Innovation in Banking Goes Beyond Open Spaces and Lattes

Innovation in financial services takes more than a unique work space and a different dress code. It takes top-down commitment to a process and mindset that encourages free thinking. Instead of discouraging failure, an organization must encourage a test-and-learn process that transforms an organization from within.

The need to innovate is indisputable. “Failure and invention are inseparable twins. To invent you have to experiment,” Amazon founder Jeff Bezos said. According to CB Insights, in the last 15 years, 52% of S&P 500 companies have disappeared. Faced with increasing customer expectations for more personalized and advanced digital experiences, traditional financial institutions are beginning to explore various ‘innovation strategies’.

But when it comes down to it, what exactly do we mean by “innovation”?

Dawn of the Innovation Lab

Innovation labs have been all the rage for the last few years. There are plenty of examples across different industries and geographical locations – CB Insights has a fine list here. Dependent on the organization, these labs exist for various reasons. Some are for showcasing new in-house technologies, some are for testing new ideas and co-creating new products, while others are set up to appease the boards and executives about how they are addressing challenges in the industry.

The concept of an innovation lab is hardly new. I came across my first one back in 2003 while working for a wireless company. Back then, we called it the “Center of Excellence”. I remembered it fondly as a special events space, adorned with beautiful furniture and decorated with prototypes both old and new. From time to time, we would bring in our partners for special tours to “showcase our innovative thinking”.

Does that make us more innovative though?

The Innovation Petting Zoo

If you have young children, chances are, you are familiar with the idea of a petting zoo. I have always found that concept to be rather odd. One would argue the zoo provides the children an opportunity to see the animals in a “natural habitat”. But, what’s in it for the animals? There is nothing “natural” about living in a glass box for someone’s viewing pleasure.

The same can be said about how innovation labs are set up. Many of these work spaces are remodeled to resemble a hip startup, with exposed ceiling, walls of big touchscreen TVs, and cool furniture, complete with an expensive coffee machine or a fridge stocked with craft beer.

Most likely, you will also find an open floor space dotted with desks and team rooms, instead of individual cubicles. While the original idea is to promote collaboration, it will not be uncommon to find people wearing a noise cancellation headset to drown out the distraction.

Often, the innovation team that occupies the lab is separate from the rest of the corporate functions. They will likely have different processes and dress codes (which can be a source of pride for some).

Sometimes, you may also find external startups co-locating with these corporate innovation teams. As with any new shiny object, you will often have visitors coming through the lab to admire the space and learn how to become more innovative. As a glorified event space for PR purposes, these corporate executives and envious colleagues outside of the innovation team will come and attend innovation jams or hackathons in order to ‘feel the spirit of innovation’.

Human Nature: The Biggest Obstacle to Innovation

Of course, the above is a cynical view of how some corporations set up their innovation efforts. JP Nicols has an excellent article on Innovation Theatre. Here is an excerpt: “Knowing that you are being disrupted and committing to doing something about it is an important first step. Focusing on the Jobs to be Done ensures that you’re solving the right problems for the right people in the right way at the right time. That is value creation. Anything less is just Innovation Theatre.

To avoid becoming an innovation theatre or petting zoo, we must be thoughtful about its purpose. As illustrated in the success story of U.S. Bank, to be successful, innovation cannot be an isolated function. It must be ingrained within the culture and DNA of the entire organization. Everyone must be on board and in alignment with what it means and what it will take to get there.

Support from the very top is a must to encourage all employees to be creative and try new ideas. The lab cannot be the only one innovating, when the rest of the organization falls back on “this is how we’ve always done it”.

And be mindful with your messaging, especially internally. Your colleagues and leadership team in your organization need to understand the value add you bring to the organization. You can’t be seen as just a bunch of cool kids having a good time or experimenting for the sake of experiment. That’s doomed to fail.

Instead of setting a moonshot goal, establish smaller ones that can be accomplished in shorter time frames so you can celebrate small wins. This will also allow the executive sponsors to see the fruits of their support, which is crucial for the team’s long term success.

And finally, the organization needs to be willing to learn and accept failure. As Thomas Edison famously said: “I have not failed. I’ve just found 10,000 ways that won’t work.”

Remember, sitting the team down in an innovation class does not automatically make them innovative. And, you can’t just open up innovation centers and expect transformation magic to happen on its own overnight. Becoming an innovative organization takes a lot more than opening an innovation center in an innovation hotspot.

At the end of the day, innovation needs to be about improving the quality of life, making things better, and solving real problems. Focus on the real change that will bring benefits to your customers and help them thrive, instead of paying lip service.

You don’t need a fancy title or glass enclosed rooms with big screen TVs to be an innovator. You don’t need flashy office space nor fridge stocked with fancy drinks. Don’t just check the box and call it a day.

To create and sustain change, you need people with the heart and passion to make a difference and challenge the status quo. You want someone who is willing to fight the good fight to bring the best solutions for your customers. That hunger is what drives innovation and progress.

So go ahead, roll up your sleeves and remember who you are serving. Inspire, lead, and dare to dream.

This article was originally published on February 28, 2018. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.

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