No One Path to Financial Innovation: Report
There is no one tried-and-true method to introduce innovation within financial institutions, but there may be a method for each organization, according to a recent white paper published by consultancy Aite Group.
Based on interviews with 48 innovation practitioners across 38 large financial institutions in banking, investment and insurance, Gwenn Bézard, Aite research director and author of Innovation in Financial Services: How Banks and Insurers are Gearing Up, found financial organizations encourage innovation in a variety of ways.
Bézard distills the various innovation methods his research uncovered into six basic models— LOBsters (in which innovators work with one or more lines of business), Advisors, Cultural Agents, Red-Tape Cutters, Entrepreneurs, and Coaches—each with their own strengths and weaknesses.
“Innovation is never easy for any company,” he explained. “Financial institutions tend to be conservative by nature.”
However, Bézard has discovered a common thread running through those companies that are more successful in introducing and maintain innovative processes.
“It was pretty clear that the companies that had innovation teams that had very strong relationships throughout their organizations, performed much better than those companies with innovation teams that were more isolated and struggle to build an internal network,” he said. “There are just some companies that have better relationships across the organization while other companies struggle more to have their people collaborate.”
Strong relationships mean more than the relationship between an innovation team and senior management, he added. “Sometimes an innovation team might have had senior executives buy into innovation only to have everything fall apart once outside the executive suite.”
Bézard cites one best practice of one innovation team that invited an envoy from the IT organization who had quite a bit of authority, to scrutinize and keep an eye on what the innovation team was doing.
“It might sound like they gave the IT organization a large stick which to beat them, but in fact the IT felt they were more in control and had a say in the process,” he said.
Bézard’s research also uncovered a disconnect between CEOs and boards, and their innovative organizations that has not been seen since the Internet bubble of the late 90s.
When speaking to banks and insurance companies, their CEOs and board members often would come back from a visit from Silicon Valley excited about what they had seen and eager to play venture capitalists without the ‘buy-in’ of their innovation teams, he explained. “Being a venture capital that invests in startups may look easy, but there are a lot of losers. It’s a challenging game.”
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