Innovation is BS

You and Ron Shevlin [could] did?accuse me of being the spokesperson/fanboy/poster child of bank innovation. We [talk] preach?at conferences, graduate schools of banking and in countless board rooms. We’ve worked with over 150 institutions to develop their innovation capacity and I have the privilege of leading close 70 of the most progressive, dare I say innovative, banks in a consortium reinventing banking. I’d like to think we’re making a dent in the world but then I read things like the headline from Finextra: “In recent poll by Finastra, 85% of polled bank executives intend to pursue a Banking as a Service strategy in the next 18 months.”

I only slightly doubt the accuracy of the poll. Part of me thinks more than 15% of FI’s still view fintech partnerships?as dangerous. The other part of me reflects on the number of times I’m approached after giving a talk on disruption and a banking/CU executive comes up to me after and whispers they have “a secret strategy… fintech.”

Innovation as a strategy is tossed about like rice at a wedding, bread at the duck pond or feed at a petting zoo (more on that in a minute); pick your metaphor. Innovation is not a winning strategy. In fact, innovation isn’t a strategy. Innovation is table stakes. What’s wrong with innovation?

Innovation is a means not an end. Do you know the end?

Getting into BaaS or partnering with fintechs may be a great idea for your institution. Or not. It all depends on what you’re trying to accomplish and this is where things go awry. Regulatory exams conditioned leadership teams to think of strategic planning as what numbers/ratios should look like in the future. Those are targets, not a strategy. Strategy, according to Michael Porter, is what you choose to do (and not do) that creates a unique and sustainable competitive advantage (that is my?21 word summary of Competitive Strategy which you should definitely read). If 85% of you are doing it (checks his notes), it is not unique. BaaS needs to be put into the context of the bigger vision you are trying to accomplish and why a fintech partner should choose you because of the unique attributes you bring to the table. Lower price and looser regulatory oversight are not unique competitive advantages. And don’t get me started that your competitive advantage is your relationship with your customers (like 9 of 10 other banks I talk to).??

What we’ve got here is a failure to [innovate] (apologies to Cool Hand Luke)

When an executive tells me they are innovative, the conversation is about to take a hard right or a hard left. I can see my teammate Emmett lean back in expectation, a GIF at the ready for the team Slack. Let me paraphrase the CEO of one of our founders: I hate when my team sends me to accept an award for being innovative. I show up and I have to listen to other CEOs prattle on about how innovative they are and when I ask them what they are doing that is so innovative, the answers are things like CRM or digital account opening.

I’d like to say he’s wrong, but our experiences validate his statement. Too often, the bar for “innovation” is replicating what‘s?rapidly on the path to tablestakes. Innovation doesn’t mean keeping up in the digital arms race. That’s necessary, but not sufficient. Innovation is more than digitizing existing (broken) processes. Sadly, one of our favorite phrases, “putting digital lipstick on the the analog pig,” is aging far too well. Another one of our catch phrases that has only grown in popularity is the “Fintech petting zoo.” Unfortunately the zoo is getting d@mn crowded. Showing up at events and taking meetings with fintechs with no idea how they help you solve real strategic problems and path to true partnership (or vendor relationship if that is what it will be) is like the Tinder Swindler. Sure you feel good?and look popular but your chances of finding a real match are about the same as appearing on the Bachelor/Bachelorette.

The courage to disrupt

True innovation is an act of courage, or as I tell my little one: being brave is doing the right thing even when you are a little bit afraid. If your innovation strategy doesn’t make you a little bit afraid, you are aren’t doing it right. Innovation is about exploring the unknown. That should be scary. Innovation isn’t about extending what we know or doing what others are doing. This is why 99% of innovation is BS. Keeping up is not innovation. We often hear “we’re more of a fast follower.” JP is fond of saying: “You’re half right and it isn’t about being fast.”

Being a fast follower only works if you are 1. Following the right crowd (hint: it isn’t your peer group that investment bankers or investors tell you about) 2. You are actually fast (can’t be a multi month process to perform a simple test) and 3. You are real about it (being in a LP in a fund or going to other Zoo events are the start not the finish).

If you don’t want your innovation to be BS, get real about the tangible goals. Innovation isn’t a goal. What is your innovation going to change for customers? What will it do to make you stand out? If it keeps you up with 85%, it isn’t innovation. Not saying you shouldn’t do it, but don’t call it innovation.

That’s BS.