Technology is table stakes in today’s business world so the heat is on for financial services organizations to become innovation-focused in order to prove their relevancy to customers and outmaneuver their competition. Yet, in the race to put their customers first, too many financial services organizations are failing to focus on the key factor that drives the engine of innovation — organizational culture.
While innovation adoption may be at the top of the agenda for many of today’s financial services organizations, innovation culture is yet to earn its spot. The reality is that faced with firmly embedded legacy systems, strict regulations, compliance requirements and budgets, it is challenging to nurture a culture of innovation in the financial services industry.
Moreover, the culture of financial services traditionally hasn’t been conducive to new ideas. While finance professionals have been trained to identify and avoid risks, innovation is all about taking small risks, failing fast and learning from mistakes.
Failing to cultivate a healthy culture that fosters innovation throughout the organization could be one reason some financial services institutions are unable to move their innovation strategies from idea to implementation.
According to the “Inside Banking Cultural Transformations” report, a failure to consider operating culture is hurting financial institutions’ innovation projects. Just 17% of the industry majority have managed to launch five or more digitally-driven products since the start of their innovation efforts, and only 16% have implemented five or more digital mid- or back-office solutions. Moreover, financial organizations are struggling to acquire the talent needed for innovation projects and to work with fintech partners. In fact, the report reveals that 55% of fintechs cite differences in management and culture are a challenge when working with incumbents.
Indeed, too few financial institutions have changed the way they pursue technology investments—from prioritizing ideas and selection criteria to review of the business case and execution to finally integration and ROI analysis. In order to remain competitive and meet the changing needs of its customers, financial services organizations will need to tackle head on the stumbling blocks on their path to change when it comes to generating and implementing ideas that help innovation flourish.
Implementing a culture of innovation is a journey, not a race. It’s not a one-and-done process. Rather than regard digital transformation as simply a set of products and solutions, financial services organizations need to facilitate a culture and mindset grounded in customer needs and enhanced customer experiences. Doing so, however, requires a commitment from the top down to ensure that new ideas receive the needed support.
Kevin Pleiter, Grant Thornton principal, Technology and Innovation, noted that a culture of innovation must be tied to a strategy that is grounded in the business problem to solve. He suggested that too often organizations will move forward with a technology-enabled solution that no one is using or even understands how to use. “They don’t invest in the necessary thinking up front about what the problem is that they are trying to solve,” he explained. “The question becomes, ‘How do we engage people in the change that organizations need to make in order to truly innovate, and how do we measure progress?’”
Technology for technology’s sake will not help financial services compete in the marketplace. Instead, they must be sure they are measuring outcomes tied to business objectives. Big or small, the objectives of the technology initiative must be measurable and relevant.
“The KPIs and measures you put in place are critical,” Pleiter explained. “If you aren’t measuring the right thing, you can deliver a project on time and on budget, but customers or staff may not be using the technology or the desired changes in working practices and business outcomes have not been achieved.”
Innovation labs feed fintech future
A number of financial services organizations have taken steps to prioritize an innovation culture by providing a space via innovation labs for their teams to engage in ideation and execution. Innovation labs in the financial services industry have been trending for at least five years, and their numbers are growing.
Deutsche Bank has launched “innovation hubs” in several cities as a way to partner with tech sector firms to encourage the development of new ideas. SunTrust launched its Accelerator Studio in 2017 with the goal of reducing time from idea to prototype as well as uncover new opportunities. The space accommodates both core team members that work in the Studio full-time as well as partners brought in for specialized expertise. Eastern Bank, an early pioneer of innovation labs, opened its Eastern Labs in 2014. However, today the organization is aiming for an “innovation-lab-as-attitude” mentality across the entire enterprise instead of just focusing on a single physical space.
Innovation labs can provide a valuable framework to pilot new technologies but in order to be effective, they must start with a solid business strategy rather than focusing on creating solutions in search of problems. For example, Grant Thornton’s Mobius provides clients with immersive, customer-centric data experiences to define and build new solutions.
Cultivate an innovation culture: 10 best practices
Financial services organizations that truly embrace the innovation challenge and support it by actively building a culture that embraces change can successfully meet the demands of a more competitive future. Consider these guidelines when looking to build an innovation-focused culture.
- Champion change from the top. Encourage leaders to commit to the culture change management that is needed to create a digital-focused and customer-centric organization. This starts by defining innovation and the culture that needs to be cultivated to support it.
- Focus on your customer. What do they want and when? Analyze your current offerings to identify gaps. Prioritize implementation of new products and services using a variety of data.
- Communicate consistently and frequently. When employees feel they are part of the innovation process, they will be more engaged. Explain what the organization is doing and why and regularly provide updates.
- Develop digital ambassadors. Whether digital natives or novices, “ambassadors” can be trained to understand new tech inside and out and encourage their colleagues to embrace the changes.
- Support a culture of experimentation. Leveraging an innovation-first model may be new territory for some financial organizations. Expect a few misfires to occur but learn from mistakes. Risk-taking and experimentation are key elements of a culture that fosters innovation.
- Adopt new project management approaches. Agility is the new currency of business. In order to compete for talent and customers, financial services organizations need to adjust their culture type from risk-averse to one that is more agile and responsive. Adopt agile techniques that allow projects to be implemented more quickly.
- Encourage ideation throughout the organization. Great ideas come from all areas of the organization, not just from the top. Implement a formal process for idea generation that leverages a diversity of thinking throughout the financial services organization.
- Embrace the power of partnerships. Collaborate across the enterprise and with partners outside of the organization. Look outside the sector for ideas on how to build an innovation-focused culture that results in greater efficiencies and improved customer satisfaction.
- Develop an attractive employee value proposition. Financial services organizations need to attract top talent in order to successfully drive innovation and remain competitive. From big tech to fintech firms, the competition for today’s tech talent is stiff. Financial services organizations will need to work to create an employee value proposition including an appealing workplace environment and culture that will attract emerging tech talent.
- Cultivate a measurement mindset. A culture of innovation that results in successful technology solutions requires a focus not just on technology but on measurement. Defining the appropriate KPIs to evaluate results is critical to any innovation program. Financial services organizations eager to compete with innovation initiatives need to start with defining the business problem followed by implementation and integration of the technology solution that derives ROI.
Building a healthy, aligned organizational culture is critical to becoming an innovation-focused enterprise. Fostering a culture of collaboration, communication and creativity to support strategic business objectives can help financial services organizations break down innovation barriers and deliver strong service to their customers.