How to commit blunders: some of the old adages and beliefs about smart marketing are no longer valid. Continue these outdated practices only if you plan to fail!

• Author: Thamara, Thomas

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Those of us who have our eyes on the financial industry know that the new millennium is with fresh competitive challenges due to globalization, advances in telecommunications Internet technology, and world "flattening." Ability to innovate and differentiate in the financial companies operate will open new opportunities. Today's banks need to think beyond past patterns in order to avoid making strategic blunders.

To survive, let alone succeed, a sound knowledge of one's particular niche or niches and how to defend them becomes paramount. The old adages bankers have long depended on for guidance now must give way to strategies based on fundamental strategic rules and a sound knowledge of the competitive environment facing the industry. I derive some of this information about the competition from the database of financial business units collected by the Strategic Planning Institute, a group formerly attached to the Marketing Department at the Harvard Business School

What are some of these old adages, beliefs or half-truths?

* Follow the leader. The perception is that the big guys know how to do things right, that is why they made it. The recent meltdown of the subprime industry--depressing home prices and causing home foreclosures to soar--is the result of blindly following the leader. Smaller institutions should discover what they can do better than the leaders by customizing services or entering segments of the market that are especially suited to their expertise, or selling what customers need, not just what the bank is pushing. In short, when everybody piles in (wisdom of the crowd), it is time to for the smart to bail out.

However, this should not be viewed as advocating the avoidance of risk, or the tightening credit and lending standards, or pursuing another fad in the opposite direction--which could result in the bankruptcy of the bank's many good customers. However, you may want to follow the strategy of a large financial firm such as HSBC, North America, that suffered $21.5 billion in loan-related losses and write-downs, by moving aggressively to minimize the problem, modifying and/or restructuring of loans, classifying loans by geography, credit profile and type of loan; and by developing processes/technologies to automate loan workouts.

* Institutions with assets similar to yours (peers) provide an excellent benchmark for you to follow Of course, "peer" comparisons are useful tools for investors and rating...