Many modern-day businesses declare innovation as a goal. Yet few, if any, measure and track innovation in their organizations. Most boards not only don’t track innovation, they frequently misunderstand what it means in today’s business environment. Some less-informed boards even fear innovation because they think it means taking risks that could harm members.
Is it time for your board to enhance its understanding of innovation and how a board might drive innovation in your credit union?
The business literature typically refers to innovation as a “big leap” in products or approaches to the marketplace—a leap significantly different than what preceded it. Innovation is different from simple creativity in that creativity may look at solutions from a novel angle, yet only achieve small iterative improvements on a process or idea. Innovation, instead, tends to provide leaps in significantly different approaches and improvements that create measurable value for the business and its customers.
Radical, Disruptive, and Routine Innovation
“Radical” innovation affects the foundation of an industry. Most of today’s radical innovation is going on in the pharmaceutical/healthcare marketplace. Personalized medicine (molecular biology-based genetic treatments), ingestible cameras and sensors, telemedicine, and single-organ hospitals are all game-changers in the traditional healthcare marketplace.
Apple, Amazon, and Google are all known for large-scale innovation, frequently referred to as “disruptive” innovation because it breaks up prevailing business models. Tesla Motors is currently disrupting the automobile and industrial battery marketplace.
Other than the Tesla disruptive innovation, most of the major auto manufacturers are dealing in “routine” innovation—trying to speed up the use of driver technology interfaces in their cars, use lighter automotive materials, and build longer-lasting engines and parts.
It’s most likely in the “routine” innovation category that most credit unions will find their innovation mojo. Most credit unions are not in the financial position to pilot lots of big ideas or changes. However, every credit union can instill a culture that supports routine innovation and sometimes achieves disruptive innovation.
Enter the CU Board
A board of directors has responsibility for defining the values and characteristics of the organizational culture it expects the credit union to demonstrate. Ethics and leadership development are common values, as are good community citizenship and member-centricity.
A board and CEO who want the organization to be more innovative must ensure that this gets stated among the desired characteristics of the organizational culture—the way the organization goes about its business. Setting this in motion involves developing an “innovation strategy,” a coherent set of principles and processes the board expects the CEO to execute within the organization.
As part of their business model, boards and CEOs must set goals to become more literate on how businesses and especially credit unions innovate. There are many conferences and publications from which to learn (Fast Company, TED, Finovate).
In the credit union movement, the Filene Research Institute’s mission is to facilitate collaborative innovation within credit unions. Its i3 program is a longstanding example of how the organization involves cohorts of credit union managers in innovative thinking. For its Strategic Innovation Institute I next being offered to credit union executives in September, CUES has partnered with Stanford University to offer high-level executive learning about innovation.
There is no reason an executive team or board should be ignorant of how innovation can help the credit union’s performance and how it can be executed. Once everyone is more literate as to how innovation may benefit the credit union and how other organizations go about innovation, boards can translate that knowledge to setting target areas for innovation that can be tracked by the board. This entire process should be a CEO-board partnership in learning and setting goals.
So how does a board know if “innovation” is actually occurring in the credit union? First, innovation does not flow from a spigot with predictable pace like a faucet—that is, unless you’re built on an innovative platform like Amazon, Apple and Google. Rather, innovation occurs in observable and measurable events that can be reported to a board.
Innovation is observable in that the board can see how an innovative approach is different from the previous approach or fills a vacuum where no approach existed. And innovation is measurable in that CEOs and management teams can regularly report out innovative achievement that makes sense relative to the strategic goals.
Innovation efforts frequently result in pilots that don’t pan out. Innovation can also create big changes that require budgetary and investment decisions. A board must be sensitive to both. I recently met with a CEO who has five to 10 innovation projects going on at any given moment. The CU also frequently kills projects for lack of promise. All of this is reported to the board in an “innovation dashboard.”
How many innovation pilots occurred at your CU over the last three years? Any in the last year? How many innovation efforts were implemented? Innovations don’t generate like rabbits, but once a culture does start innovating, it is predictable that it won’t simply be one innovation here or there over a five year period.
Because innovative efforts are often targeted to areas of the credit union business model where members and the financial health of the organization will benefit, pre- and post-innovation metrics can track impact. For enhancement of a business model, a board can track cost savings, increased revenue, member adoption, and new member acquisition. For process innovation, a board can track measures of increased process speed, quality improvement, cost reduction, and member satisfaction.
Take an Innovative Step
A board should expect its CEO to discuss innovation and how it applies to the credit union. It may take a year or two of study for a board to determine what it wishes its innovation strategy to be and for the executive team to fully learn how to target and execute innovative efforts. Larger credit unions can afford more aggressive innovation strategies than can a $250 million credit union. However, innovation can be scaled for any credit union if you study and learn about what it can mean to you.
Some examples of credit union innovation that I like can be found in the article “7 Innovations for Credit Unions.”
Les Wallace, Ph.D., the 9Minute Mentor, is president of Signature Resources Inc. He is co-author of A Legacy of 21st Century Leadership and author of Principles of 21st Century Governance and a frequent speaker and consultant on leadership and governance.