Innovation terror: 3 things big banks can do to stop stagnation of innovation
I think we’re all agreed that innovation is crucial to the continuing success of any organisation. But what does innovation really mean?
For most, innovation is about designing and building new products or services, but for me it’s about ideas and their practical implementation to change an organisation. These ideas can be the smallest things to game-changing shifts for the organisation - this and everything in between is still innovation.
Anyone working in a small business or a startup might take this for granted, but innovation often takes on a life of its own in big banks. It becomes a destination rather than a journey, and stops many from even getting out of the gates.
So, what can large financial institutions do to avoid their big - and small ideas - growing stale?
An institutional fear of failure can stop banks from even trying to effect change in the first place.
1. Stop fearing failure
Big banks are full of smart, ambitious people that want to drive change and innovation in their businesses, but who also find it difficult to achieve because they hit process or leadership blockers at every turn. How many times have you been asked to do a proof-of-concept (PoC) or undertake an incubation idea only to be blocked unless the outcome is guaranteed to be positive? Or heard that your PoC failed because the outcome was negative?
An institutional fear of failure can stop banks from even trying to effect change in the first place, especially when a negative outcome is viewed as a waste of time and budget.
Naturally, failure is never a desired outcome, but when it comes to innovation, a fear of failure makes it a non-starter. It can ultimately prevent innovation from happening at all, and the business will fail to change and move forward. Stagnation is the end of this path.
Proponents of Agile delivery will often talk about the concept of Fail Fast. I’ve heard many C-level executives talk about Fail Fast but then they don’t equip their organisations with the ability to do this. It’s not just about giving teams the space to try things. It’s about setting up frameworks and guardrails around how they spend their time, what they build, where they build, etc. with a whole lot of trust. And of course it needs to align to the regulatory and compliance needs of the bank.
2. Treat innovation projects like startups
An innovation project is effectively a startup business, so treat it like one.
Treat the initial idea like you would a seed funding stage, with budget (cash or time) assigned for development. I’ve seen this run as a 6 week timebox for AI/ML ideas and at the end of the 6 week period, outcomes and a business case need to be submitted in order to move to the next “investment round”.
This approach of providing stage gates allows ideas that don’t meet the organisation’s criteria to be killed off quickly. It also provides focus to rapidly take successful ideas forward to add value and for the organisation to innovate.
A strong incubation function should have an entrepreneurial, venture capital mindset, thinking outside the normal operating models that would constrain ideas in the organisation it’s born within. A VC mindset also means you’re thinking about how the project is funded (ie. whose budget is this coming from?) and what return they need to see to continue investing.
Like most startups, many ideas will fail but make sure you learn from those that don’t succeed, pivot and try other things.
The strongest power for innovation is people, and creating a culture of trust that allows them to surface their ideas is critical.
3. Adopt a culture of innovation
At 11:FS, we all embrace curiosity and encourage people to think differently. We challenge each other and learn from everyone as we progress through our day-to-day lives.
Having an Innovation Centre in an organisation may sound like the perfect way to drive innovation but it often leaves people feeling it can only happen within that centre. Everyone else is not expected or empowered to innovate.
The strongest power for innovation is people, and creating a culture of trust that allows them to surface their ideas is critical. A central innovation function should only be there to raise the profile of innovation and deliver frameworks to innovate from - the ability to surface ideas from everyone is the most valuable resource.
A culture of innovation must recognise that no idea is a bad idea. After all, the worst idea could be the spark for the best thing ever.
Successful innovation is not a top-down or centralised approach, it should be pervasive in the bank’s psyche.
Put your innovation where your mouth is
Driving successful innovation in large banks isn’t about being brave and trying things, it’s about embracing ideas, using them to drive the company strategy and to enhance your products and services leading to a better customer experience.
It’s also about recognising that not every good idea is right for your business. That’s not a reason to kill them though, spin them off as their own business and let them thrive. Then earn back from their success on their own through your investment.
An innovation culture cannot be led from the top down and must be ingrained as a behaviour in everyone regardless of their role.
Ultimately, if you don’t shoot for the stars you will never even leave the ground. By understanding how you change and innovate, you can continue to pivot and grow until the stars are easily reached.
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