A wise man once said, “It’s not innovation while you are doing it, only once it’s worked. While you are mucking around with it, it’s called experimentation, inspiration, madness, not-doing-the-job-at-hand, perseverance or play.” A wise man … or my mother (I can’t quite remember), but the fact remains that it’s true.
By creating innovation departments across banks, we acknowledge that we want the outcome of the experimentation process. But ipso facto, we also acknowledge that we have lost the ability to naturally engage with the process of “mucking around with things”. There are good reasons for that. People don’t want you mucking around with their pension or life savings. So banking is serious. When certain activities bring in oodles of profit, the organisation develops urgency and focuses time and resources on those. So banking is busy, time is limited and precious. And innovation is all about making time during which you don’t take yourself seriously, so that you can learn new things and do new things. Innovation is also about coming up against more dead ends than solutions in the process.
That in itself is hard enough; hard to build, hard to sustain, hard to persuade people that not only is it work, but it’s the most important work they will ever do. It’s hard to protect and hard to measure. And it’s hard to measure because it’s not meant to be measured. But we are bankers and we measure things, so off we go and measure this too.
Measuring impact in banking
Over the years, I’ve had some success persuading stakeholders to measure things that are meaningful: the integrity of your process once you transition from waterfall to scrum, the constancy of your velocity once teams bed in, the speed with which decision makers get to yes or no as they become comfortable with new things coming at them. These metrics may actually tell you something about the stickiness of the change you’re affecting.
More often than not, however, the things that get measured either don’t mean much (number of ideas generated during design thinking exercise, number of employees visiting fintech stand in lobby during their lunch hour), or they mean doom.
The most popular way of measuring impact in banking has a dollar sign attached to it – money made, money saved. So most innovation ideas, most startup plays, most digital propositions try to devise metrics for themselves that fall within this discipline. But what do we actually mean when we talk about dollars? Here’s a quick pocket glossary to help you pick your audience if your entire value prop is around this theme:
- Efficiency. Essentially someone is making money along this value chain and you’ve found a way to stop that by replacing what these guys were doing with a nifty digital solution and lower price point. Nice. Just make sure you sell it to the people who will pocket the saving, not the people whose business you just killed. This one is for free, blockchain peeps.
- Speed. STP, APIs, manual intervention reduction, ‘real-time’ solutions otherwise known as your friend Bobby just got fired. As sanitised as the term ‘FTE-save’ may be, it’s not fooling anyone. It means jobs are on the line, usually belonging to the teams of the people you’re pitching to. These FTEs have names, families and favourite afternoon snacks. Or they represent the size of their boss’s kingdom. Either way, these people leaving isn’t necessarily a good thing.
- Transparency. The end of discreet recalls, the end of obfuscation, the end of your clients assuming you do some stuff that deserves the fee they’re paying you. Now they will know. And the speed and efficiency above means that what the machines you have just spent a fortune on are doing won’t look like it deserves the price point.
- “In line with regulatory trends.” Kiss your margins goodbye. The regulator in Europe is my favourite superhero. They have a vision and they’re pursuing it. Their vision entails putting customers first, leveraging the art of the recently possible and, for the first time, regulating not what’s being done but what should be done. Runways and extended roadmaps are granted, because the regulator realises current business models and legacy infrastructure can’t be changed overnight. But make no mistake: every piece of regulation coming out of Europe in recent years points in the same direction, that is reduced margins, transparency in pricing, product unbundling and simplicity. They don’t always get it 100% right, but they have a vision, they iterate and collaborate and do this innovation thing better than most banks, it seems.
So what’s left? The customer
The customer, that for years banks could afford to neglect or treat as an afterthought; because thousands of retail customers walking out would be a blip in the weekly MIS; because whole chunks of the economy – startups and SMEs – were routinely priced out due to size or youth; because the pain of putting them through a credit committee was more important than their business; because corners of the banking world were black box oligopolies, accepted as such for so long by customers with little choice. That customer. Individual, corporate or institutional. Often the banks themselves (as customers to each other). The customer the regulator is championing. The customer the innovator is championing. The customer at the heart of the digital era: the human user around which the digital experience rallies.
Innovation is all about your customer – keeping them, and giving them something they need and are happy to pay for. It’s about spending time (here’s your innovation exercise) working out what matters to them, where you fit into their lives and how you can make money giving them more of what they need, want and are happy to pay for.
Yet, to pitch a winning case premised on client delight, you have a tough journey ahead, because this isn’t vanilla share of wallet increase. This isn’t the harder (but familiar) lateral expansion into new segments or geographies. This is about the customer being at the heart of what you do. Not a nuisance. Not a credit line. Not a vague concept, but your life blood. That’s what your innovation effort is about and you can’t measure its success. Only your client can.
Image by Sergey Nivens, Shutterstock.com