Banks deal with risk every day. Large organizations still struggle with building a culture of calculated risk when it comes to exploring new ideas and innovation. For banks to succeed, leaders have to build a culture which embraces innovation, partnership, agility and encourages the employees to be bold and take risks.
Working with fin-tech startups, I’ve realized that the innovation, partnership and risk taking models are ingrained in their DNA. Startups look to build a team which is motivated, working fearlessly towards a common goal; it’s a question of survival.
Banks are also keenly aware that they need to change. They are spending money upgrading their legacy systems and reconciling fragmented data architectures. They are doing this to better position themselves to best serve their customers across multi channels, as well as to respond to new and existing regulation. Banks have the capital to achieve this, but lack a collaboration framework and a sense of urgency. The answer lies in setting up a framework for innovation, collaboration and unbundling.
The marketplace is already starting to see some of the banks opening up to collaboration. (Read:R3 blockchain group adds 5 banks, brings in technology heavyweights).
In addition, banks are also facing a threat from non-financial companies that are leveraging the collaboration economy to unbundle the bank services and are willing to invest in faster agile fin-tech firms. The chart below shows how some of this unbundling is happening.
How do banks promote a culture of innovation, calculated risk taking and collaboration ?
- Be Bold – Provide a framework for internal teams to explore new ideas for success and take these ideas from concept to market. This is a cultural change and not a one time technology project.
- Build an agile collaboration ecosystem – Build a faster Idea2Market framework with the right risk metrics for external partnerships. The collaboration landscape could leverage partnerships with startups, venture capital firms, industry consortiums and academia.
- Offer your employees an engaging, continuous learning workplace – With the half life of digital skills reduced drastically, creating a learning organization and a culture to promote learning is important to attract and retain talent. The millennials – the workforce of tomorrow, rate learning as the most valued work benefit (Read: Kleiner Perkins Internet Trend 2015 report).
- Continuous leadership engagement –Senior level ongoing mandate for support is critical. Innovation is not a one time event but requires a continuous education and participation of senior leadership including the board.
- Develop Measurement Metrics – Innovation done without the right measurement metrics can spiral out of control and banks could be spending money chasing unicorns. A measurement framework is important, one which defines not only the what and how, but also is tied to the strategic vision.
Collaboration and Innovation are major drivers for the future of banks. A recent comment made by Bob Reynolds, Putnam CEO explains,
“”Some of the greatest advances in industry result from collaborative, creative thinking. One new idea can transform your business into an industry leader, and your business model can become a game-changer.” (Read: Risk Takers Move the World Forward. Do You ?)
Banks have an incredible opportunity to participate in the transformation of financial services and with a renewed sense of urgency, innovation, risk framework and collaboration they are well positioned to do so.