The Killer Tweak

I’ve been trying to work an idea I’ve had for a while now into a blog post, and James Gardner’s post When Small Innovations Are Good finally gave me the launching pad. According to James, not all innovations must be game-changing and industry-disruptive:

Do lots of incremental innovation, and you have a large portfolio of returns. Do lots of ground breaking, and you may have a hit product/service/process which pays off big time, but the probability is that you won’t.”

I couldn’t agree more.

It seems, however, like too many financial firms are looking for a killer app — whether it’s to drive online banking adoption higher (see my comments on why PFM will not accomplish this), spur the use of online bill pay, or create that one great product or service that will make customers fall in love with them, give them all their money, and never leave.

What might they be missing? The Killer Tweak. It’s that one little service enhancement, one simple application functionality addition, one new product feature, etc. that just makes a disproportionate impact on the customer experience by adding convenience, improving quality, or reducing cycle time.

Based on his comments, I’m not sure that James would consider a killer tweak an “innovation” because it’s too close to “business as usual.”

Focusing on that distinction is potentially harmful. It’s great that there are a growing number of firms creating teams focused on innovation. But I can’t help but wonder if, by focusing on innovation versus optimization (or process improvement), opportunities to find the killer tweak are being overlooked.

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Credit Unions’ Competitive Secret: Innovation?

A Boston Consulting Group exec was recently quoted in American Banker as saying that financial services firms could do even better if they raised the bar on innovation — a view shared by Matt at The Boulevard to Retirement.

What do consumers think? According to Forrester’s research, not a lot. Just 18% of the consumers they surveyed said they would use the word innovative to describe their bank. Investment firms scored a little higher at 26%.

Which banks had the highest percentage of customers considering them to be innovative?

In first was SunTrust with 27%, followed by Wachovia with 24%, and credit unions at 23% (note: Forrester doesn’t ask survey respondents to identify the specific CU they do business with, so responses are attributed to credit unions in the aggregate).

And in the ranking of investment firms whose customers consider them to be innovative, CUs again came in third, behind Ameriprise and Charles Schwab.

My take: These findings should make some CUs reconsider their marketing messages. By focusing their marketing on the service aspects of CUs (which, according to Forrester, CUs already score very highly on), their marketing messages are preaching to the choir — and doing little to convert the heathen. The Forrester data raises two marketing considerations.

First, it raises the question of how well CUs tout their (perceived) innovations and how aware bank customers are of what CUs are doing. I don’t mean to downplay CUs’ efforts by qualifying them as “perceived” because there are plenty of examples — from using biodegradable corn plastic for membership cards for new members at one CU to interest-free energy loans at another. But I’ve found out about these efforts on sites like CUES and Filene Institute — which I doubt are read by consumers looking for new financial providers.

Second, it raises the question of how well CUs really understand why their members perceive them to be innovative in the first place.

I’d bet that, with some consumers, it’s a halo effect. A member has a strong emotional connection to her CU and gives it high marks across the board — even if she can’t identify anything she would consider to be innovative.

But for other members, something about their CU is causing them to consider their CU innovative. And my hunch is that, in many cases, it’s not some big, earth-shattering, disruptive innovation, but something that CU execs wouldn’t have thought their members would even consider to be innovative. (For a good discussion of different types of innovation, go here).

CU execs need to better understand their members’ perceptions on CU innovation. Doing so could give them a much-needed opportunity to break away from the “this amp goes to eleven” marketing strategy many CUs employ today. (It’s a reference to a line in the movie “Spinal Tap”).

Here’s what I mean: Many CUs say that they “compete on service”. But when that strategy doesn’t deliver the market growth and profitability they’re looking for, what do they do? Change the strategy? No. They “turn the amp up to 11” and scream even louder about their superior service.

Successful marketing is about exploring — and exploiting — the opportunities hidden in the nooks and crannies of the marketplace. This innovation perception could be one of those opportunities for credit unions.

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The Challenges To Raising The Bar On Banking Innovation

The title of a recent American Banker article claims that financial firms are “behind in innovation.” It quotes James P. Andrew of Boston Consulting Group, who said the financial services industry…

…could do even better if it raised the bar on innovation. Financial services execs shouldn’t take their foot off the gas when it comes to innovation; they should accelerate.”

Do you know of any financial firms that are consciously saying “We need to slow down here — we’re innovating way too much, way too fast”? I don’t. The problem isn’t that financial firms are decelerating, or even considering slowing down their rate of innovation. The issue is threefold:

  1. Defining innovation
  2. Dealing with politics
  3. Establishing business priorities

The BCG article that the AB article cites found that “only 53%” of financial services respondents said innovation is a priority (versus 67% of those from other industries). What the article didn’t say, though (and I can’t find it on BCG’s Web site), is how did the study define “innovation”?

My hunch is that many survey respondents equated innovation with disruptive, strategic change. And — if I’m right — therein lies the problem: Confusing “big I” innovation (large scale, disruptive innovations) with “little I” innovation (feature or functionality improvements).

Introducing revolutionary new products and services is rare to the world of retail financial services. But feature and function improvements — or innovations — are introduced all the time. It would be interesting to know if many within the financial services industry consider this “innovation”.

The second innovation challenge that banks face is political.

According to AB, the BCG study found that “part of the problem in financial services is lack of support among top executives.” James Gardner, who recently joined Lloyds TSB to become Head of Innovation and Research, understands this well. As he wrote on his blog, some members of his firm are hesitant about the results his group will be able to achieve because

they wonder how we will ever get the support of the business to fund any of our initiatives, given that budgets are fixed, and other business-as-usual projects always take precedence.”

Addressing the first issue (definition) and overcoming the second (politics) can only be accomplished by taking care of the third challenge: Strategy.

James said in his blog that Lloyds TSB will go from 1500 ideas to 64 business cases, to 30 pilots, of which 7 or 8 will “see the market and/or go live”. What he doesn’t mention (and I don’t want to imply that he doesn’t have this nailed down) is what the prioritization process looks like. Lloyds might have this down to a science — if it does, it’s in a small, elite group of financial firms.

This is the biggest challenge financial firms (and banks in particular) have when it comes to innovation. They’re not sure where to focus. Capital One recently introduced a new product innovation. Should other large firms follow? Or would service or process innovations better suit their strategies?

Who knows, because few of them have clear, well articulated, well understood strategies to guide their innovation decisions.

No one I know of in the financial services world is taking their “foot off the gas pedal.” But there are some challenges that must be addressed before the innovation engine can be revved up.

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Google’s Faulty IT Innovation Logic

Google’s general manager of enterprise business, Dave Girouard recently told the Mass Technology Leadership Council that:

“the insane complexity of technology is leading companies to spend 75% to 80% of IT budgets simply maintaining the systems they have already.”

And what should they do instead, Mr. Girouard? Simply ignore — or better yet, throw away — these applications?

Mr. Girouard’s comment reflects a naive understanding of the ROI of IT investments. Smart firms build ongoing maintenance and enhancment expenses into their ROI projections. These ongoing M&E costs create new functionality that enables the firm to continue to reap the projected benefits of the app.

Discontinuing these costs in order to “innovate” is foolish and naive.

The Unseen Barrier To Marketing Innovation

Following my post on sense-and-respond marketing, I exchanged emails with Steve Haeckel, who coined the term “sense-and-respond” as a business concept in the mid-80s.

One comment from Steve sheds light on why many innovation initiatives (which includes building a sense-and-respond marketing capability) are doomed to under-deliver, if not fail outright:

The legacy managerial framework systematically discourages front line empowerment in general, and innovation and improvisational responses in particular, because these are disruptive, inefficient, and contradictory to top-down authority hierarchies.

Changing the managerial framework from one that discourages, to one that fosters, improvisation and accountability for outcomes is pre-requisite to sustainable adaptability. As soon as executive attention turns to other priorities, the management system begins to corrode sense-and-respond behavior…which is why sustaining empowerment, simple rules, teams, and customer-back behavior has proven so difficult, and is so rare.”

Short-term focus and lack of resources are often cited as the top barriers to innovation. From Steve’s comment, I can’t help but think that these issues pale in comparison to a bigger barrier to marketing innovation: Management itself.

Check out Steve’s web site at

p.s. By “customer-back”, Steve is referring to “establishing a business’ purpose, designing its business model, and driving its operations from the customer benefit back….rather than from the firm’s internal objectives forward (e.g., revenue, profit, cycle time, customer sat metrics, margins, ROI).”


Innovations In Bank Marketing


Here’s how [I imagine] this came about. Overheard at the Management Committee meeting:

CEO: We need to increase deposits. Any ideas?

Marketing guy: We could give away iPods.

Finance guy: Too expensive.

Retail banking guy: My brother-in-law has a chicken farm. We could give those away.

IT guy [mumbling about an email he read on the Blackberry he was playing with under the table]: Hmm….that’s a good idea.

CEO: I guess it’s a done deal then. Let’s move on. What’s next on the agenda?

Disclaimer: The above conversation is fictional. Any resemblance to real bankers is purely coincidence.

p.s. What do you think they were doing with those chickens that would warrant a service charge in the first place?