Centenary Bank at the top with a silent Blue Ocean Strategy

Centenary Bank at the top with a silent Blue Ocean Strategy  

By Andrew Obara

Miracles happen in business and a curious one is that of Centenary Bank. Relatively young, the bank’s story dates back less than 40 years. Today, it is the undisputed number two bank in Uganda. Created in 1983 as a credit trust of the Uganda National Lay Apostolate (of the Catholic Church), Centenary Rural Development Trust started operations in 1985 with two reasons which have never changed since: serving the rural poor and making a meaningful contribution to the socio-economic development of Uganda. With that overriding   strategic intent, the institution has grown, transformed, developed and ascended to the top of Uganda’s bank list. A recent New Vision paper carried the following summary of the six Domestic Systemically Important Banks (DSIBs):

How did a humble institution, formed out of conviction and with no clout, capital or fame leap forward to achieve so much in so short a time? How did it leapfrog banks that had been here several decades before it and pass them so speedily? How did passion for the poor rural people become a driving force for such phenomenal institutional building? Why did a bank with no management fad, no exotic corporate lingo and little claim to international financial sophistication get to the head of the pack while all the wise heads gazed wordless? The answer can be summarized in three ordinary words: Blue Ocean Strategy. Without calling it so, Centenary Bank executed a clear Blue Ocean Strategy from the word go and still maintains it.

To understand what catapulted Centenary to fame and prominence, we need to understand the basics of Blue Ocean Strategy. It is a fairly new way of thinking up effective business strategy, a shift away from the purely competitive mindset that depends on the already defined “market”. Instead of striving to beat competition in the known and existing marketplace (otherwise called Red Ocean Strategy), Blue Ocean Strategy seeks to extend market frontiers, create more demand and make competition relatively irrelevant.

While Red Ocean Strategy focuses on competing in existing market space, Blue Ocean Strategy concentrates on creating new market demand and capturing it with and for value. While Red Ocean Strategy offers either high value at high cost or vice-versa, Blue Ocean Strategy breaks this value-cost trade-off to offer high utility value at relatively low cost. While Red Ocean Strategy focuses on studying, outwitting and beating competition, Blue Ocean Strategy seeks to make competition irrelevant by creating new market spaces where competitors do not play. Thus, Red Ocean Strategy seeks market differentiation of existing customers while Blue Ocean Strategy seeks commonalities among non-customers so as to attract and serve all of them. While Red Ocean Strategy uses complex analytical tools to study, stratify and focus on a segment of customers in the existing market, Blue Ocean Strategy concentrates attracting massive numbers of non-customers into the market and serving them, alongside customers of the Red Ocean, in a mutually beneficial way.

Back to Centenary Bank. For decades, while most of the other banks were involved in a red ocean strategy of cut-throat competition for narrowly defined “bankable customers”, Centenary was opening branches, developing products and channels to serve the “non-bankable”. Extending market frontiers. In the late 1980s and early 1990s, foreign “experts” advised certain banks to close branches and concentrate on serving the “bankable niche” in Kampala and Jinja. Today those banks, though older and originally a lot bigger, have much smaller balance sheets, revenue and profits than Centenary. The then big banks hired in international consultancies that used sophisticated econometric and macro-economic models (never mind with little knowledge of the real market drivers in Uganda) to advise them on which segments to serve and how. Centenary stuck to its original idea – serving the rural poor and making a meaningful contribution to the socio-economic development of Uganda. No fads. No big grammar. No exotic corporate speak. No marinated financial jargon.

Today, Centenary is serving the largest number of customers in Uganda, mainly those previously considered unbankable by other banks. It also serves the corporate and mid-sized businesses, a bonus due to its good customer service. And most of the customers are not about to switch banks. They feel they own Centenary.  Years ago, I was interviewing small business owners in Wobulenzi and I remember this modest middle-aged woman who was a member of a SACCO and yet was borrowing from Centenary at just about the same rate as the SACCO was charging. When I asked her why, her answer was “Eyo Centenary; ye banka yaffe ddala” (That Centenary is really our bank). I didn’t ask her any more. She owned Centenary much more than she owned the SACCO in which she was a shareholder. Talk of good customer care. Customer delight. Blue Ocean Strategy.

Service quality and out-of-the-box thinking is not Centenary’s only strength. Management is solid. If you ever attended any forum or workshop addressed by Fabian Kasi the Managing Director, you likely realised what makes Centenary tick – simple but deeply insightful; clear and determined; doing more and saying less. And so are most managers and staff of the bank. They work for the client and do not carry an air of corporate superiority. In any branch or office, every customer is served with utmost dedication as if they were the only ones.

At FRIENDS Consult, we have over the years done scores of surveys related to financial inclusion and customer satisfaction allover Uganda. Whenever and wherever we did the survey, Centenary Bank was three times more likely than any other bank to be mentioned first in response to the question, “which financial institutions do you know of?” Blue ocean Strategy works and progressive businesses should consider it.

Andrew Obara is a financial sector consultant and managing Director of FRIENDS Consult Ltd