Five Ways Financial Institutions Can Foster Innovation

The following is a guest post from RJ Sherman, VP of Innovation, Citizens Bank.

The word innovation is often thrown around casually to describe anything new that an organization is doing. However, for an organization to be truly innovative, it must adopt an “innovation mindset.”

Broadly, this means the organization needs to: take an empathetic approach to customer research to fully understand the customer’s needs; think longer term to identify potential disruptors that are further out on the horizon; and “test and learn, fast and cheap” by quickly exploring new ideas in a calculated manner to understand their value.

Innovation is more than simply creating new products or exploring emerging technologies. Innovation means acting on ideas that accelerate growth and challenge the status quo.

Here are five specific ways an organization can foster innovation:

Focus on the customer experience

Innovation starts with a deep and nuanced understanding of the customer journey and the associated pain points. Innovating for the sake of innovation doesn’t work – instead, use your customer’s pain points as a ‘North Star’ and design a compelling offering around them. Don’t be afraid to iterate in partnership with your customers (the solution is for them, after all). Despite the pandemic, there are still many ways to collaborate and co-create with customers, it just requires us to be more creative with how we conduct research.

Take a balanced approach to building the innovation portfolio

A balanced innovation portfolio is made up of opportunities from all areas of the business, including internal (organization-facing) and external (customer-facing) opportunities. This is critical as it signals to colleagues that all aspects of the business play a role in positioning the organization to win in the future. Continuously monitor your balance and partner with executive leaders across the organization to identify and explore strategically aligned opportunities (especially in underrepresented business areas).

Partner with fintechs when and where appropriate

While fintechs can pose a threat to financial incumbents, there is a significant opportunity for banks and traditional financial institutions to join forces to better serve the customer. Fintechs have a significant advantage when it comes to designing great customer experiences, but lack the customer relationships, scale, expertise, or risk management muscle needed to operate as broad-based financial services institutions. Fintechs can help power and accelerate a smart, data-enabled strategy, and offer a quick and relatively low-risk way to support business strategies.

Create the appropriate organizational mechanisms to explore early stage ideas

Citizens is investing in innovation using an Innovation Fund as part of its annual Tapping Our Potential (TOP) program. The fund operates like an internal venture capital firm, placing small-scale investments in colleague ideas. It is a great way to generate a grassroots movement around innovation and invest in the ideas of colleagues.

Encourage idea generation from everyone in the enterprise

When someone asks me “how big is the innovation team at Citizens?” I say 18,000 colleagues because every person at our organization has a role to play in innovation. Encouraging colleagues to participate in innovation begins at the top and, if done successfully, colleagues will buy-in and it will be embedded into everything you do. That way, when it comes to evaluating new opportunities or reimagining traditional business lines, innovation will always have a seat at the table.

To sum up, there isn’t a single “one size fits all” innovation model that will work for every financial institution to bring new ideas to life. Instead, leaders must create a bespoke solution for their organization, establishing mechanisms to leverage the cumulative power of their colleagues to identify and solve for the most pressing customer problems.

Photo by ThisIsEngineering from Pexels