Six Barriers to Effective Innovation

This post was excerpted with permission from "Innovation Basics for Community Banks and Credit Unions."

Innovation isn’t easy, no matter how you define it. It takes time, costs money, and requires attention from very busy people. And sometimes, we seem to be running as fast as we can just to stay in the same spot. Here are a few things that stand in the way, and some general approaches to addressing them.

Other priorities. We all are familiar with the tyranny of the urgent. By its nature, innovation is a strategic activity. When day-to-day pressures dominate, long-term strategies fall by the wayside. Solution: Ensure that at least one senior leader has innovation as their highest priority. This should be the main activity on which their performance is measured.

Ill-defined needs. We know we need to innovate. But we don't know what problems to start with. Solution: Create a prioritized list of innovation opportunities. Each should have well-defined problem statement, desired outcomes, and measures for success.

Fintech companies that don’t understand us. Technology vendors may have a good solution for our stated problem. But they might not know anything about financial services. Often they don't know how  credit unions work. And some have no clue about risk management. Solution: Set expectations early. Be patient, but be insistent that they learn. Or ask them to add a banking-knowledgeable member to their team.

Being sure a new idea will work. An idea may seem compelling, and yet there are so many unknowns. Will members behave as we expect? Will we get the intended improvements? What if we can't handle product volumes? Solution: Use tried-and-tested approaches for proofs of concept, which demonstrate that we’ll get the intended results. Plan for pilot implementations, which are controlled and limited production implementations. These can be closely monitored with minimal impact from failure.

Inability to integrate with our core banking system. We may have found a good, stable, functional solution. Now we have to ensure it will work with our existing core banking and mobile platforms. Core banking systems are typically closed, and heavily vendor controlled. Integration can be expensive or even impossible. Solution: Get an early take on what a solution’s integration points will be. This may mean bringing in your system integrator, or even your core banking or mobile vendor, early in the process. Start negotiating early to limit losses if the price tag is going to be too high. In the longer term, start considering a core and online/mobile strategy that demands openness from your vendors.

Resolving problems after production. Once we’ve overcome all the other barriers and implemented a solution, the challenges don’t stop. What happens if the solution goes down, or we find bugs? What if a regulation changes and we need to adjust the solution? What if the solution has introduced new fraud or data theft risks? Solution: Ensure that your third-party risk management strategy extends to all kinds of technology and service providers. Make sure that you have active vendor management in place. (Increasingly, your regulators require this anyway). This may be partly outsourced (though of course that introduces a new kind of third-party risk). Carry out an operational risk assessment before production roll-out. Make sure you understand and manage risks resulting from this new solution. I’m sure you’ll have other barriers to innovation--and ways to address them--in your list, and encourage your comments and input.

Graham Seel is founder and chief consultant at BankTech Consulting.