In this episode, Jim Young chats with Travis Engebretsen, VP of Strategy at Seacoast Bank. Engebretsen recently wrote a piece on how a well-defined value prop that points to the customer is what will distinguish one bank from the others. The two discuss how a bank can create a customer-centric value prop and they talk through the do's and don'ts of doing so. They also discuss how to buy technology effectively and efficiently at your bank and how your value prop affects how and what you buy.
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Podcast Transcript
Jim Young: Hi and welcome to The Purposeful Banker, the podcast brought to you by Precision Lender, where we discuss big topics on the minds of today's best bankers. I'm your host, Jim Young, Director of Communications at Precision Lender, and my guest today is Travis Engebretsen, VP of Strategy at Seacoast Bank, which is based in Stuart, Florida. Here at Precision Lender we're always on the lookout for not just smart bankers, there are plenty of those, but smart bankers who like to share their knowledge out in the public realm. Those are a bit more rare.
I first ran across Travis at the FinXTech Annual Summit back in April where he was on a panel titled, "The Lending Shakeup". His comments on bank innovation and the need for speedier design decision making struck a chord and I started then bugging him to come on this podcast. He finally relented and when he put out a recent post on his site, Travisengebretsen.com, and also on his LinkedIn page, we had our topic. That article is called "Build Better Bank Value Props". We're going to dive into what Travis means by that and then what that has to do with how banks think about purchasing new technology. But first, let's get a little bit more about Travis.
So, Travis, tell us some more about yourself and about Seacoast.
Travis Engebretsen: Sure, Jim, and thank you for having me. I never know where to start off with a question so broad, so I'll go right back to day one, because it connects to where I am today. I was born and raised in Stuart, Florida, which is a small town about halfway between Miami and Orlando on Florida's east coast, but I started my career in New York City at PricewaterhouseCoopers doing asset evaluation work. I had an opportunity to move back down to Florida and I worked at Morgan Stanley in West Palm Beach where I did institutional investment consulting for about four years. Then everything came full circle when I accepted this position at Seacoast which is based here in my hometown of Stuart. This is where I grew up, it was my local bank growing up, so it's interesting to come back after all these years and now work here.
So Seacoast has been around for, obviously, a lot longer than I was aware of it. We've been here for about 90 years, primarily here on the east coast of Florida, but over the last few years we've been growing very rapidly. We now have a very large presence in Orlando. We just announced our second acquisition in Tampa and so now at around $5 billion in assets, we're one of the largest Florida-based banks.
Jim Young: Yeah, I did a little of S&L research on your guys to confirm that. My suspicion was, I've been hearing a lot more about you guys and I had a feeling you were growing and I took a look and you guys have acquired, gosh I want to say, is it about six banks or so in the last two or three years?
Travis Engebretsen: Sounds about right.
Jim Young: Yeah, it has been rapid growth and generally we talk about it a lot on this podcast. Banking these days, you're either growing or you're getting swallowed up it seems to be. Glad to see Seacoast is on the right end of that equation. Let's go into your article. What was the impetus to write a piece about bank value propositions?
Travis Engebretsen: Yeah, so first let me just kind of clarify and saying I'm using a value prop as a shorthand for anything related to the communication of a company, its vision or mission or values or the actual value proposition. There are a lot of different definitions around those terms so I don't want to be dogmatic because everyone interprets them differently. The point is, how are you communicating to your customers and your associates what your values are and what value you add to your customers. Why should your customers choose you over anyone else?
There's been a lot of focus in the industry recently on technology and making things better and faster and competing with the startups that are coming. I really just wanted to take a step back and start asking the higher level questions around what problem we're trying to solve and why and for whom. I think it's so easy to get caught up in all the changes and trends and lose sight of the customer. So I just wanted to start that dialog.
Jim Young: Yeah, boy, I tell you what, it sounds like you were speaking at our bank on purpose conference because that's a lot of the conversation there was about that. We had Bob Moesta and Chris Spiek who are big proponents of Clayton Christensen's Jobs to Be Done theory and applying it to banking. And a lot of what you wrote gave me a lot of flashbacks to that, that idea of if you're not thinking about essentially what's the problem your customer's hiring your bank to solve, then you're kind of missing the point.
So what's your feeling then on how banks are doing with this? How often do you think they're really taking the time to consider this part of it before they jump in to the latest technology or the latest trend?
Travis Engebretsen: Yeah, I think different banks are at different levels in terms of where they are and I gave a few of them as an example in the article. I'll spend a minute just talking about one thing that was in the article more around my experience to kind of give an example and then we can talk about some of the bank pieces as well. But when I was at Morgan Stanley this became so apparent, just from the way the industry has developed and adding thousands of people to the industry every year, you were supposed to come in and learn and elevate our pitch. But by the time you were trained and you really started going, everyone sounded like they were saying the same thing. They all said, "I'm here to help everyone meet their financial goals."
But when you're one advisor out of 50,000 who are saying the same thing, it loses meaning to the potential client. Then you add in all the thousands who filter in and out of the industry and it becomes more diluted. But back then, and this is before I got into banking, but a difference that I noticed between those who could make it or couldn't make it and those who were successful is having that clearly defined target market and a value prop that was backed by their actions and connected to the market. There wasn't one right answer. All good advisors had their own interpretation for their clients, but it was just a manifestation about what the advisor believed and then they found others who believed the same things that they did. It's like Seth Godin talks about in his work on tribes.
So for us, we really focused on the union space, which is not a big market in Florida, but unions control hundreds of billions of dollars in investment assets. And because we got connected to that community and shared their same values around how deeply they care about their members, we were able to go beyond the financial returns and the fees into connecting with them on what they cared about and that allowed us, they could see the expertise that we had in their industry and that we paid attention to the little details that mean a lot more to those clients than just, "Oh, I'm here to help you meet your goals and I do that for you and 400 or 500 people that look nothing like you."
When you say, "I know exactly what you're dealing with and here are your pain points and here's how I've helped other people solve those exact same problems.", I think you stand a much, much better chance of competing and winning.
Jim Young: Yeah, a lot of times we talk about how a bank, every bank's money is just as green as the next bank's. That thing essentially what your product is a lot of times is no different, it's how you manage to present that product and how you serve that customer in doing it is what's going to separate you. You sort of got into this, you partially answered it, but I want you to flesh it out a little bit because when I was looking through, reading your article, one of the push backs I had is if I'm a niche bank or if I've got a specialty area it's got to be a lot easier for me to put that value prop together. Like you mentioned about the unions, you can focus in that one area, but if you are one of the big money centers, one of the big banking conglomerates out there that has all sorts of different things, is it possible to have a unifying value proposition for the bank?
Travis Engebretsen: Yeah, and that's a very good point and I totally agree with you. I think the way I would break it down is there are kind of two components when you get to be that big. The first, even before you narrow it down to a customer standpoint is just having a customer oriented culture. I laid out three types of value propositions in the article and one was banks who are just profit driven. The others were a next step closer, which is generic missions around the customers. Then the third, which you're right was mostly smaller banks, was much more specific around the type of customer they were serving.
So there are a lot of banks that just need to work on the first step of focusing on the customer. There was one bank where you go on their website and this is not the investor relations page. This is what they tell anyone who comes to their main website. It says, "Our ultimate purpose is to create superior long-term economic rewards for our shareholders." So if I'm a potential customer I'm not going to feel like I'm very important. I feel like the investors are the customers and the investors and the bank are buying financial returns extracted from me as a borrower or a depositor of the institution. So the customer from the bank's perspective is merely a means to the end and it doesn't feel good.
I think for those types of banks, the first step is just moving to that customer first culture. Secondly, I think once you get there you can be very customer focused and still be very big, how do you narrow that down. I think when you reach that large of an organization, you're probably already organized into different business units and groups and that's probably where you push down the differentiated value proposition. You empower your people on the front line, again, whether it's the business unit or the individual because, again, there's so much in banking that is still face-to-face personal relationships.
Technology helps facilitate it, but when someone needs advice you can have an individual who gives specialized advice. But no matter what level, if it's at the individual associate or if it's at a business unit level, it should roll up and be consistent with the broader organizational mission so that all the business units are aligned. So it takes more work, but if we can pivot away from focusing on investors and away from ourselves and know we're some big bank, if we focus more on the customer I think it'll go a long way.
Jim Young: Yeah, that's really an apt way to put it. Because you were with Morgan Stanley which is enormous but you guys narrowed it down in your area to unions and that's where you can narrow it all the way down to the individual relationship manager and their little bit of turf and how they see things. But it all starts with if you don't have it set at the top level with that customer focus, then everything else beyond that would get shunted off into the wrong direction. So, yeah, your way of putting it was much more elegant than mine.
I want to take a little bit of a segue, you talked at the very beginning about this and how it connects to tech in buying technology. First I want to get your take on that. Obviously, from our view it feels like banks are shifting a lot of their focus into investing in technology, but then again, we also come at things looking at things through a certain prism as a vendor of technology. What about you on the bank side, do you agree that there has been a shift and there is more investment in technology in the banking industry?
Travis Engebretsen: Yeah, I would agree. I think almost an echo to your comments from earlier, it's not across the board. I think that the majority of banks realize that they do need to invest in technology, whether it's upgrading to the latest, greatest new system, or just it's very expensive to maintain their old systems. But kind of what you were saying before, there's two groups of banks and one group probably realizes that it's so expensive to maintain they might be better to consolidate and start, join forces with another bank so they can get scaled to invest. Then there are the other banks who are aggressively investing in technology and I think that's kind of driving some of that consolidation, which is how banks are responding to the need for technology. So everyone is aware of it, but we have different responses.
I think there are a couple of different things that I think are driving that. I think mostly you hear either banks are increasing efficiencies or they're trying to compete with all of the non-bank technology providers, whether it's a startup who's lending online or people are now saying our bank needs to be as easy to use as Starbucks or something like that.
I think people talk about a lot of that, but I think there's some more fundamental things going on as well. I've got a hunch and I haven't backed this up, I need to go look at the numbers, but my guess is after the financial crisis, so many banks held off on investing. Partially they couldn't for years because they were just trying to make sure that they stayed solvent. Now it's taken a few years of good results and now getting back to profitability and now there's a backlog of pent up technology investment demand that says, man, we haven't made an investment in eight years in upgrading any of our systems.
I think at the same time that being with the technology we have today is so much more advanced than what we had three years ago. So you're seeing these massive efficiencies and improvements in technology that I think banks are very interested in. Now you're seeing that they have the capacity to invest more as well. So I think those are coming together and driving some of the increased technology spend.
Jim Young: Okay, so let's say I've got the resources and I've got the backing of the higher ups in the bank to say, let's upgrade our technology, let's really improve our systems. How should the value prop of my bank help guide that process? Or if I've got it wrong, how would it take it off the rails?
Travis Engebretsen: The wrong one there are many ways I could go. Let's assume you have it right. It really is just a filtering mechanism for helping you make the choices you need to make. Again, you probably have a dozen different things you need to improve and if you don't know what direction you're headed, who you're trying to connect or what customers you're trying to serve, then what are you using to prioritize those different investments. If I'm a business bank and I'm targeting certain industries, I probably can still do consumer loans and maybe I have an old system from 15 years ago. But if that's not my focus that may be fine, I don't need a whole new consumer loan origination system. I'd rather spend the money making sure that my target customer is getting everything they need.
I would say for a bank who, here's the second bucket, right, a bank who maybe is trying to become more clear, they've got a new value proposition but their old legacy customers are just a variety of customers that many banks have from operating for a long time. I think what you do there is you've got to reach inside your customer base and find those customers who you already have who align with the new vision and value that you're offering and then start listening to those customers.
I think, in general, banks probably need to do more customer research, just the basic things around understanding what your customer problems are. But you can use your value proposition to make sure that you're listening to the right customers and not just listening to anyone who wants to talk to you.
On your other question of how it can derail, I think you'll probably get nothing done because you'll have nothing that everyone aligns to as far as this is what we're trying to solve. So you'll have people in the organization who have different ideas of what the bank should look like and they're all going to be going their separate ways. And there should be, in general, some competition for investment funds where you can't fund everything. But everyone needs to be aligned with where the organization is going. I think this really helps everyone, if you are here, this is what we're about.
So in addition to attracting the right customers, when you start talking about your values and what your value proposition is and who you are as an organization, you're also going to attract the right associates to work with you and to stay there for the long-term because they're bought into the vision of the organization.
Jim Young: Yeah, absolutely. I sort of leaped us into this next question, which is you're got those right values and you've got those resources, are there still some ways that that process can get derailed at a bank and how do banks get around some of those obstacles when it comes to buying tech?
Travis Engebretsen: Yeah, I think that it's both a blessing and a curse all the new technology that's out there because I really do believe that if you know what you're looking for there are so many vendors now, whether it's the traditional ones or a new startup. If you are looking to put a new piece of technology or something in place, you do need to go out and do a comprehensive assessment of who's out there. It doesn't mean you have to have 20 different companies come in on site and be there in person, but you really need to spent the time to be aware of your potential solutions.
The downside of that is you can be sitting there with 20 different companies who are all promising that they can do the same thing or something better than the next person that comes and I think that can lead to a lot of delays. So to me, all those could align with your value proposition, but I think it needs to further cascade into some more of your operational plans. We have for Seacoast a vision and some goals around what we want to look like as a bank in the year 2020, which is getting closer and closer, it's only three years away. So we can filter our decisions to that criteria. We have some measurable goals and does this change help us make a step closer to that goal.
Once you narrow down a list to those changes that'll help you reach your goal, it's just about basic resource planning and timing to ensure that we can fulfill on all the great ideas that we have. I think every bank will prioritize it differently. They'll have different approaches. But I think having a vision and then measurable guidelines will help prioritize and drive actual decision making and having that well thought through value proposition you communicate to your customers and your associates, I think that will go a long way in aligning the organization for success.
Jim Young: Yeah, absolutely. We see a lot of times banks that get very siloed and have their kind of fiefdoms there. You can lose sight of what are we doing this for and a lot of times things can get derailed by a group that says this doesn't benefit us, when it would actually benefit the bank. But as you've been making the point, if you've got your bank aligned around the right values, then that's a problem that, hopefully, shouldn't crop up. This has been really informative, Travis. I really appreciate you coming on.
I encourage our listeners, again, to check out that article. It's called, "Build Better Bank Value Props". Travis has a website, travisengebretsen.com. You can also, he has it posted on his LinkedIn page out there as well. I encourage people to check out Seacoast Bank. They are a bank that's making some waves and really, we talk about banks that "get it", and Seacoast is definitely in that category.
That'll do it for us today, thanks for listening. If you'd like to learn more, visit our resource page at precisionlender.com. If you like what you've been hearing, make sure to subscribe to the feed in iTunes, SoundCloud, Google Play or Stitcher. We love to get ratings and feedback on any of those platforms. Travis, thanks so much for coming on.
Travis Engebretsen: Thanks, Jim.
Jim Young: Thanks for listening. Until next time, this has been Jim Young with Travis Engebretsen and you've been listening to The Purposeful Bank.
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