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Kelly Sheridan
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The Challenge of Defining Financial Services Innovation

Despite plans to increase innovation within financial services, many businesses struggle to define and manage it.

In a recent Celent webinar, senior analyst Mike Fitzgerald and independent consultant Mick Simonelli, who used to work for USAA, spoke about the importance of innovative growth within financial services. Their analysis indicated disconnect between company goals and innovation strategies throughout the sector, and between financial services and other industries.

A recent Celent study revealed an industry-wide effort to improve focus on innovation. Participants consisted of executives, senior management and mid-level employees from insurers, banks, credit unions, and other financial services companies. Seventy-nine percent of respondents claimed that innovation is a key focus for 2014, but Fitzgerald and Simonelli believe that major issues have to be resolved before true progress can be made.

[ More opinions from industry experts: What's so innovative about innovation? ]

A primary issue is establishing what innovation means, which can vary by company. “If you think you are being innovative, you need to put some tight definitions around it,” said Fitzgerald. If employees have conflicting perspectives on innovation it can cause disconnect and confusion within the company. In order to establish a singular meaning, businesses need to consider their culture, workforce and areas of expertise. All employees must agree on what innovation is before they can focus on their programs.

In defining innovation, Simonelli noted that financial services companies should strive to keep up with other industries. He – along with 51% of survey respondents – believes it is behind. Banks that think they are innovative because they have functioning mobile apps are not truly innovative, he said; nor are insurers who are content with merely having functional websites. “I am not happy with that,” he said. “It’s troubling to me that so many leaders are satisfied.”

Once it is defined, innovation must become a corporate priority. 65.5% of respondents claimed innovation is important to strategy; 28.2% said it was critical. Given these statistics, Simonelli believes that we won’t see positive results in the near future. The focus on innovation must increase. He cites Apple and Google as examples of companies where employees are given time to focus on innovative projects. These practices should become the norm, not the exception.

“If innovation is not critical then it competes with a lot of other priorities,” he said. “If it has to compete, innovation is always going to lose.”

Kelly Sheridan is an associate editor for Insurance & Technology. Prior to joining InformationWeek Financial Services, she was a staff writer for InformationWeek and InformationWeek Education. Kelly has also written for trade publication Promo Marketing and a number of ... View Full Bio

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KBurger
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KBurger,
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1/23/2014 | 7:13:35 PM
re: The Challenge of Defining Financial Services Innovation
I have spoken with innovation "experts" who have offered definitions of different kinds of innovation (disruptive, process, etc.), which as I noted before makes sense ... but also smacks of "everyone gets a prize" at grade school field day. Jon's point below is a valid one and we are seeing more people with an innovation officer role across FS. That said, if innovating is a corporate priority it should be everyone's job and "not having time" is not a valid excuse. As we know from our own jobs!
Kelly22
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Kelly22,
User Rank: Author
1/23/2014 | 7:01:27 PM
re: The Challenge of Defining Financial Services Innovation
Great point, I never thought of that. That sounds like an ideal starting point for businesses, as it solidifies the presence of innovation within the company.
Jonathan_Camhi
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Jonathan_Camhi,
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1/23/2014 | 5:38:02 PM
re: The Challenge of Defining Financial Services Innovation
Before there can be a definition of innovation in an organization, they have to really create a function for making and updating that definition. I'd imagine financial services executives don't have the time to do something so abstract as come up with a definition for innovation for their company. Creating an innovation officer and putting him/her in a place to define and engineer innovation is a first step.
Kelly22
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Kelly22,
User Rank: Author
1/23/2014 | 3:44:43 PM
re: The Challenge of Defining Financial Services Innovation
I think you're getting to the idea of what the moderators meant by creating unique company definitions for innovation. By evaluating their culture, workforce and goals (which would likely involve looking at other companies too), businesses can more easily create benchmarks they can each strive for in achieving innovation.
IvySchmerken
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IvySchmerken,
User Rank: Author
1/22/2014 | 8:01:03 PM
re: The Challenge of Defining Financial Services Innovation
Innovation suggests a new way of doing things. While it can be improving an existing process or doing it faster, I think of breaking the mold - such as Apple or Google as role models. Having a working mobile app or a web site is not innovative - it's a basic requirement today. The vagueness of the definition can make it hard to achieve. How can you achieve something if you can't define it? Maybe companies should create benchmarks to strive for.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
1/22/2014 | 5:37:53 PM
re: The Challenge of Defining Financial Services Innovation
Well there are kind of two levels to innovation: big disruptive innovation, which is very difficult to pull off for most FI's, and incremental innovation. Innovating in small chunks; almost more like process improvement. That can be a good place to start.
Kelly22
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Kelly22,
User Rank: Author
1/21/2014 | 8:45:16 PM
re: The Challenge of Defining Financial Services Innovation
Unfortunately the panelists didn't discuss any definitive characteristics that are essential to innovation. While I think it's good that insurers have the freedom to define innovation as it pertains to their companies, you're right that it makes its meaning vague. I do think that regardless of the business, company-wide engagement is a key factor in innovation. All employees should be involved in the innovative process to improve the chance of progress being made.
KBurger
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KBurger,
User Rank: Author
1/16/2014 | 6:16:49 PM
re: The Challenge of Defining Financial Services Innovation
This research & discussion touches on a few really interesting points. It's not surprising that innovation is more buzzword than reality at so many firms. Companies/execs like to talk about innovation (or customer service, environmental consciousness, collaboration or whatever the hot topic of the moment is), it's much harder to put it into practice AND sustain it. Mike's comments about how each company needs to define innovation suggests that innovation is not an absolute concept and could mean different things to different organizations. While that makes sense at one level (since not all organizations are alike in structure, mission, capapbilities, resources), doesn't that potentially devalue the concept -- essentially it could mean whatever an organization wants it to mean? Did they identify any "required" elements something must have to truly be innovative, versus improved or faster?
Nathan Golia
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Nathan Golia,
User Rank: Author
1/16/2014 | 6:03:05 PM
re: The Challenge of Defining Financial Services Innovation
Again we're seeing the meme that financial services companies must look outside their industry to be inspired from an innovation perspective. There are some really interesting entrants to the space, though, that are pushing FIs from within Gă÷ especially when it comes to usage-based insurance or mobile payments.
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