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CIO Leadership: CUNA Mutual Group's Rick Roy picks a challenging time to return to IT

Rick R. Roy
Madison, Wis. - When Rick Roy first came to CUNA Mutual Group's IT shop, he wasn't coming into a crisis situation. Thanks to the nation's gloomy economic picture, his second IT stint is much different.

Not that the IT group at CUNA Mutual is in crisis mode, but after nearly three years as the head of CUNA Mutual's customer operations unit, Roy has picked a challenging time to return to IT as senior vice president and CIO. He recently took over for Thomas Gosnell, who left CUNA Mutual to pursue other career opportunities.

The financial crunch already was underway, so Roy knew exactly what he was getting into. But the reality is there are few executive roles that are not impacted by these stormy conditions, and Roy does not believe the CIO's position is any more or less affected than any other C-level role.

“My sense of timing is excellent, but my eyes are wide open,” Roy said. “The financial crisis was in full-force gale when we started talking about me potentially taking this role.”

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Roy's favorite quote on leadership, “Perpetual optimism is a force multiplier” (Colin Powell) will provide an important reminder as he helps CEO Jeff Post guide CUNA Mutual through this economy. The company, which provides insurance and other services to credit unions nationwide, reports $2.8 billion in annual revenue and employs 4,700 people, has reasons to be optimistic.

While the credit union industry has seen some consolidation, the credit crunch has actually worked to the benefit of credit unions. Roy said CUNA Mutual has not seen an erosion of members because there has been a “flight to safety," the safety of credit unions that shied away from the sophisticated and ultimately risky financial products that harmed so many banks.

That proved to be a very good decision, Roy said, as credit unions actually have seen more members come to them because they don't have the balance sheet problems and liquidity problems that many banks do.

CUNA Mutual is diversifying into new products and markets, and IT is expected to help CUNA grow through this economic uncertainty. “The challenge for us in growth is about growing and maintaining,” he said. “Part of our growth is diversification, and part of our growth is within our core market. It's a balance of both, but we look at IT as a key enabler in either case.”

To grow market share with credit unions and their members, CUNA Mutual has invested in business intelligence tools to warehouse and mine data. Its largest line of business is its consumer product business, which is focused on providing products to members of credit unions through credit unions. The intent behind BI is to work with credit unions to develop more sophisticated segmentation of their customer base, targeting products and offerings based on that segmentation.

“It's almost like a B-to-B relationship for us with the credit union, but it's B-to-B-to-C because the products, themselves, are actually targeted to the member,” Roy explained. “So we're working with credit unions to use business intelligence technology to help with not only the segmentation, but also with how you might align those product offerings against that segmentation.”

According to Roy, it's always a challenge for companies of CUNA Mutual's size to get their hands on their own data, so there are a number of different tools, including its choice of Business Objects, that are needed to pull off its strategy. The organization is using a mix of vendor and homegrown software because, like a lot of financial services companies, some of its data is tightly locked up in legacy systems. Some systems are open enough to use off-the-shelf tools, but others need more custom work.

This toolbox will help produce a couple of data sets. One is the scope and value of today's relationship between credit unions and individual members. From that, Roy said business partners could get into profitability modeling, not only depository information but also quick calculations of profitability.

“We hope this will expand into almost a futuristic model that asks, “what's the lifetime value of that customer? What is the propensity of that customer to grow their relationship with us? What could that look like and what could their profitability be as opposed to what it is today?' he indicated. “When you do that, you get into other variables like income, occupation, age, and other demographics, so you start to introduce other variables that have a lot more to do with potential than they do with what the relationship may be today.”

Roy is “definitely pretty deep into” BI, but in many ways it's a journey that will last forever. There are a lot of things on the drawing board that CUNA Mutual would like to use that technology for, including its own customer profitability analysis. In Roy's view, the key thing to remember about BI is that it's very easy to get enamored with the technology and the tools, spending a lot of money and getting nothing out of them, and lose sight of the business value.

“One of the things we're really trying to do is watch our spend visa vis the value of the results coming out of those tools,” he said. “Unfortunately, that last 10 percent is what delivers all the value. How do you get good, meaningful output out of the warehouse? The technology is only a means to the end.”

The first step in establishing a BI initiative, he added, comes way before the tools. It starts with identifying some key business questions that must be answered to either grow or better run the business. “I really believe you have to start with the question because then the tools you actually use to extract the data, in a query-type mining sense, get you pointed toward making sure you're answering those questions. I think step one is what questions are you trying to answer from a business perspective, not a technology perspective?”

Innovation

Rick Roy
Roy said the new product areas - pensions/401(k)s, private student loans, and a crop insurance venture - do not conflict with client businesses; in fact, they initiatives like private student loans are complementary. The loan initiative, which will be rolled out in 2009, is the result of the company's innovation program. CUNA Mutual has established Greenhouse, an online idea center that serves as a starting point for innovation for employees, customers, and even business partners.

Roy uses a funnel metaphor to describe how the process works. Ideas come in the top of the funnel and the company takes them through different levels of review to try to drive through the bottom of the funnel things that provide a value proposition to either a credit union or a member. Using an internal venture capital group called the Incubator Team, CUNA Mutual takes ideas through different levels of review; at different stages of review, ideas may require seed funding. The Incubator Team funds experiments, pilots, and prototypes to determine which ideas have commercial viability.

The student lending initiative started as an idea and moved rapidly down the funnel through a set of review gates, required some seed money to conduct a market assessment, and then received an initial round of “VC” to launch the prototype. Calendar year 2008 served as the pilot year and included a test with a select group of credit unions.

“Obviously, it's a very interesting environment for lending right now, but we we're very pleased with the results of the tests that we've done,” Roy said. “We learned a lot about what would work with the loan applicants, how we work with credit unions, and how we play a role in that mix. We're very pleased that we were able to do that test, and now we're working on our plans for expanding that next year.”

Transformation

All this is happening as the company completes a three-year transformation that has been somewhat controversial in terms of a smaller employment base in Madison. The goal was to make the company more nimble and consistent in terms of service. The inconsistency in service was noticeable to customers.

“We found in our service model that a lot of our customers were very frustrated because the way we provided customer service to them varied quite a bit by product line,” Roy said. “We have a very broad set of products, so the customer could really enjoy one experience, and turn around and have a service requirement of us in another product, and get a completely different experience.”

CUNA Mutual used technology to change its service model in a variety of ways. It deployed a Voice over Internet Protocol infrastructure for its call centers, which allowed the integration of business applications with the telephony system. IT leveraged teams of employees to consolidate some customer-facing call centers into common sites where best practices could shared.

“That wasn't all just about a flight of work out of Madison,” Roy said. “We moved a lot of work around. We moved work into Madison. We moved work to our new Fort Worth, Texas location. We still have service work being done in our Waverly, Iowa location, so we view all three footprints as very strategic.”

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Comments

Robert Merrill responded 5 years ago: #1

I just attended WTN's Innovation Master Class with Tom Koulopoulos. CUNA's "Greenhouse" sounds like a clear example of the kind of Innovation Zone that Tom said was necessary for firms that want to innovate and not just invent. It gives people a place to drop off ideas where they will be objectively evaluated, advanced if advantageous to the business, and not co-opted or encrusted with political promises in order to get early-stage budget.

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