By Kathy Garner
As an efficiency-minded organization, Catalyst Corporate gives a lot of consideration to the notion of core competencies – areas of strength housing hard-won knowledge and expertise that position us as an industry-leading provider in those categories.
Traditionally, our core competencies have included liquidity, settlement, payments and balance sheet management. Ignoring distractions in favor of focusing on these core competencies allows Catalyst Corporate to channel its resources into optimizing performance while keeping costs to credit unions low. This strategy has paid off, as Catalyst Corporate has built over $45 million in retained earnings in less than five years and is well-capitalized with an 8.06% leverage ratio – all the while rating a very high 70-point Net Promoter Score from our members.
So where does innovation fit in?
Philosophical questions arise when we talk about an innovation focus: Is an investment of time and money into innovation a distraction from the core competencies that have made us successful? Is it ever a good time to review core competencies for relevance…or should an organization simply wind-down as their offerings lose currency? Why now?
Innovation as a process can never be considered a distraction; it “fits” into the very fabric of the credit union mission. Cooperative finance was a groundbreaking concept in the early days – a true innovation designed to improve the lives of marginalized citizens who became credit unions’ first member-owners.
Further innovation has populated the credit union landscape in the ensuing decades, though a fair amount of energy also has gone into trying to keep up with our for-profit counterparts. Now we, along with financial institutions everywhere, are at risk of being displaced by a new breed of innovators: fintech.
Every service offered by mainstream banks is duplicated currently in the fintech universe by one of the nearly five million fintech startups operating in the United States today – companies that don’t have the same regulatory framework as the institutions they are displacing. These fintech firms are performing tasks faster, cheaper and with seemingly no limitations on convenience. And while we can assume that lawmakers and regulators will slow them down eventually, they aren’t going anywhere anytime soon. Financial start-up investment in the U.S. exploded from $1 billion in 2010 to more than $12 billion invested in 2014, and was around $14 billion in 2015.
For credit unions to compete, mindful innovation can help them relinquish traditional thinking and embrace the changing needs – and wants – of consumers. And there is no time better than right now.
Creating an Innovation Competency
Though ideas can be spontaneous, innovation is not. Organizations seeking to harness its power must take a methodical, disciplined approach to incorporating innovation into their culture. Ultimately, innovation must become a core competency in the same way that all other core competencies were developed – years of hard work, commitment to excellence, and continuous attention.
Catalyst Corporate first began to explore innovation as a discipline in 2013. We realized our innovation formula was lacking some critical components: 1) a methodology that could be incorporated into our business practices 2) dedicated resources and 3) an innovative culture. Setting our sites on an innovation competency, we set out to achieve our goals by rectifying these limitations.
Methodology: In 2014 we established an internal Catalyst Innovation Group modeled after the Filene Research Institute’s i3 (Ideas, Innovation, Implementation) program. Filene taught select team members their human-centered innovation methodology, which they pursued in a structured process over a six-month period. Four teams pitched ideas, and in early 2015 Catalyst Corporate launched the first new service, Checking with Benefits, resulting from this program. At present, three more services are undergoing review, and we are on the cusp of kicking of the 2016 innovation cycle in April.
Resources: Each year, as our skills expand, we take a step closer to running our innovation program in-house. In 2016, Catalyst Corporate established a new Vice President of Innovation Strategy position to lead that effort, provide global support to the development of an innovation competency, and gather insights and opportunities for the future.
Culture: Catalyst Corporate’s innovation program provides a key channel for achieving our innovation culture goal. As new participants are recruited to work with program veterans each year, we believe the principles guiding the innovation methodology will seep into the mindset of individuals throughout the company until this way of thinking permeates the culture. Ongoing innovation activity coupled with periodic “wins” as new services come to fruition will go a long way toward sustaining the culture over time.
Plans For 2016
Our plans for 2016 include retooling our approach for mining the great depths of insight present in the bright minds of all Catalyst Corporate team members, as well as from staff at member credit unions.
Not every credit union will approach innovation the same way – nor should they. However, I believe that all credit unions should strive to add innovation to their list of core competencies, and that doing so will require the formalization of a methodology, dedication of resources and intentional development of a new cultural mindset. Combined with an intrinsic mission to serve the interest of members and a strategic affinity for collaboration, credit unions are well-positioned to leverage the power of this discipline.
Kathy Garner is CEO of Catalyst Corporate. For info: www.catalystcorp.org.