To all bankers: Innovate in the name of sustainability!
“Innovate in the name of sustainability”! This call by Contzen from the Luxembourg Bankers association can be considered the key message of the first Innovation for Financial Services Summit, 21-23 September 2011, Luxembourg. Banks and insurers need to start building sustainable relationships with consumers and open up to include the consumer’s voice in the open and collaborative innovation process. Even if this implies/requires one of the most disruptive cultural changes in the financial sector of the past decade: from reactive/ close to proactive and open.
Impediments to innovate are probably more persistent in the financial sector than in any other industry: strict regulation, low margins, commoditization of services and products … And banks are indeed quite often the opposite of an open innovation minded culture. However, creating the ‘innovation ambiance’ and collaborative platforms connecting all stakeholders – including the consumer – will be key to differentiate over the commodity trap. With IT being the main force behind innovation in the financial sector up until now, service innovations taking advantage of changing consumer needs and demands will make financial institutions outperform in the long run.
The first steps are already taken by Cortal Consors, the online broker of BNP Paribas, with the launch of the first trader community Hopee.com that capitalizes on user generated content for finance. Initiatives like this should inspire all of us to engage in open innovation using social media dynamics, be it in a more closed (research) environment or in the complete open on the world wide web…
Another thread may come from outside the industry. New players are developing financial service platforms, allowing customers to meet their financial needs in peer-to-peer online communities. One example is Zopa, with the strong statement: “At Zopa, people who have spare money lend it directly to people who want to borrow. There are no banks in the middle, no huge overheads and no sneaky fees, meaning everyone gets better rates”. Such entrepreneurship also emphasizes the urge to innovate, to think in a new way and to embrace the consumer in order to stay in business.
BUT, a thousand miles journey starts with a single step, Lao Tseu, founder of Taoism, said . Even so Innovation starts at the very beginning with a good definition. Stefan Lindegaard (author of The Open Innovation Revolution) : “What is the right definition of innovation? If you ask 10 different people, you will get at least 5 different variations. I advise companies to develop their own definition and it should fit the specific issues at their company. Once they have developed such a definition, they can begin to build a common language internally and for use with their external stakeholders. This will make it easier for them to understand and communicate about what they are trying to do.” Besides a good definition one of the other critical success factors is to manage the fuzzy front end. A challenge quite some players in the financial sector are facing. Good management of the ideation and innovation process is key. Quite often innovation already fails in a too early phase due to miss management or even a lack of management. Within this context it is interesting to take a look at an article of Frishammar & Floren.
Innovate in the name of sustainability, or to quote Marko Torkkeli, Prof. Technology and Business Innovation, Lappeenranta University and Summit Keynote speaker “If you are not open you are closed”. Want to read more? A Summit speaker Srini Giridhar (IBM Institute For Value), presented and discussed a very interesting survey he conducted ‘From complexity to client centricity, with simple smart service’ (pdf).
I’ve written this post togehter with my wonderful colleague Frank Geers, research director at InSites Consulting. Follow him on Twitter!