperative Score initiative. Cooperative Score is intended to help strengthen our marketplace by highlighting the power of cooperative business models, and then making sure that credit unions walk the talk to set themselves apart.

From data processing and computer support to marketing campaigns and teller training, CU*Answers helps credit unions address their every need, every day. For more information, visit http://score.cuanswers.com/.



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