Innovation | 07.10.19
Think Like A Startup – How Banks and Credit Unions Can Unlock Their Inner Disruptor
Rightly envisioning a paperless future in which photocopiers would be obsolete, Xerox created its world-famous Palo Alto Research Center to facilitate unfettered incubation of cutting-edge products in 1970.
User-interface technologies created at PARC – the mouse, icons, windows – would revolutionize desktop computing. Except, for that revolution to begin, it took Steve Jobs and his startup, Apple, to copy the giant company’s ideas.
Xerox executives were never particularly interested in PARC's world-of-tomorrow innovations.
"They didn't know what they had," said author-futurist Scott Snyder, a partner at Heidrick Consulting. "It took an outsider to see what the bigger, more established player could not."
Snyder was underscoring the potential capabilities and advantages of established companies, relative to smaller startups that are more commonly associated with disruption. The message was not lost on bank and credit union executives tasked with figuring out new and profitable ways of serving customers who are growing evermore accustomed to doing things easily on their phones.
In this fast-paced age of digitization, data science and machine learning, financial services firms will need to appropriate the DNA of startups and other best-in-class innovators. This was the key takeaway of the Snyder-led discussion, "Fintech and Digital Innovation," which took place this past April at the BISA 2019 CEO Retreat at the Aresty Institute of Executive Education of the Wharton School in Philadelphia.
‘What Are You Solving?’
During the three-hour workshop, attendees dove into topics relating to digital innovation and the fintech landscape, both inside and outside of financial services. One thing was made clear: the transformation of banks and credit unions via digital innovation will require far more than just headline-grabbing fintech acquisitions.
Snyder highlighted critical traits common to innovative organizations. These companies:
Harness “Intrepreneurs”: At most firms, there are always some incurable inventors – those employees within the company with an entrepreneurial knack and a unique ability to think outside the box. So-called "intrepreneurs" are increasingly being tapped and incentivized with some of the best ideas eventually developed into new products.
Travel at Two Speeds: Innovation can involve a small but important tweak to a product or service – or it can represent huge and radical change. Both of these tracks need to be simultaneously traversed.
"You have to be able to do the incremental innovations while at the same tame taking your big swings," Snyder said.
This is not an easy feat. Short-term pain clashes with the best-placed patience and layers of managers waiting to say no. However, whether the tech-enabled move is a proactive cultural shift or quick, reactive efficiency tweak, it can't become a question of one approach versus the other. True game-changers do both, Snyder stressed.
Go for 10X: The most forward-thinking firms are always allocating resources into at least one big idea that can make a customer's experience better – as in, 10 times better. For example, Netflix used superior viewer-preference data analysis to create content that took the media landscape by storm. Financial firms that know for what they are solving have a chance to do something to change their game, provided they aim highly.
Leverage What Is Already There: Referring to Waze, the successful motorist navigation app, Snyder explained how a small engineering team realized that instead of having to reinvent the steering wheel, they had an opportunity to piggyback on existing infrastructure that millions of users were already driving around with on their phones. How financial services firms can put their customers to work for them remains to be seen. However, Snyder stressed repeatedly that bank clients are willing to share data and assist firms in new strategies that solve their problems, provided the solution is compelling and firms are transparent about their intentions.
"Startups would kill to have your unique customer data," Snyder said.
Put Themselves Out There: If you were a fintech company, would you want to collaborate with a bank? What kind of partner are you willing to be? Are you easy to work with? More than a few financial services/fintech marriages look great on paper, but for these arrangements to reach their potential, banks will need to take risks and become comfortable exposing their crown jewels to outside innovators. Inclinations to keep certain elements of the business cordoned off need to give way for more mutually-integrated operational strategies. It might even require not just an organ transplant – but also a full-body transplant, Snyder said.
We Are All Innovators Now
Synder suggested looking at Allstate, which owns Esurance. For now, the two remain in their brick/click swim lanes, but this dynamic is bound to change.
“Commitment to innovation and approaching it the right way means getting everybody involved," Synder told the BISA CEOs.
Managers who thought their job descriptions entailed strategic thinking, as well as communicating, delegating and organizing, need to add another distinct arrow to that quiver: innovating.
This activity ideally involves internal and external talent, and "innovators" can't be siloed off on their own.
"Managers need to be able to innovate," Snyder said.
Established players in traditional businesses have proven capable of innovating, Snyder said, referring to Walmart. The retailer, fighting to keep market share in a world dominated by Amazon, has a test-pilot program through which it rolls out a new technology (e.g. shelf-stocking robots) in one store, and then ten. If feedback loop remains positive, it gets fast-tracked in 100 stores and beyond. Alternatively, if a technology is not promising, Walmart will quickly scrap it, Snyder said.
After all, among the most common traits of the most innovative companies is failing now and again.