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For some reason, the topic of innovation as a business practice popped up several times this past week.

Take, for example, two stories included elsewhere in this issue of Tech Topics. First, there is Gartner talking about "decision support processes," in which it says CIOs must realize that innovation needs to go well beyond the technology used to manage big data. They also will need to seek and embrace innovation in the way business problems are analyzed with big data. (See CHANGE MANAGEMENT.)  

Then there is Celent's report on how traditional bank branches inexorably will fall from favor because of customer preference for other channels, even as bank management remains slow to commit to the general consensus that fewer but more highly automated branches will be needed. In other words, the old paradigm of transactional branches is in need of an innovative approach to better meet the needs of today's customers. ( See BANK BRANCHES.)

Those stories are interesting enough in themselves, but other voices have come forth recently with a similar sentiment-namely, the use of innovation to further business goals.

Curiously, it seems that it's the people on the business side who get this, rather than the people on the IT side. A Forrester study finds that 90% of business decision makers in general, who are outside of company IT departments, earmark 21% or more of their unit's expenditures for technological uses. (In financial services companies this 90% rate jumps to 95%.) In addition, business decision-makers are 20-50% more likely to increase their spending on technology compared with IT decision-makers.

Forrester deduces from all this that "over time, the CIO's organization will be much less about hardware and servers and much more focused on external business partners and public cloud services."

A separate survey by Kovarus finds that only 28% of IT decision-makers prioritize their spending to provide innovative solutions for the business. The rest, it says, take a more traditional budget approach, focusing on fixing issues at hand and reducing expenses.

"Our research shows a clear divide between the needs of the business and the business' perceived capability of the IT department to satisfy those needs," says Andy Lewis, CIO of Kovarus.

So businesses presumably crave innovation and the competitive advantages it might promise. But there seems to be a catch. An Accenture study finds that, despite increased business investment in innovation, only 18% of executives believe their company's innovation efforts deliver a competitive advantage.

It looks at 519 companies in 12 industries, including banking, in France, the United Kingdom, and the United States. Of these, 93% of those same executives say long-term business success depends on innovative ideas put into practice, and 70% place innovation in their company's top five priorities.

Why the gap between expectations and results? The main reason, according to Accenture, is too much emphasis on product line extensions rather than big ideas.

"Many companies take a low-risk approach to innovation that can jeopardize results because they lack a prudent, disciplined approach for innovation risk management. It's a situation compounded for many by an inability to rapidly scale inventions," says Wouter Koetzier, managing director at Accenture. "However, the research suggests that those companies that have a formal, end-to-end management system to nurture, scale, and launch innovations tend to be more satisfied with their results as they achieve stronger outcomes."

A separate Gartner study makes the bold statement that companies ought to embrace failed innovative ideas-only do it faster while learning from them.

"Accepting higher project failure rates can help organizations become more efficient more quickly," Gartner says in its recent report. It even projects that the top leaders in project and portfolio management will see failure rates of 20-28% as the norm by 2016. This, it says, will help their organizations become more agile by embracing experimentation and enabling the declaration of success or failure earlier in a project's life.

Of course, it also recommends that such a "fail-forward-fast" approach include "stop-loss" criteria to determine when to accept failure and bring a project to an end.

This last qualification most likely offers a sigh of relief to bank leaders starting to worry that their lines of business might take off on pie-in-the-sky ideas that could potentially nose-dive, taking the institution with it.


There are guidelines out there on how to structure and manage innovation strategies. Infosys provides one in a white paper. Briefly, here is their framework:

 Use market studies and sampling to assess current capabilities, gauging customer satisfaction, retention, and advocacy, while benchmarking against those of competitors.

  Define the role of innovation in the long term and develop a road map for achieving its goals.

  Formulate strategies that are in sync with larger business goals throughout the organization, setting up guidelines and measures to ensure they are universally understood.

 Evaluate the cost of innovation versus expected economic benefit.

 Build a strategic team to implement the innovation portfolio; consider setting up incubators in which senior executives, middle management, and junior staff jointly can develop the big ideas.

  Mitigate risk by being prepared with an alternate plan or a roll-back mechanism in case the worst happens. Have an exit option.

   Use external consultants to bring clarity to innovative thinking. Alternatively, collaborate with third parties to generate and execute innovative ideas.

These points fairly well reinforce Accenture's basic advice regarding key elements of forming an innovation system:

   Have end-to-end processes that contribute to speed and flexibility.

   Provide unique, personalized customer experiences that can foster loyalty and enhance revenues.

   Apply risk management to help drive innovation with analytics, processes, and tools.

   Integrate the customer voice through the use of big data and social media.

 Focus on "frugal" innovation that can reduce complexity to shorten time to market, reduce the cost of innovation, and disrupt business models.

"The bottom line is that innovation can work better when a formal system exists to streamline processes, manage risks, and mine the data needed to generate new products, services, and business models to foster growth," says Adi Alon, managing director, Accenture.


Sources used in this article include:

Accenture Study: Innovation Efforts Falling Short Despite Increased Investment

Consumerization, Systems Of Engagement Driving Business Spend On Technology

Gartner Says Smart Organizations Will Embrace Fast and Frequent Project Failure in Their Quest for Agility

How Successful Banks Build their Innovation Strategy

Kovarus Survey: Significant Gap Exists Between Business And IT 

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected]

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