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Innovation has nothing to with technology

It intrigues me how often we have a conversation about innovation, and everyone starts talking about new technology.

“Oh, have you seen our iPad app, it’s really hot.”

“Sorry, but our Android apps beat that hands down, and Android is hot today.”

“Yea, Android is hot today but forget all of those things. You need to look at internet television for the real innovations of next year.”

“Internet TV or 3D-TV?”

“Hmm … 3D-TV with avatars for call centre servicing. That sounds like a good project. Get our innovation team onto it now.”

Apart from the fact that innovation is no longer the hot topic it was in banking – the credit crisis saw to that – innovation has nothing to do with technology.

Innovation is to do with people.

In fact, I can point to lots of innovations in banking that use poor technology, such as First Direct, who admit their legacy systems are so legacy that it took them 21 years to replace it (and they were legacy when they were first implemented!).

And no-one ever says that Apple is innovative due to their technology.

Their technology is innovative, although rarely are they the first to create these ideas.

MP3 players were around long before the iPod, and tablet computers were on the market way before the iPad.

It is thanks to the way that Apple develops differentiation through their processes and culture that is innovative.

In fact, it’s their basic tenet – making technology cool – that really is the essence of why they do these things.

Similarly, that’s what Virgin does.

Virgin – when they were innovative as I don’t think they are anymore – were really rocking and rolling over most markets by building differential in their process.

For example, they have a great methodology for innovation.

Their method is this: take a market full of fat and lazy competitors, such as banking.

First, list the attributes upon which these firms compete, such as fees, interest rates, number of branches, opening times, etc, and prioritise them.

Second, list the attributes that customers seek, such as fast call pickup, nice people, interested in me, treat me as an individual, maximise my returns, etc, and prioritise them.

Third, see how the two lists align and pick the top customer attribute to emphasise as Virgin’s differentiation that does not appear or is not seen as a competitive differential by the first list, such as maximise my returns, by coming up with new products and offers.

Fourth, add the Virgin brand values:

  • Fun = enjoyment and humour, not offensive and incompetent
  • Value for Money = Simple, not cheap
  • Quality = Attention to detail, not expensive for the sake of it
  • Innovation = challenging convention, not different for the sake of being different
  • Competitive Challenge = responding to consumer needs, not being irrelevant
  • Brilliant Customer Service = empowered, not unprofessional people

And then let the secret sauce rock and roll.

It kind of works, but it’s all about a machine of process and culture for innovation, nothing to do with tech.

I say it kind of works because Virgin actually started encroaching into the banking space back in 1997.

In 1997, people like M T Rainey, managing partner at Virgin’s main ad agency, said to the Financial Times: “Virgin has a reputation for being innovative and taking on large, lazy competitors”; whilst his client was being quoted in the Economist with a vision where: “…executives cross the Atlantic on a Virgin plane, listen to Virgin records and keep their money with a Virgin bank” (Richard Branson, Chairman, Virgin Group, the Economist, World in 1997).

Thirteen years later, the Virgin bank is just about to launch … or is it?

It’s easy to get a banking licence – you just buy a small bank – but to get into competing and innovating in banking is harder as a newbie. You need more than just a licence. You need executives, capital, capabilities and more.

So, maybe this shows why innovation and banking is more of an oxymoron than we thought.

But there are innovations in banking.

I mentioned First Direct, whose innovation is their culture of telephone service.

Equally, I’ve referenced Metro Bank several times on this blog, whose innovation is branch retailing.

We could talk about ING Direct in the USA, whose innovation is branch retailing.

Or Jyske Bank in Denmark, whose innovation is their culture of thinking differently about finance.

I could talk about the Islamic Bank of Britain, who reinvented the rules to launch Sharia-compliant financial products in the UK.

There are loads more we could reference, and they all have one thing in common.

None of their innovations have anything to do with technology.

Their innovations are all about design, process and culture.

So stop thinking that innovation needs, requires or relates to technology.

Now then, where did I leave my iPad?


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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