Thursday, October 21, 2010

The Scramble Drill

In my day job, I am the CEO of TMG Financial Services, a credit card issuer that works with community financial institutions. As I was thinking about what a Plan B mindset really is, I began to reflect on our business and I thought about the world we live in. We began the business in 2007 to provide credit unions and other community financial institutions an option to provide a competitive credit card offering to their cardholders. We purchase the assets, enhance the program and brand it as if it came directly from the financial institution. We build partnerships that intend to be invisible to their members and customers but can create a competitive offering that stands up to the largest issuers in the country.

Most people in our business would tell you that 2007 was not the best time to start a new credit card company or be in the financial services industry. The capital funding to buy portfolios evaporated as the credit markets collapsed. The economy began tanking and unemployment began to rise. The small to medium-sized financial institutions we work with were beginning to feel the impact of the housing and jobs crisis. And we were taking over an unsecured loan. Then add in Congress and the CARD Act of 2009 which sought to ban a number of despicable practices that were inflicted on consumers by a number of bad actors in our business (never us) but also came with the “Law of Unintended Consequences” that made it harder to serve our cardmembers and make money. Add to that the consumers that are walking away from their homes (and at the same time their credit cards) via bankruptcy, and it makes for a lot of surprises from our neat and tidy business plan written in early 2007.

But I think it was exactly the right time to be in our business. Our vision of providing a fair and competitive credit card product to American consumers was just what was needed as the largest banks cut more than $1 trillion of credit lines from cardholders in 2009 alone. Our vision of creating a true partnership with our financial institution portfolio partners was exactly the right model for what they needed to continue to offer a product to their customers and manage the increasing complexity of regulation and the marketplace. And our vision of funding this program through our partners and other smaller financial institutions was both the right answer for the marketplace and those funding partners as they needed places to put the excess deposits that were flowing in the door as consumers fled the large national banks. Today we have 40 partners and more than $115 million in assets. We are in no way out of the woods from a sustainability standpoint (for the record, neither are issuers 100x our size), but we have built a way of moving when the marketplace needs us to move while remaining consistent to who we are.

But it hasn’t been easy. Along the way, we have met a great deal of challenges and have many more to meet. The world continues to change. Through this experience I have reflected on the number of times our team has said, “I guess we need to go to Plan B.” This made me think of my uncle who has said, “Well, let’s go to Plan B,” often when working on various building projects with me (mostly when I need an outside expert). When I first asked him what Plan B was he said, “I don’t know, I guess we should figure that out.”

That is at the heart of a Plan B mindset – stay relentlessly true to the vision of value that you deliver to your customers, but be willing to be flexible and inventive in how you get there. When you are working on a change effort, whether it is a new business, a new product, a new process or a new market, Plan A rarely works. There is almost always new news and other stuff that gets in the way of the perfect plan. Plan B is what counts for success. How you develop the capacity to change tactics and execute Plan B is the difference between success and failure.

How does this play out in the real world? The vision must be so clear that the tactics can unemotionally adapt to the changing reality. You must realize that the “world as you know it” is changing, but then be willing to throw out the perfect piece of prose that was your strategy, business plan or statement of direction.

There are many examples outside the business world. I’m a football fan, so I think about football as an example. When the offense comes to the line of scrimmage, there is only one goal – score a touchdown. There might be interim goals, such as picking up the first down, but the team is focused on one goal. When the coach calls a running play, each player knows what their role is – what the snap count is, where to block, where the hole will be for the running back. But what often happens when the ball is actually snapped? The play breaks down, the defense does something unexpectedly and sometimes an offensive player doesn’t follow an assignment. It is rare that anyone remembers the dive up the middle for a two-yard touchdown. However, the plays that result from adapting are the memorable ones. For NFL fans of a certain age, it is easy to remember Marcus Allen’s reverse field run in Super Bowl XVIII against the Washington Redskins. In fact, true fans are seeing it in their mind right now (or have clicked to the YouTube video and left this wonderful analogy!). Allen, a former Heisman Trophy winner, started out to his left. The defense pursued well and plugged the hole to the left. At this point, Allen could have lowered his shoulder, gotten back to the line of scrimmage and moved on to the next play. That’s what most running backs would have done. Live to play another day. That is not what Allen did. He quickly reversed field and began running right. The line kept their blocks and there was a hole up the middle. Allen cut, accelerated and burst up the field. But he was chased by the defense. At that point he could have given up and marveled over how well he had done in a bad situation. But that wasn’t the goal. Forty yards down the field wide receiver Cliff Branch blocked the remaining defender and Allen scored what was then the longest touchdown in Super Bowl history. I didn’t remember Cliff Branch until I saw the video clip again – but he was one of the keys to this memorable play. He never gave up, even though that downfield block “wasn’t his job.”

This type of a play isn’t that unusual in football – it’s called a broken play or scramble drill. Most of the good professional players can execute when the play called in the huddle creates a strategic advantage against the defense. The great ones – especially quarterbacks like John Elway, Joe Montana, Steve Young and Brett Farve – make something happen when the call wasn’t perfect or someone missed an assignment.

Whether your game is football, business or just life, being able to adapt to Plan B is crucial for long-term success. The key is will you hang in there long enough to have the opportunity to score when the situation presents itself.

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