Academic journal article
By Bielski, Lauren
ABA Banking Journal , Vol. 100, No. 10
Long before the value of a cup of joe and an overtly retail-looking environment was conventional banking wisdom, Portland, Ore.-based Umpqua Bank offered its customers coffee and a chat. The bank's sharp-looking branches began popping up in Oregon at the forefront of the experience-design movement after CEO Ray Davis and his team bought into an idea that said, don't be visually boring and support your brand in your branch outlets; the investment will pay off.
The idea of all of it? To make financial products tangible and customers feel like banking could be more than an errand. With 148 stores that sit between Napa Valley and Bellevue, Wash., and a growing reputation as a bank that's reinvented the rules of retail banking, Umpqua is succeeding on the terms of differentiation it set out for itself.
Certainly there have been pressures. In 2007, the bank experienced just 5% organic growth, well down from previous years, and reported earnings of $65.3 million, or $1.08 per share, down from $1.63 per share.
Yet, there has also been progress. That same year, the bank acquired $727.8 million-assets North Bay Bancorp based in California's Napa Valley. Last November, the bank launched its Innovation Lab in Portland (shown above), a one-of-a-kind branch run with technology partners to help the bank figure out new approaches to retail service, even as it addresses the needs of tech lovers. Not a bad year in an environment characterized by drastically downsized performance by many.
Also in 2007, Davis wrote a book, Leading for Growth: How Umpqua Created a Culture of Greatness, and the bank ranked 34th in Fortune Magazine's Top 100 Companies to Work For in 2007. Early in September, ABA Banking Journal talked with Davis about retail delivery, strategy creation, and execution. With a reasonable demeanor, Davis is certain without being arrogant--sure of his bank, without preening over it.
How would you describe your bank's retail delivery strategy and why it has been successful?
Our strategy has been to engage the customer by dramatically changing what happens at a branch. Back in 1994, when we were looking at the competitive landscape at an asset size of $140 million we asked the question, why should anyone do business with us? It was clear that we couldn't out-resource, out-gun, out-man, the big banks. So we set out to differentiate ourselves in customer sales and service. And our results have validated our efforts. We've become the largest regional community bank in the Pacific Northwest, with assets of $8.3 billion. It's not that our delivery is necessarily better, but we certainly don't provide the usual bank experience, with tellers behind glass and teller lines and the same old behaviors. We don't have "branches." We have "stores." And our stores provide an environment that encourages browsing for financial products, not just completing a transaction.
In our look, feel, and actions we're communicating that our customers, that people generally, have options when it comes to banking. Basically, we've succeeded because we created a very different experience. We've created a bit of a mystique.
How would you address critics who dismiss what you've done as a gimmick?
I'd say, well, we have done well. If it were merely a gimmick you wouldn't have that long-term result. I'd also say, look at our growth. There have been acquisitions that were a good fit and made sense for us, but a lot of growth was organic. Our loan and deposit growth are north of 35% annually. And I'm convinced that without that organic growth, those acquisition opportunities would not have happened.
When I take colleagues from other banks on tours, many of them get it: it's not just the great-looking stores or fun ads or our non-traditional marketing efforts. It's what takes place within the stores.
We hire people who want to engage with customers. …