Asset Based Lending
Chief Investment Officer
Commercial Loan Automation
Innovation is a hot topic in banking. Mobile and social media are producing rapid change in customer behavior, and yet our vendors are not keeping up with the leading banks. What is a community bank to do as they are held hostage by a handful of vendors?
Think about innovation. It's something everyone wants, but how do you know you have it? How do you know if you encourage innovation in your organization?
I serve on the board of WSFS Bank. The bank has a highly innovative subsidiary, CashConnect, and its leader, Tom Stevenson, is a lightening rod for innovation. As he described what he does in order to foster inventiveness in his organization, and having read some about the subject, certain themes emerge that I'd like to share. Note that NONE of these themes is scale-sensitive; in other words, there is no minimum size for fostering innovation. It is size agnostic.
Most companies turn to an inexpensive and efficient source of innovation: their own employees. There are conflicting theories on whether to incentivize employees to get the creative juices flowing, but other elements of the process are less controversial.
Encourage experimentation. Allow employees to think freely, and encourage, highlight and reward new ideas, whether they are successful or not.
Tolerate, even reward, mistakes. This doesn't mean that all cowboys have license to bet the company on an idea, but it DOES mean that there is tolerance and expectation of failure, and that lessons learned are rewarded. As Thomas Edison once said, "You'll never find the ways things DO work without finding the ways that won't work first".
Give the employees a forum to voice their ideas. Go beyond the old suggestion box. Establish a process (but not a bureaucracy) to submit ideas and request resources to investigate them further.
Work in teams. Tom Stevenson found out that there are two kinds of people with respect to innovation, and both are necessary. Some are idea-stretchers, while others see a cloud in every silver lining. Both are needed for an effective innovation process, but it all starts with the stretchers. Those folks will cling on to any sliver of an idea and stretch it to its fullest potential. The problem is, the very same folks haven't met an idea they didn't like. Once the incubation group comes up with an idea that passes muster and has reached critical mass, you need idea-shrinkers to find the snags and offer a practical "take" of the concept, point out the risks and evaluate to ensure it is indeed viable.
Recognize that there are two triggers that spark innovation: Inside the box and outside the box. Start with the "inside the box" ideas, which often take an existing product and reshape it for a different customer base or audience. It's easier to consider what problems need to be solved within the bank's current environment than to figure out what's the next big thing. Even idea-stretchers work better inside the box first. They find ways to repurpose what you already have and monetize it. That's the genius of innovators looking at something we all see every day and yet seeing in it something different.
Don't forget your interns. Some of them may be idea-stretchers and can spark innovation. Just because they are not senior executives doesn't mean they can't be an important resource in the innovation process. Contests among current employees or even applicants (where the prize is getting a job at the bank) are effective and efficient tools to trigger innovation among your intern and new employee populations.
You need an incubator. Allow the investment of limited resources in an "incubator", a place where your idea-stretchers can gather, "play" with ideas and technology, and incubate innovative ideas. "Book reports" on some of these ideas encourage the stretchers to develop ideas and offers highly coveted recognition when presented to executive management.
Innovation must fit into the company's strategic plan. Once a new idea emerges, make sure it fits your strategic direction and corporate identity. It might not, in which case you have a different decision to make: whether you're willing to invest in this appendage to the current business model or not.
Many banks are still stuck in a survival mode, and find it difficult to move on. Employees are worried about losing their jobs, especially in light of another wave of cost cuts, and therefore avoid decisions that might cost the company money, even if they entail making property repairs, bringing hardware and software up to date etc. Innovation is the last thing on people's mind in such an environment.
One interesting idea Jim Donald, the CEO of Stay America, came up with to spark conversations, was "Get Out Of Jail Free" cards which he eventually handed out to all 9,000 of his employees. All they had to do, he said, is to call the card when they took a risk on behalf of the company (e.g. waive a fee for a customer or comp them a room night). This approach, WITHIN CLEAR PARAMETERS, is another great way to encourage your associates to think differently.
Our industry, especially now, has zero tolerance for mistakes (we borrowed a page from our regulators). This attitude kills the spirit of innovation, and we must find ways to overcome it. Maybe this card isn't what works for you, but you do need to figure out what does. Continuing to wait for your vendors to take the next step might be a losing strategy.