How credit unions can harness the ‘virtuous circle’ of innovation
Innovation has become practically synonymous with “new”: In-new-vation, you could say. I recently saw a quote from the late author and business professor Oren Harari that illustrated this perfectly. He said, “Edison’s electric light did not come about from the continuous improvement of the candle.” In my view, innovation means anything that adds value to existing systems for the benefit of all stakeholders—primarily achieved through new processes that create better user experiences.
Innovation will be the focus at the upcoming BAI Innovation Summit, Oct. 8-10, which will be led by two of the industry’s top innovators, FinTech Forge’s JP Nicols and Jason Henrichs. Their insights will help credit unions, where member experience must drive all innovation efforts because relationships with members define their existence. Credit unions guide the financial futures of their members, and their innovation efforts must aim to provide a simpler, superior, more enjoyable experience even as they safeguard the trust already earned.
But where do we begin?
Innovation is not a project: Build it into your culture.
You cannot simply check “innovation” off of your to-do list after the launch of a new project, service or product. When companies innovate, they must work—hard—to maintain their efforts on an ongoing basis, not as a project but as part of their daily routines. They must weave a culture of innovation into the way people work.
As business leaders, keep the following four innovation principles in mind. Think of these as four cornerstones for building an edifice of successful, continuous innovation.
Focus drives innovation
First, clearly state your objectives and define them as narrowly as possible. Innovation commences with the right purpose; to become the best card issuer in the world, you must look beyond interaction at the point of sale. Despite whatever innovative products and services you offer cardholders, your goal will be limited and fail to change how your members interact with merchants. Likewise, solutions for your merchant customers will be lacking and make it harder to create a great shopping experience.
The right focus will help you change the existing process. Ask the following questions:
- Which areas indicate more growth potential?
- Where can we predict less competition?
- Where can we improve, especially based on plentiful internal resources?
After completing this in-depth analysis, define areas of focus for the next years. To innovate and dominate, narrow the objective down as much as possible and communicate it clearly.
Limited resources foster innovation
You read correctly. People with limited resources work harder and they work smarter. A lack of two resources in particular can drive innovation: time and people. Time should be everybody’s most valuable resource. The world is full of smart people: If you work on something, chances are others will, too.
Creating small teams is essential. If a company employs 1,000 IT people, it would be impossible for them to create something as a unit. Instead we need task forces, agile teams, work groups and project teams.
But please: No innovation departments! In fact, innovation departments suffocate real innovation. You need profit and loss responsibility and customer pressure to innovate, just as heat brings a pot of tepid water to a boil.
Culture nurtures innovation
On the most basic level, innovation departments demotivate employees by dividing people into a “business as usual” camp and a specialized group. A single department cannot create organization-wide change—that must originate come from the culture itself. The whole organization must serve as your innovation department.
To move from strength to strength, credit unions must adopt a “startup spirit”—a unique corporate culture and structure that facilitates continuous innovation and creates the fundamental operating principle for every small, semi-autonomous, startup-like unit within the company.
Consider timing crucial
The best time to introduce a brand-new product or service occurs when you can build ecosystems around it. By ecosystem, I mean an environment that places your products at the center of an experience consistent across various interaction points. Lotus123, iTunes and 3G made their mark because they appeared at just the right time while ecosystems around them began to mature.
Today, this window of opportunity is contactless. Contactless point-of-sale terminals will soon become the norm worldwide, with cardholders accustomed to tap-and-pay convenience. Credit unions can seize this golden opportunity without reissuing the plastic card. They simply need to utilize something consumers already own—the smartphone—and the help of fintechs. Marrying contactless payments with seamless mobile banking, with the value add of flexible, wide-ranging loyalty offers, makes a mobile app the top focus area for credit unions today.
Parting thoughts: Innovation holds teams together
As the financial sector weathers rapid change thanks to new digital technologies, better connected consumers and fast-paced market expansion by leading tech companies (such as Apple and Facebook), innovation creates brilliant “virtuous circle.” When you innovate, you boost customer satisfaction, generate higher profits and attract more loyal customers. Naturally, all credit unions should strive to become innovative companies. But no matter how well you organize and plan, brand culture need to gear towards innovation—and institute a “startup spirit” —or risk taking two steps back for every step forward.
For truly, one wants to stress the “no” in “in-no-vation”—especially when customers and merchants are waiting to give the savviest credit unions a rousing ovation.