Customer Driven Innovation at Bank 2.012

The banking industry is often accused of taking their customers for given, but the recent Bank 2.012 event implies that customers are sacred to banks. The attendees were chocked when the speaker from ING Direct told them that they regularly “fire” customers that demand more support than the bank’s self-service based business model allows. Similarly, there were several twitter posts from appalled attendees when Anki Ahrnell, head of Marketing and Online Banking at Swedbank, disagreed with another speaker that argued that it was imperative that banks adopted a Customer Driven Innovation approach. She argued that the bank should perform the early stages of the innovation process themselves and engage the customers later in the the design phase when you have sketches and/or mock-ups that the customer can give feedback on. I will argue in this blog post that they both are right and wrong. In my opinion, you need to consider three innovation drivers to attain a balanced innovation portfolio that can ensure your long-term competitiveness.

There is famous quote from Henri Ford on the dangers in relying on Customer Driven Innovation. He said “If I had asked people what they wanted, they would have said faster horses”. In addition, we have all read stories on Steve Jobs that refused to use marketing surveys and engaging customers when working on new innovations. Clayton M. Christensen, one of the most famous scholars on innovation, has explained the challenges to executives and innovators when the industry experience disruptive technology shifts in his book “The Innovator’s Dilemma”. Initially, a disruptive technology provides a worse product performance, but a changed value proposition that eventually will transform the market. The dilemma to the innovators is that it is dangerous to listen to their regular customers that may be shortsighted and only see the deteriorated product performance.

Similarly, your customer base will not help you in finding innovative ideas if you intend to expand to adjacent markets. And you have to be aware of any potential bias in using a crowdsourcing approach to capture innovative ideas from a new market. The individuals that you engage in the innovation process may become customers that you later will have to fire. So, it is important that your strategic intent is the main innovation driver when expanding to new markets.

I will conclude this blog post with a token to you advocates of Customer Driven Innovation on the power of listening to your clients. My colleagues at Avanade UK have produced this film on the future of mobile banking based on input from extensive marketing surveys. So, do not hesitate in engaging your customers but, please, do not forget the other innovation drivers.

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