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Kenneth Cline Nov 5, 2012

Disciplined Process for Innovation

Innovation requires focus and a disciplined process. That’s the message from the winners of the 2012 BAI-Finacle Global Banking Innovation Awards, which were awarded at BAI Retail Delivery 2012 on October 9 in Washington, D.C. Each of the institutions that won in the four categories consciously focused on innovation as a way to differentiate themselves from competitors and embarked upon a disciplined process to nurture and implement innovative projects.

Consider, for example, Johannesburg, South Africa-based First National Bank (FNB), a Division of FirstRand Limited, which won “most innovative bank of the year.” Each year, FNB holds an internal competition called “Innovators” to formally encourage the process of innovation and related competencies throughout the organization. That’s at the high level, for big “game changer” projects, such as e-wallets and mobile phone offerings, for which FNB is well known in South Africa.

Then, FNB goes a step further to encourage innovation at the lower levels of the company with its “Minivation” program, which rewards back office employees with “e-bucks” that they can redeem at FNB clients for suggesting more day-to-day, incremental improvements. “The definition of a minivation is anything that takes less than three months to implement for which there is some business benefit,” says Paul Steenkamp, head of employment branding and FNB Innovators. “I call it the ‘democratization of innovation.’”

“What we’re doing is, we’re circumventing this annual cycle of reward that’s associated with the bigger innovations. Potentially every employee has a minivation they can present, such as, say, changing the printer settings in your office. If you can show a significant saving over a three month period, that’s a minivation,” Steenkamp said.

As for why FNB puts such a company-wide focus on innovation, Steenkamp says it’s because it has to. South Africa’s banking market is dominated by an oligopoly of four major banks and FNB has chosen to differentiate itself by being the most profitable, by delivering the highest return on equity to shareholders. “Profit per-employee is one of the measures you could look at,” Steenkamp says. “In our current depressed economy, you’re not going to grow that profitability necessarily just by the top line, or doing things you used to do well. You’ve got to find new things to do well and look for low lying fruit internally from an efficiency perspective and innovation helps us achieve that.”

The need for innovation is also acute in Poland, whose once-insulated banking industry has been exposed to competition from western Europe since the fall of communism. Young people in Poland are aware of the latest technological developments abroad and want to experience those innovations in their own country.

“Many companies from abroad try to launch on the Polish market because we are interested in new things,” says Krzysztof Czuba, vice chairman of the board at Warsaw-based Alior Bank. “If you want to be one step ahead of your competitors, you have to launch some new things, new products or new tools, each quarter or six months. We try to do that because if not, we’ll be boring like the other banks.”

Alior Bank, which was founded just four years ago, won the award for “disruptive innovation in banking” for its Alior Sync operation, a virtual bank targeted to young people that offers mobile services, Facebook functions and the first fully online credit process in Poland. “In Alior Sync, we try to have the most interesting things accessible on the market and to put them under one roof so it’s interesting for the customer,” Czuba says.

Like FNB, Alior Bank has a disciplined process to reward employees for innovative ideas and then move quickly to implement those ideas. The bank formed a 200-member group composed of internal staff and some outside experts to design and implement Alior Sync in just eight months, according to Czuba.

Istanbul-based DenizBank won the “channel innovation” category for introducing the world’s first-ever Facebook banking platform, which features full online banking functionality and enables customers to check their accounts, view their total assets and liabilities, send money to other individuals and apply for consumer loans and credit cards. A. Murat Erdag, senior vice president, channel management, says this effort grew out of a realization that nearly half of Turkey’s 74 million people were on Facebook.

“We realized that we had to access that customer base,” Erdag says. “We looked at that environment and saw something missing, which was financial services. We said, ‘This is 35 million people who are spending a lot of time on Facebook, about seven or eight hours a week, which is a good sign. Why don’t we open a branch there?’ Now, all the Turkish banks are actually trying to do something on Facebook. So, this was a game changer for everybody.”

In terms of innovation process, Erdag says that’s he’s part of a “digital generation banking group” whose task it is to scour the world for digital technologies that can be adopted by DenizBank. Most recently, for example, his group has been looking at offering banking services via Twitter.

OCBC Bank, based in Singapore, won the “product and service innovation” award for its FRANK by OCBC concept, a radical approach to encouraging young people to engage with financial services. FRANK branches are designed to appeal to people in the 18 to 28 age group by appearing decidedly “unbank-like,” more like retail stores.” The four current FRANK branches are located on college campuses and in a mall and feature a casual atmosphere where popular music is played and customers can utilize interactive touch screens to learn about OCBC products and apply for personalized debit or credit cards, which feature more than 130 designs.

Chng Bee Leng, head of mass affluent for OCBC Bank, says her institution created a small, cross-functional team to develop a youth-oriented offering and visited banks and retailers around the world to search for ideas. Then, the team returned to Singapore to conduct “ethnographic research,” according to Chng. “Our team, including senior executives, hung out with the young in malls, ate with them in restaurants, went shopping and played pool with them. During that time, we tried to understand their relationship to money and tried to see how we could help them be more successful.”

OCBC learned “the importance of listening to the young people and acting on the insights” during this innovation process, Chng says. “And for FRANK to stay relevant, we recognize that this co-creation, interactive process between the young people and FRANK will need to continue.”

Mr. Cline is managing editor for BAI Banking Strategies. He can be reached at kcline@bai.org

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