Innovating for Growth

When it comes to banking, innovation may not be as compelling a priority as managing cost, risk or compliance. But it is definitely on the strategic agenda given its potential in driving differentiation, customer acquisition and growth. No surprise then that 73% of the global banks featured in the 4th edition of the EFMA Infosys Innovation in Retail Banking study had increased innovation investments in 2012 compared to 2011.

It is possible to extrapolate a broad innovation structure from the practices featured in the study. Of course, the final strategy has to account for the competitive and regulatory dynamics at play for individual banks. But here are some central components of most successful strategic innovation efforts.     

Define: Action without intent cannot be strategic. The most innovative banks start by defining objectives and priorities of the exercise. To further hone focus, the best innovators also establish a structure that maps investments to priorities.  

Dedicate: While the innovation agenda should be part of organizational DNA, it would still need resources to see it through. From the perspective of ensuring execution and governance, it is ideal for the organization to have a dedicated innovation department. Should that not be possible, then the organization must at least assign responsibility and accountability for critical initiatives like idea generation, open innovation and metrics.  

Decentralize: Bureaucracies create procedures, not outcomes, and generally do not breed innovation. It is therefore best to decentralize the idea generation network across employees, customers, partners and other interest groups that constitute the business of banking.

Design: The customer, rather than cool technology or corporate fancy, is central to the innovation design process. The design has to be driven by insights into customer need and experience. With the help of mobile and social technologies, organizations can involve customers in the product co-creation journey starting from the design phase itself.

Deploy: Innovation is a journey not a destination and step-change innovations are fine. If core IT system integration is a challenge keep implementing meaningful improvements around it until deeper integration can be achieved. But it is essential that every improvement be driven by an intelligent prototyping, testing and development process that acknowledges the bigger picture.        

Innovation themes may vary by bank, region or country, but the trend is global nevertheless. For banks looking to leverage the long-term potential of innovation it is essential to start now. With a strategy and a structure.