Innovation Mythbusters

“If everything seems under control, you're not going fast enough.” ― Mario Andretti

Financial institutions, under constant pressure from regulators, need to be strategic about their response to disruption. Many firms implement only superficial innovation, not tied to business objectives, so it’s hardly a surprise that 84% of companies fail to digitally transform. But if financial institutions want to stay relevant, they need to take control of disruption – and take measured risks.

Here’s a list of five myths that keep financial services firms from innovating in the digital age.

1.    Innovation is about trying new technologies

Bust: While it often involves new technologies, innovation requires a business to change at its core while staying laser focused on one thing and one thing only: solving a business need or issue that brings value to its customers. Focusing on the technology alone turns organizations to a hammer looking for a nail and make them happily enjoy the ride on the “me too” train. It is not to say that customers always clearly articulate their needs or issues. Motorola CEO famously mocked the iPod Nano, asking “Who listens to 1,000 songs?” As it turns out, before streaming, I had more than 9,000 songs on my iPhone and now, through streaming, I have and need access to millions and millions of songs, so I can listen to the song I feel like listening to, whenever and wherever I want, which is the point of having a portable music player in the first place (Duh!). In today’s financial services environment, it’s not enough to have a digital strategy – or a digital team. Financial institutions need to have a business strategy focused on thriving in a fully a digital world where they give customers what they need when they need it.

2.    Innovation should be mainly focused on exploring the unknown and the art of the possible

Bust: The most successful organizations focus on all types of innovation: core, adjacent, and transformational innovations (source: HBR – Managing your innovation portfolio), with the majority of efforts being spent on core innovation. It is true however, that the biggest returns from innovation come from transformational innovation; the type of innovation that explores the unknown. Every company has its bread and butter, and continuing to innovate with those core customers and services is critical. It’s also important, however, to manage innovation as a portfolio of offerings, including some that are truly groundbreaking. For the latter, as no-one has a monopoly on talent and intelligence, many organizations would do well to embrace open innovation to create the right mix of technologists and domain experts to ideate, rapidly prototype and test innovations.

3.    Innovation is a special project that happens outside of regular business hours

Bust: Wole Soyinka, the famous Nigerian poet and literature Nobel Prize winner once said, “A tiger does not proclaim his tigritude, it pounces”.  Many of the well-known innovative companies don’t spend their time talking about innovation, creating rigid innovation governance processes and structures, or identifying “innovation teams” whose mandate is to innovate for the organization while others continue to focus on “real work”; they just innovate day in day out. Innovation must be embedded into everything the company does from recruiting, training, and engaging the best talent to developing new products and services to engaging with its stakeholders and optimizing its operations and infrastructure. Innovation must and can occur throughout the enterprise as a part of the daily routine as long as the organization has built the right culture, enabled the right innovation platform, and empowered its people. Incorporating innovation into the day-to-day will help financial institutions secure tomorrow’s digital customers, maintain a competitive edge, and utilize new technologies as they gain prevalence.

4.    Innovation requires a new workforce

Bust: Employees are a firm’s greatest asset. While constantly evolving business and technology trends may require new skillsets, organizations need to equip their employees with the skills, tools, and freedom they need to innovate without fear of excessive consequences. Simply replacing the workforce or punishing it for failure to innovate isn’t sensible, practical, or economical. When employees succeed at innovating, or even fail fast in attempts to innovate, they need to be recognized and rewarded for their efforts so as to encourage other employees to do the same. This will help build momentum through example and healthy competition.

5.    Designers and technologists mainly drive innovation

Bust: Innovation can’t turn into revenue for an organization if it never leaves the lab or progresses past the hackathon. Innovation can’t occur in a vacuum. It’s not enough to leave the job to designers and technologists. Only when a business connects its “suits” (traditional business enabling functions, such as operations, accounting, compliance and tax that enable an organization to operate at scale) and “jeans” (disruptive technologies, such as blockchain, artificial intelligence (AI), robotics and advanced analytics) can innovation unlock significant business value across the enterprise. If businesses can transform their strategy and operating model to deliberately and effectively link these two groups, hyper-innovative digital labs will be positioned to benefit the entire organization and the company’s bottom line.

If financial services organizations can successfully break these myths and think holistically about innovation, they can accelerate change. Speed of adaption and a willingness to take risks and fail fast, are the new rules of the road.