Introducing Innovation Market

So sorry I vanished into thin air after I kicked up that recent ruckus about banks not doing social media. You see, the manuscript of Futureproofing is due with the publishers in January, and I'm on that final death march to get everything done. But I digress, because what I wanted to talk about today is something that my team and I have been working on for some time.

We've been struggling, you see, with finding a way to create an innovation culture that's quite different to the one we have now. What happens in most banks (and I know this from the research I've been conducting for FutureProofing) is that staff dump ideas into some kind of suggestion scheme, and a central team does something with them. Most ideas, of course, don't go anywhere, and it's not because they are bad: the key problem is there is never enough innovation resource to do everything that shows up.

You have to pick and choose. In the end, you leave a lot of money on the table.

Turning an idea into reality is hard work. But creating the idea in the first place is fun. Therein lies the dysfunction between ideation and innovation. You can can get lots of people to do the former, but its so much harder to motivate the latter. But what if you could make the innovation part fun as well? That's what we've tried to do with something we've been working on that we call the Innovation Market.

Innovation Market is ideation with a difference. We've created a virtual currency we call Bank Beanz. We pay Beanz to our staff for participation in an online community that collects, rates, and categorises new ideas. Staff can vote for the ideas they like, or comment on them in forums.

We measure the buzz of all these activities, and then promote the most successful ideas onto an internal stock market. Then, staff can use their Beanz to buy into ideas they like. The price of the idea approximates the chance it has of going into production. Consequently, believers in the idea can get in low, and sell high. They can make windfall gains in Bank Beanz, and use them for rewards in our Innovation Store.

Yes, we back the Bank Bean with cold, hard, cash. It is an exceptional motivator.

Now, here's the fun part. Because we've created an internal market for ideas, we are getting all the standard market behaviours you get externally. Firstly, we had hyper inflation of the Bank Bean. We had to put special controls in place avoid what was essentially a system that just printed money. It is hardly a reward for participation when your Beanz buy you a gift voucher one day, and nothing the next. Anyway, we fixed that.

Then, we had insider trading in ideas. Just as we were about to try to fix that too, we realised something interesting: when you're talking Bank Beanz, insider trading can be a good thing. It makes people want to be on the inside so they can speculate successfully. And how do you get on the inside? You have to work on the team making the idea happen.

In other words, we coupled ideation and innovation together in a way that's fun. It was an interesting revelation to us.

Innovation Market just won at the Financial innovation Awards in London – it was voted most innovative IT project in a bank. We were thrilled of course.

But the most interesting thing now is to see where Innovation Market takes our programme in the future. The idea, we hope, is that with this coupling of ideation and innovation we'll make it possible to accelerate our pipeline of interesting things. Instead of being scale-limited with headcount constraints in the central innovation team, anyone can be an innovator.

And isn't that the definition of an innovation culture in the first place?

Comments

[Paul Tran]

Hi James,

Very interesting indeed. I would love to connect with you. We provide a platform that can help you accelerate this program.

You can download the presentation from here:

BrightIdea Overview
http://budurl.com/3g9b

I can be reached below. I will also connect to you via LinkedIn.

Regards,

Paul Tran
Brightidea – Innovation & Idea Management
[email protected]
415-992-2082 office/mobile
415-842-0300 fax

Yahoo IM: paultran888
Twitter: twitter/paultran888
Web: www.brightidea.com
LinkedIn: http://www.linkedin.com/in/paultran888

[Thomas]

And there's the fait-accompli aspect. Would a risk averse senior manager turn down a project that several hundred of his staff have a financial interest in?

;-)

[Simon Deane-Johns]

James

Am interested to know how your internal market for ideas will tell you what innovation customers would like to see, rather than merely the bank itself?

[Oliver Bernhard Pedersen]

Hi James

Sounds very cool. We done kind of the same thing with our Idea Exchange. We worked with a couple of banks and have had huge success because it is a great way to bank terminology and innovation.

Try Idea Exchagne here: http://idea-exchange.realpredictions.com/signup

Read about Idea Exchange here: http://www.nosco.dk/product.html

Best regards,
Oliver Bernhard Pedersen

[miroslodki]

James
excellent example of crowdsourcing

why do you say implementation is not fun/difficult
is it perhaps going to those who don't believe in it?
have you perhaps asked folks to volunteer for the implementation team?
Enlisted to power/visibility of the C-Suite to give it a higher (skunkworks) cachet? (or maybe "Q Division" for the Bond fans)

Cool site
Miro

[Hjalmar]

Great innovation!
Particulary the buying into ideas and trading on ideas.

Looking forward to reading your book.

Have a good Christmas!

Hjalmar

[Graham Hill]

Hi James

Great blog.

Sounds like an interesting experiment in running an internal prediction market. I am pleased that you as an innovator were alllowed to try it out.

But Simon D-J did make a very valid point in his earlier post. Where on earth is the customer, in particular where are their unmet needs, in all this. Ideation & innovation without understanding unmet customer needs in detail is a lot like playing poker; Lady Luck usually deals you a dud hand. And having staff heavily involved is certainly no gaurantee of success either. The 80% of new product introductions that fail, despite all the internal attention lavished on them by staff, is ample testament to that.

Just think how much more effective your prediction market would be if you went out there to really understand customers' needs first, then you clustered related unmet needs into, let's call them 'customer challenges', then you used the challenges as the seed for targeted ideation/innovation. This is far more likely to lead to market winning innovations than I suspect your current approach is.

We used this approach to drive product innovation when I was Head of CRM at a respected German automotive bank. It dramatically improved our success rate in the market (and that without an internal prediction market to help predict winners from our portfolio of projects better).

See you at the Nesta WeB@nk event in January on the 21st.

Graham Hill

[CP]

The Bank Beanz concept seems a fantastic way to evaluate many ideas simultaneously, maximising the number of investments that return on their investment, minimising expenditure on ideas that do not.

I have one worry about relying on this approach, however.

The Eureka moments are few and far between, whereas public opinion is unending. Scientific endeavours that bear fruit from the ideas of a single creator are at an end. Rutherford discovered the atom’s nucleus. It took thousands to conceive of and build the Large Hadron Collider.

Unarguably, however, the former has shaped history far more than the latter.

The idea of using a simulated market to evaluate the most likely winning idea from the many contenders is a winner – to a point. Where it is limited, is in the very fact that it relies on the views of many. Sometimes the unprecedented ideas and efforts of an individual will win through, contrary to the accepted views of everyone else.

Hopefully the greatest ideas won’t get lost amidst public opinion.

[CP]

The Bank Beanz concept seems a fantastic way to evaluate many ideas simultaneously, maximising the number of investments that return on their investment, minimising expenditure on ideas that do not.

I have one worry about relying on this approach, however.

The Eureka moments are few and far between, whereas public opinion is unending. Scientific endeavours that bear fruit from the ideas of a single creator are at an end. Rutherford discovered the atom’s nucleus. It took thousands to conceive of and build the Large Hadron Collider.

Unarguably, however, the former has shaped history far more than the latter.

The idea of using a simulated market to evaluate the most likely winning idea from the many contenders is a winner – to a point. Where it is limited, is in the very fact that it relies on the views of many. Sometimes the unprecedented ideas and efforts of an individual will win through, contrary to the accepted views of everyone else.

Hopefully the greatest ideas won’t get lost amidst public opinion.

[GrahamHill]

Hi CP

An interesting point. But do lone-wolf innovators really have a good track record of producing winning innovations?

Increased innovation is a must, particularly in these recessionary times, but not just any old innovation. A paper by Lehmann et al looked at the origin of almost 200 new products and how successful they were.

The least successful origins for new products were 'trend spotting' and 'mental innovations' (often by marketing) with three failures for every success. This isn't far from the 80% failure rate often quoted for new products.

Better was 'need spotting' with twice as many successes as failures and 'market research' with four times as many. These are similar to the traditional needs-based approaches to innovation.

Best of all were 'solutions spotting' with seven times as many success as failures and 'taking advantage of events' with a whopping thirteen times as many. These are similar to the customer-driven approach to innovation used by successful entrpreneurial organisations.

Customer-driven innovation looks much deeper at what customers are trying to do and how to help them achieve their goals. And helps organisations have a much higher success rate with their innovations too.

Graham Hill

Lehmann et al
The Idea Itself and the Circumstances of its Emergence as Predictors of New Product Success
http://www1.gsb.columbia.edu/mygsb/faculty/research/pubfiles/523/523.pdf