An article in American Banker highlighted a conversation that was circulating on Twitter on why banks are struggling to innovate. Some of the reasons included:
- Innovation Costs
- Limited Technology Vendors
- Size of Organization (Too Small to Innovate)
These are all real obstacles, but they aren’t impassable, especially in light of the importance of overcoming them. Research from PWC reported by Jonathan Camhl from Bank Systems and Technology: “…the ability to innovate will be a key differentiator as that transformation occurs, with 97% of them calling innovation a critical driver of growth in the future.”
Innovation stops when you focus on obstacles instead of opportunities. For banks to succeed it’s time to put aside the motto: “This is how its always been done” and embrace the mantra: “How can we do it better?”.
The Correlation Between Growth and Innovation
You cannot achieve new growth by doing things the same way you’ve always done them. New results require innovation. The PWC research, quoted by Camhl, indicates that banks that find ways to innovate, in spite of challenges, are more confident about success.
“[T]hose banks that considered themselves innovative predicted they would grow by more than 60% over the next five years, while the least innovative institutions predicted growth of 21%,” reports Jonathan Camhl.
When you think in terms of growth requiring innovation, it’s pretty obvious to see why banks that even consider themselves more innovative are more confident in their ability to grow. They face the same struggles and changing environment as their counterparts, so their confidence doesn’t come from a different environment. Their source of confidence lies in having create an organization that finds ways to succeed no matter the challenge.
Developing an Environment of Innovation
“Innovation” has become a business buzzword, as such it as been misconstrued and lost it’s meaning. I have been in organizations that use it to entice investment, but discourage innovation in practice. I’ve also worked in organizations that make it a way of life. The difference: Talking and Doing.
Innovation impersonators talk about innovation, set up “innovation programs” and committees to direct innovation. However, when a truly innovative idea comes up they quickly find reasons why the idea is not viable, too expensive or too risky to adopt.
Encouraging innovation requires a strong culture of improvement. Innovative companies:
- Allow open discussions of opportunities and challenges.
- Consider new ideas no matter the source (teller, banker, manager) or the obstacles (costs, regulations).
- Shift the organizational paradigm from a “can’t” to a “can” culture. They assume that a new idea can work, instead of creating a list of reasons why it can’t happen.
- Track and celebrate new ideas, making those ideas a key differentiator from their competitors with tangible examples, not just referring to “innovation” (think of Geiko when they came up with the 15 minute quote).
Customer Centric Innovation
The most valuable innovations are those that directly impact your ability to attract and retain clients. Cost cutting is a noble cause, but your client relationships are your best opportunity for return on innovation. Identify best practices and the obstacles that are in the way of achieving those best practices, and then find a solution.
As an example, everyone knows the best way to strengthen relationships with businesses and build better business loan pipelines is to meet with clients at their location. However, many of the processes and work tasked to your loan officers ties them to their desk. Giving them new business loan pipeline management tools that allow them to get out from behind the desk and in front of clients will strength your client relationship and increase opportunities to grow.
If you want to stay competitive you have to innovate, no matter what obstacles stand in the way. Your long-term success depends on your willingness to embrace new ideas and successfully implement them. Banks that find success in the future will innovate their way to it, while others focus on obstacles on the way to irrelevance.