Will innovation succeed in changing Banks DNA

Media, Broadcasting & Publishing industry has gone thru significant disruptive innovations over last decade to meet their customers’ expectations providing easy of access, on demand anytime anywhere content availability, personalized contextual and engaging experiences.

Many players in Technology, Media, Telecom, Retail and e-Commerce space like Amazon, NETFLIX, Apple, M-Pessa, Walmart, Starbucks & Alibaba have used innovations to create new business models & new markets to grow further. Now some of them have started offering better financial services traditionally offered by Banks (such as Payments, Remittances, Lending, Trading & Investments).

While new players have disrupted some aspects of financial eco-system, some banks still confident (Over confidence - 1^st stage of classic disruption cycle) that threat is not real for their core business as regulators will slow them down when they become large players. This may turn out to be just wishful thinking on an assumption that they are going to follow existing business models as theirs requiring compliance to existing regulations.

UBER business model has skipped government regulations for running taxi services business and become real threat for existing operators. Funding Circle has provided $600m loans to small businesses while Prosper has extended $1.6b in personal loans. Could mortgage, leasing, auto loans, cash line, credit cards & corporate loans be next… Will these players with new business models will be able to find ways to work around entry & operational barriers. It may take few years but threat to banks is real… very real.

Banks have operated long on blind trust and lock-in schemes with very little transparency, customer engagement & service excellence. Customer was seldom a King in their business. Therefore for some Banks it is extremely hard to see thru what’s coming. A survey in USA which covered 10,000 Millennials asking about their brand love among 75 companies spanning 15 industries, it is noted that all four leading banks were the least loved brands for Millennials.

NEW NORMAL & FUTURE GROWTH

However some smart banks have now realized NEW NORMAL of consumer & business world and focusing to change their DNA to respond to this real threat.

In this NEW NORMAL, consumer’s expectations and behaviors are getting redefined by rise of social media, e-Commerce and personalized engaging mobile experiences.  New business players equipped with design & technology weaponry are also converging their digital & physical world to offer best service experience to their customers. (UBER – A new ecosystem delivering reliable Taxi service with frictionless payment leverages digital & physical convergence very well).

Industry leaders believe that 80% business growth will come from organic growth and rest from mergers & acquisitions. Innovation will play lead role in organic growth of business by creating new radically different value propositions.

INNOVATION & APPETITE FOR FAILURES

Innovation demands experiments which inherently come with failures. Complex operating environments of banks full of decades old systems & processes adds further to failures probabilities.  

Success may have many fathers but failure is often left as orphan. Embracing deep understanding of art of failures and failing smart & fast way is the key to change organization DNA & to get close to moving targets.  One need to understand that failure is a necessary part of growth.

In the 1960s, IBM CEO Tom Watson called an executive into his office after his venture lost $10 million. The man assumed he was being fired. Watson told him, “Fired? Hell, I spent $10 million educating you. I just want to be sure you learned the right lessons.”

Banks need to build this reassuring environment that even if the ideas fail; the intrapreneur will not lose his or her job or be “punished”.

Innovation needs to be institutionalized as a dynamic system not only as a guiding principle to reap real benefits from collective wisdom of employees, customers & partners. Innovation System may sound like an Oxymoron as Innovation demands out of box creative thinking and systems defines process structures.  A right balance needs to be found to be efficient when turning ideas into concepts & prototypes and innovating new products, business models, customer experience, operations, processes & technology.

Successful innovative companies have used various innovation principles however almost all have used following four

• Think Big
• Start Small
• Fail Quickly
• Scale Fast

Smart Banks have recognized seismic waves emerged from NEW NORMAL world and this underlying current is getting stronger to disrupt all business segments in near future.  Smart Banks have started work to change their DNA and transform themselves to be seen around by another decade.

Would love to hear your thoughts about what may help Banks to become truly customer centric business.