Crowdsourcing for the Environment

Winner of Starbucks' Coffee Cup Challenge Isn't a Coffee Cup | Fast Company

I feel Starbucks have somehow been short-changed with this as the winning suggestion. It highlights the productivity of idea generation that is the result of crowdsourcing; many good ideas but difficult, if not impossible, to implement.

By choosing this idea as the winner, Starbucks reveals their need to move in small steps from their present position to something new. This is not uncommon and it important for firms to understand how far and how fast they can move to effect change.

I wonder how many of the ideas generated by this initiative will ever be implemented.

MasterCard Partners in Prepaid Set to Drive Global Innovation and Growth Source: BusinessWire 24 June 2010

MasterCard Worldwide today launched MasterCard Partners in Prepaid - a new initiative to stimulate MasterCard's collaboration with partners and customers around the world and drive growth in prepaid. MasterCard Partners in Prepaid will focus on delivering innovation at a number of levels: in the sharing of global best practices, in thought leadership, in investments in partner growth; and in simplified interactions. The initiative aims to accelerate innovation and engagement to deliver the best prepaid solutions for the marketplace.

Companies are accessing key stakeholders in order to crowdsource ideas to enhance their offerings.

Assessing the Potential in Innovation Outcomes

In this Harvard Business School note on Bloomberg.com the authors highlight a number of issues to be considered when the potential of a new or changed offering for customers is to be assessed.

Bank of New York Mellon Extends Offerings to Include Securities Clearing

Source: PR Newswire 22 June 2010

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BNY Mellon, the global leader in asset management and securities servicing, today announced the creation of a new company to clear futures and derivatives trades on behalf of institutional clients. The company, BNY Mellon Clearing, LLC, is a U.S. registered futures commission merchant and a member of the National Futures Association, and plans to become a clearing member on major exchanges and central clearinghouses on a global basis to support the trading activities of its clients.

This is an obvious response to the growing preference of Regulators across the world to see more and more transactions on centrally cleared hubs. This trend to more centralized clearing has two major side effects.

First, as more transactions get standardized and centrally cleared, a platform for further financial innovation is created allowing firms to recombine these standard offerings in new ways. This phenomenon, known as the spiral of financial innovation, may be slowed down by regulations that require higher capital on non-standardized transactions.

Second, as more transaction consolidate onto hubs, the network becomes less resilient to failures of the hubs themselves. This is similar to the network effects found in the internet and the electricity grid which are resilient to failures of thousands of lesser connected nodes but very brittle for failures of key highly connected hubs.

Three Innovation FAQ's

Here are three frequently asked questions on how to spur innovation in organizations.

1. Are there schemes that organizations can set up to get employees to generate ideas?

Of course there are. However, when organizations do something like this they have to be very careful of unintended side-effects. Say for example, you paid for each new idea. You would get tons of ideas. Some employees might give up concentrating on their day job and only generate ideas. Say you paid for implementable ideas. Who would act as the filter on these? If this is not judged fairly, it could lead to demotivation and a lack of trust in management.

So if you come up with schemes for innovation they need to be authentic to the core values of your organization. This is not easy. Often some cultural change and a revised view on organizational learning is required.

2. How do you get staff to participate in these schemes?

My advice is to start with a scheme that is relevant to the employee in such a way that it links a corporate objective to something within the capability of the employees. Then keep the rewards aligned to the normal outputs of the employee. In this way the chance of an unintended consequence is reduced.

Show the employees that they can be rewarded for innovations in their day-to-day activities. Over time this gives you an innovative capacity throughout your organization. This is not a quick 'ideas competition' and then everything is OK and we can go back to our desks.

Remember innovation is as much about execution as it is about ideas. So start getting people to innovate locally and they will grow in this ability each and every day. Then when you really need the big ideas they are ready and willing participants.

3. What are the support mechanisms?

Encourage learning and experimentation. If you approach something as an experiment from which are are going to learn, you can't fail. You need to look at the failed experiment and ask "what have we learnt from this? What would we do differently next time?

So for support you need to develop a tolerance for failure and an ability to unpack the learning experience. Obviously, you need to be able to withstand the failures so the experiments need to be carefully structured so as not to put the whole organization at risk. Over time as your capabilities build, you will become more proficient at structuring things so that you can take slightly bigger risks.

You also need to allow the employees time to consider the possible innovations they would like to recommend and experiment with. And then they need the time to do so. This is why a firm like Google gives employees 20% of their week to pursue their own interests. Of course, not every firm can be that generous but you can see the enormous commitment to slack resources. If everyone in your firm is stretched to breaking point, don't expect much innovation.

There is Nothing Personal about Personal Banking

I recently conducted a "straw man" poll into understanding people's frustrations with their personal banks. The population sample was from LinkedIn members from around the world who are computer literate, mainly professional, and have a desire to interect on electronic systems. There weren't any really surprising results. The frustrations can be seen as product, people and technology related. Here is my take on some of the issues highlighted.

The main conclusion is that the customer experience in branches is poor because of long lines and inadequately trained staff. This is an old issue which banks have tried to solve by moving some of the business into call centres.

The frustrations with call centres are relationship churn (never interacting with the same person and the associated lack of continuity and ownership) and lack of ability to make unscripted decisions.

In general people were happy with the products with some minor complaints about lack of flexibility in terms of product delivery, product rules and cost structures.

The on-line experience is better with frustrations related to site performance, browser support and overly complex and fragmented security.

These findings underline the idea that innovation in banking is really about innovation in service and customer experience. Some of the basic products have been around for centuries.

What banks need to take into consideration is that more and more customers are becoming comfortable with conducting business on-line. However, there will always be a handful of interactions that need to be done between people, either over the phone or face-to-face.

At that point the quality of interaction is the key differentiator and a source of competitive advantage.

The on-line experience is an opportunity for further innovation. This is the dangerous zone for many banks with their legacy of multiple complex, poorly, integrated, monolithic applications. The physical-world analogy of the situation is where you are selling steel bars and coal in high fashion clothing stores in popular shopping malls. You need the flexibility to be able to modify, repackage, and tailor relatively commodity products to the whims and fashion dictates of the customer base.

The scariest part of this is that many customers seem loyal only because there is too much pain and suffering in changing from one supplier to another.

Frameworks

Strategy was easy in the '70s. According to the Boston Consulting Group all you had to do was "milk your cash-cows, get rid of your dogs, and turn your question marks into stars". This well-known BCG matrix was perhaps one of the first strategic frameworks. It was effective because it provided people from different backgrounds a common language to use when analyzing problems.

Many other frameworks have followed. Perhaps the most famous is that of Michael Porter who analyzes organisations in terms of five competitive forces; competitors, customers, suppliers, substitutes and new entrants. Porter also set out numerous ideas about value chains. His latest works concentrate on country and regional competition.

I mentioned the need for an innovation value chain in an earlier article. This article investigates how you can use an anlysis of your present value chain to give ideas for places to innovate.

The starting point of the analysis is to describe your existing business within your existing industry. Any one of a number of frameworks can be used. You can even develop one of your own. The important thing to remember is that the framework helps to establish a common understanding of the organisation in its competitive environment. There is a lot of value in having the discussion with your teams in order to develop your own framework. Although this is time consuming.

I find the one suggested by Alex Osterwalder to be quite useful in financial services.

Clients are considered under the sub-headings of relationships, segments and distribution channels; products and services are considered under the sub-heading of offer; operations is considered under the sub-headings of resources and competencies, partner networks and known issues; finally an understanding of the financial implications to revenue and expenses.

This nine point framework lets you ask key questions of each item. "In respect of [each of the nine]: what can we learn from our competitors and other industries? What would our organisation and industry look like if we moved to this? Do we have the experience and capability to do this? What are our risks if we do nothing while others do this?"

For example, "In respect of distributing equities, what would our organisation and industry look like if we distributed over the internet? Do we have the experience and capability to do this? What are our risks if we do nothing while others do this? What happens to the revenue and expense cycle from doing this?"

So the role of the framework is not simply to describe what happens today, it helps focus our attention on what could happen into the future. It gives us a common language on which to base our discussions. The key questions for strategy are; Do we have the common language today to hold this discussion; Is it rich and diverse enough to consider the changes taking place around us; Do we have the desire to develop our own framework; Will doing so be beneficial or simply too time consuming?