Innovation won’t always mean a cool new whistle for financial institutions. Smarter processes and policies may bring banks and credit unions more. Getting staff to produce fresh ideas means making innovation everybody’s job but also rewarding those people who come up with winners with money and recognition. Ultimately, only committed leaders drive such change.
Banks and credit unions focus more than ever on innovation to stay relevant and profitable, and they are spending more on it, but in some ways, building an innovative culture presents leaders with paradoxes.
Instead of injecting their organizations with innovation and vigor that fills everything, taking accepted approaches to it means they run the risk of their efforts being isolated to only part of their organizations, or even to specific initiatives.
Establishing innovation labs, appointing a chief innovation or chief digital officer, and partnering with fintechs have become increasingly common strategies. However, innovation labs can wind up off on their own, isolated from day-to-day business and operations. Chief innovation or digital officers may by definition have a role limited to IT area. And fintech partnerships can be confined to one product or department.
On their own, none of these limited and piecemeal efforts can prepare financial services firms for the future. For any of these efforts to be meaningful, banks and credit unions must instill a culture of innovation that reaches every corner of their institutions. This requires encouraging staff, down to the individual employee, to become innovative, to stimulate development and application of new ideas.
Doing this successfully can bring seismic change. But that’s the trick. It’s a monumental task to pull off. However, an innovative culture can ensure an ongoing pipeline of new and fresh ideas, a powerful weapon in today’s fast-changing environment.
1. Banking Leaders Who Want Change Must Drive It
Innovation, while it must permeate the organization, demands leadership. Setting up any of the efforts mentioned above and stepping back to watch things grow is futile. Leaders must play a significantly outsized role in shaping innovation’s development.
Why don’t more leaders get this? It lies in the optics of innovation. Innovative cultures are often depicted as open and egalitarian, emphasizing the sharing of ideas among equal members. It’s a collegial picture, and utterly misleading.
Reality Check: Sorry, but someone still has to be in charge.
Before change has a chance, leaders need to “walk the walk.” Studies indicate that 70% of the impact on an organization’s culture comes from leaders’ decisions and modeling behaviors, with the rest coming from training and engagement programs.
This means leaders need to learn how to handle the ideas the employees generate. They have to engage with ideas in an open and sincere fashion.
Rather than looking for reasons to dismiss an idea, they should ask:
- What is the opportunity?
- What are the factors that could kill that opportunity, and how could they do so?
- And how do we test this idea while it is still a good opportunity?
This type of engagement encourages an iterative, experimental approach in the spirit of learning that is essential to innovation. But it also keeps down the “squirrel syndrome” — having attention distracted by every new shiny idea.
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