Our first Innovations Forum

Yesterday, we hosted the first Innovations Forum, a meeting of people in banks who are involved in the innovation process. As I've mentioned previously, this was initially an idea of Pol Navarro, of Banco Sabadell (the same bank that recently signed a deal with IBM to do labs.bancosabadell.com for Web 2.0 experimentation). Unfortunately, Pol was on leave and missed the first call, but sent along someone in his place.

Quite a few banks from around the world attended. Here is the list:

• Banco Sabadell from Spain
• National Australia Group
• Kiwi Bank New Zealand
• HSBC
• HBOS in the UK
• Lloyds TSB in the UK
• Caja Navarra from Spain
• Societie General
• Credit Suisse
• ABN Amro
• Citibank Greece

Considering that list, you'd expect we'd have a lively discussion, and we did. There were two topics on the table: driving an innovation culture, and managing the innovation process.

For the former, quite a bit of the discussion revolved around reward systems, and the means one would use to ensure that people were motivated to be innovative. On this score, a few banks actually had formal reward programmes. One of the attendees said, in fact, that their staff got 10% of new income or cost savings for any innovation that went to production. With such money available, you can imagine that pretty much everyone would be wanting to get their great ideas into the world. At Lloyds TSB we don't necessarily pay people for executing their ideas, but we do have a formal recognition system coupled with our ideas management process.

Another key point that I took away from this part of the discussion was that some banks didn't necessarily view the concept of an innovation programme – with separate group and accountabilities – to be necessarily the best way to get change in an organisation. For them, innovation is a necessary "business as usual" activity, one that is part of everyone's jobs. Obviously, at Lloyds TSB we do have a separate innovation programme, but the cultural change we want to drive is that everyone is part of the programme.

With those points in mind, the second part of the discussion really focussed on the process banks used to get their great ideas into the market. Here, too, there was quite a bit of variation in the way that things are done. The interesting thing that emerged here was the difference between those banks who put aside an investment fund for innovation and those that didn't. Clearly, investing in innovation is a speculative activity. If you have a formal innovation programme, you probably won't know what is going to come out the end of it, and so driving a decent business case for such activity is quite difficult. It speaks volumes for the maturity of some banks' innovation processes that they are able to measure the returns of their programmes sufficiently to make these kind of investments sensibly.

On the other hand, when the innovators actually have to go out and "win the money", it provides a quality check in its own right. I suppose the danger is that you can spend all your money on the "cool" stuff and then find that no-one really cares about what you are doing. As I said, that there is the capability to spend money speculatively and generate a good return speaks volumes to the maturity of the programme that can do it.

We also looked at the role of vendors in the innovation process. Some of the group expressed the view that using vendors was a great way to de-risk the whole innovation thing. The idea is that vendors should be spreading the risk of their propositions across many customers and, therefore, that the incremental risk to a particular bank should be less. An alternate view was expressed however: that vendors, by virtue of this risk sharing behaviour, would not be able to drive specific competitive advantage for an individual bank, and that the process of innovation was best left as an internal one with pieces being bought in as necessary.

Finally, there was a discussion around the concept of incubators. As this is something that we've been thinking about at Lloyds TSB, we were especially interested in the views of the group. An incubator, as a means for quickly trying new things and getting early experience in the market sounds like a great plan on paper. How better to see if something works than to put it out there and try it? But some of the banks which had tried such programmes sounded a note of caution: there is the danger that the people working in the incubators see themselves as an "A Team", and that everyone is effectively marginalised from the innovation process. Going back to our initial discussion on the culture of innovation, it was suggested that incubators could in fact be a hindrance rather than a great advantage to any bank. I have to admit, I hadn't thought that particular angle through, but it does make sense. Clearly, if you want to have an innovation culture, it has to be an inclusive one. I suppose.

We closed out the discussion with some administrivia, such as the time for the next meeting and the role external parties might play in any future meetings. We're going to be holding these every two months for now until things get rolling proper, and have decided that its best to keep the Innovation Forum to just banks for now. There is also the possibility that we might get together as a group some time in the future at an event somewhere – I think someone suggested one of the Gartner events.

Already, there has been very positive feedback from those who attended, and I'd like to thank all of you that made the call. We're very much looking forward to the next one.

Comments

[Lauchlan Mackinnon]

Hi, Great article.

I have posted on it on my blog http://www.ideamanagementsystems.com/2007/08/current-thought-on-innovation.html

I would be really interested to hear more about your (and other banks) views on and experience with Idea Management Software vendors such as Imaginatik, BrightIdea, Jenni, Idea Champions, or OVO.

Kind regards,

Lauchlan Mackinnon

[Charles Sherrill]

Mr. Gardner,

I fine post. Thank you for sharing your insights. My thoughts on the role of vendors in the innovation process:

While it is true that global financial institutions, some U.S. based money center banks, and the occasional regional or community bank are capable of bringing innovations to market without vendor assistance, these innovations tend to be incremental in nature (e.g. Bank of America's Keep the Change) and are often fleeting.

Banking is a highly networked industry. As such, most game-changing, disruptive innovations (e.g. Image Exchange in the U.S.) require participation of all network participants (e.g. banks, vendors, payment networks, regulators). The thousands of regional and community banks in the United States simply could not compete without vendor participation in the innovation process.

Even U.S. based money center banks, shackled to massive I.T. groups for which innovation is a secondary concern, frequently turn to vendors for innovation. To capture competitive advantage from their vendor innovations, money center banks have lately taken to making equity investments in strategic vendors which often lead to outright acquisitions. For example, JPMorgan Chase's acquisition of Fisacure followed several other bank acquisitions of vendors in the medical banking space.

For banks with deep pockets, internally developed innovations can pay-off as they build on one another over time. Bank of America's on-line consumer banking website and Wells Fargo's small business website are good examples of many incremental innovations, individually of little consequence, adding up to a significant competitive advantage when considered in the whole.

The proper role of vendors in a given bank's innovation strategy is a fascinating topic. I hope you will explore it further in future posts!

Best Regards,
Charles Sherrill
www.cfsherrill.com

[Alexander Osterwalder]

Hi James,

Thanks for posting a summary of your conference call. I'm looking forward to more (every two months...).

Greetings from Geneva,
Alex

[Rob Findlay]

Hi James

Great discussion, and thanks for organising this. Dont forget http://www.fidelitylabs.com/ - this, according to the copyright in the footer, has been around since 2005, so some interesting things there.

Cheers,
Rob
TheBankChannel.com

[FredericBaud]

Hi James,

Was the idea of keeping the link between people in-between forums through a wiki or some other tools mentioned? Because of privacy issues and current agreed participant profiles, access control can remain strict while still offering a convenient place to share views and synchronize on different meetings. Private google groups could offer a way to rapidly implement this. I would personally be interested in being granted access to this area.

Cheers,

Frederic

[Jay Hamilton-Roth]

To get great innovation you need two things:

1) resources (money & time) and
2) a reason to innovate (not just $)

Innovation that makes people's lives better creates passion (and a personal stake) in the outcome. Making the results tangible creates a great feedback cycle, improving innovation in future iterations.

[Yuva Anandan]

Thanks James, Nice talking to you and others. Call was very informative and looking forward for future events/calls.

regarding reward system-- yes, its 10% "Net"cost saving. Also, certificate is award for participation and these certificates (1 or more based on role/grade) is mandatory future promotion.

for linked group, you can use contact sheet which I sent with everyone's linked profile details.

Cheers/Yuva

[Julia Styles]

If you want to keep brainstorming with other bankers, you may be interested in checking out http://www.brainreactions.net. We have private and public virtual brainstorming rooms with RSS feeds. We have worked with Bank of America and other large companies to help them with the front end of innovation-idea generation and qualitative analysis. We would love to help.

[David McQuillen]

James,

Thinking over the discussion we had on the innovation call, and a discussion I've had internally recently...we've got to put the role of vendors in perspective as one of three "inputs" to innovation within a business: clients, internal resources, external contributors (of which vendors would be one).

As well, I think it's important to understand where vendors are of best use: in identifying customer problems that need to be solved (the first step in innovation) or in generating ideas to solve those problems.

[Jay Bhattacharya]

Great job, having this forum. Would love to participate in the next one. On the question of vendors, I've used vendors for both phases in the above comment. I found that certain "customer insights" firms may be too rigid in their flexibility and generate too many ideas across a broad range. You can cut things down, but then their feelings get hurt.
As I said to a colleague recently, innovation is business, nothing else.
Looking forward to discussing more.

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