Why CUs Should Forget About Fintech

ORLANDO, Fla.–Forget about fintech. Ditch those “clichés” otherwise known as best practices. And realize what you strongly believe doesn’t apply to what you or your organization actually likely does. 

Do those things, and you’ll begin to understand what’s necessary to really innovate and grow, according to one authority on management and innovation.

Luke Williams, a professor with the NYU Stern School of Business and also CEO of Meta Idea Labs, told credit union and bank executives gathered at the BAI Beacon Conference here that an overarching challenge for all organizations and leaders when it comes to making decisions is “similarity bias,” or the tendency to seek out other people and decision-making processes that are similar to themselves and to what they have already done. 

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It’s a bias, he argued, that manifests itself in a number of ways across the enterprise.

It Seems Obvious, But…

While innovation dominates nearly every discussion or presentation around adapting to the future, Williams acknowledged, “I don’t take it for granted that anyone wantsnew ideas or wantsto innovate anything. But I do take it for granted that everyone in this room has a vested interest in growth and value in our career and life.”
The obvious reason, he said, is that it’s innovation that drives growth. Yet as obvious as that may be, Williams said it’s really only recently that students of management theory have come to have a deeper understanding of why innovation doesn’t naturally occur.

“It’s about scarcity,” he explained. “Everything in the physical world is subject to diminishing returns the more it is consumed. But the idea of a thing is not. It inspires other ideas, which in turn inspires other ideas. There is a difference between the world of things and ideas. The world of things is the world of cooking, of execution. The world of ideas is the world of recipes. Your growth prospects for the future are going to come from better recipes, not more cooking.”

Reading This on a Blackberry?

As an example, Williams cited the “old recipe” of what were previously known as cellphones. Just 10 years ago 64% of that market was owned by Motorola, Nokia and Research in Motion (Blackberry). Those companies have now either exited the market or are fringe players. 

The new recipe is being created by Apple and Samsung, which now dominate the market.  

“Every business is a technology business now. It’s just the baseline,” Williams told the meeting. “Now, the traditional disruptors are turning their attention to traditionally stagnant industries, such as those with high regulatory schemes.  If the ideas in your industry are stagnant, you are in an incredibly dangerous position. We all know this conceptually, but we never think it applies to us.”

Williams urged financial executives to think of ideas as patterns of interconnected resources. Like letters in an alphabet that can be rearranged to create new worlds, he said innovation is all about putting resources together in different ways, such as the people and things a credit union or bank already have available. 

“In financial services, we often think we have very constrained resources, and it’s often used as an excuse for not thinking differently or innovating,” Williams said. “But this isn’t about the need to create any new resources. It’s about your willingness to take the resources you already have and seek a new way to connect those resources.  The number of connections between the resources you already have in your organization is infinite. It’s subject to increasing returns. The more you use an idea, the stronger it becomes.”

A Time-Honored Worst Practice

He said most financial institutions are mistaken in believing they are operating with the best model, as it has been proven over time and mustbe the best. 

“But it is highly unlikely that it’s the best arrangement of resources in 2019, because the sequence of time has had an effect,” he said.  “The decisions you are making on a day-to-day basis are based on decisions and ideas that were conceived in a different age and a different context. Most were probably established at least five years ago, and maybe 20 or even more than a hundred years ago in banking.”

What must be considered too, argued Williams, is that once an idea or option is thought of or imagined, it cannot be “unthought” of.

“It may not be right at this time, but in three years or five years, if you’ve thought of the idea or option today, you’ll be in a much better position to capitalize on those resources,” he said. “That’s the advantage of start-ups. You just have to be willing to challenge the underlying ideas. How many decisions are we making on a day-to-day basis based on decisions made by someone else in a different age and context. What you usually find is they are there for historical continuity.”

Forget About Fintech

Williams said every industry has become obsessed with “tech.” In the insurance industry, there is “insurancetech.” In Education, “edtech,” he said. In financial institutions, of course, there is much discussion and worry around fintech.

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Luke Williams speaking to BAI meeting.

“I know there is a lot of talk about fintech. It leads us to believe our future is all about thinking about technology,” he said. “Your future success will not be driven by your technology capabilities. It’s going to be driven by your conceptual capabilities. This is about mindset. The boundaries in financial services constitute your conceptual mindset. Everyone in your organization is compensated and rewarded for keeping the current structure going. Anyone telling you you should replace everything you do with something new is completely wrong.”

In order to grow on a stable basis, said Williams, a financial institution needs to be building ideas and capabilities for its future, even if (or especially if) those are inconsistent or in conflict with what is currently making the bank or credit union successful. 

“If you think this is about just the people in product development, it’s not. This is for every function, for HR, for the finance department,” Williams said. “You need a balancing loop to your continuity loop. In innovation, we refer to this balancing loop as introducing deliberate discontinuity. The most important part is where they meet in the middle.”

Five Steps

The five steps for introducing that discontinuity, according to Williams, are:

  • Craft a disruptive hypothesis
  • Define a disruptive market opportunity
  • Generate several disruptive ideas
  • Shape a disruptive solutions
  • Make a disruptive pitch

“The process starts with learning to kick against the status quo,” said Williams. “We need to get into the business of making unreasonable provocations. Give yourself permission to be wrong. If you have an idea you can implement tomorrow, that’s incremental, and it means everyone else will be doing it.”

Where to Begin? With Clichés

Where does the process begin? According to Williams, an organization must start with all the cliché ideas to which it clings. 

“Cliché ideas are the widespread beliefs that govern the way people think about and do business in a particular space. The other words for cliché ideas is best practices,” he said.

Williams said the three filters to be used in identifying such cliché ideas are:

  • What are the interaction clichés? “What are the steps a consumer goes through to experience your product? Whenever you use jargon or acronyms, it means you are perpetuating these clichés. What Interaction clichés can you deny?”
  • What are the product clichés? “What are the attributes we’re always trying to convince others of? What cliché features to you always include? You’ve got to challenge the natural assumptions you are making, invert them, and explore the opposite direction.”
  • What are the price clichés? “The biggest barrier I see to organizations like the banking industry is they are always trying to innovate around their current strengths? What can you scale? What’s free that could be made expensive, and what’s expensive that could be made free?”

“There has never been a more exciting time to think about moving away from only pursuing high probability ideas to pursuing low probability ideas, from obsession with ROI to obsession with return on learning,” Williams said.

Section: Standard
Word Count: 1639
Copyright Holder: CUToday.info
Copyright Year: 2018
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URL: http://www.cutoday.info/THE-feature/Why-CUs-Should-Forget-About-Fintech