Innovation by Design

A formal approach to innovation helps CUs tap creativity from within.

June 1, 2013


• Companies too often rely solely on a small group of people to come up with new ideas or solve problems when they should involve all staff in the process.
• Creativity shouldn’t be an escape from disciplined thinking, it should be an escape with disciplined thinking.
• Board focus: The more evidence that’s compiled for an idea, the more likely it is for the board and CEO to approve it.

Creativity, some believe, is an escape from disciplined thinking.

“Instead, it should be an escape with disciplined thinking,” says Disney Institute Programming Director Bruce Jones. He believes organizations without formal approaches to innovation, involving staff at all levels, risk missing opportunities that exist right in front of them.

“One of Disney’s central themes is that everyone is creative,” Jones says. “When we get smarter about unleashing the creative potential within our employees and guests, we find there’s a lot of creativity out there. We’re always thinking about new ideas.”
And with a process in place to harness that creativity, he says, “we can activate those ideas and get something done.”
Few leaders would dispute the importance of innovation. In fact, a McKinsey Global survey found that 84% of executives believe innovation is “very or extremely important” to their companies’ growth.
But too many organizations leave the process to chance. Only 27% of executives responding to the McKinsey survey say their companies hold leaders accountable for executing strategies that support innovation.
Coming up with ideas is one thing. Selling them to decision makers is quite another, says Matt Davis, innovation director for the Filene Research Institute and head of its i3 (ideas, innovation, implementation) Group.
“I used to think that if you had the right people thinking about an issue, it would get solved,” he says. “While this sometimes works, I’ve learned that unless you’re going about it in a methodical way, you might arrive at a creative solution, but you won’t have the data to support it. You need to accumulate enough evidence to convince others, and yourself, to pursue or use a solution.”
Tap staff’s potential
Too oft en, companies seek input only from the stereotypical creative departments in their organizations, Jones says. They rely solely on a small group of people to brainstorm new ideas or solve a particular problem when in fact there’s creativity throughout the organization.
“Organizations aren’t fully tapping their employees because they don’t have a process in place to do so,” says Jones. “And if they have a process, it’s probably not communicated in a way that lets everyone know, understand, and use it.”
Jones says Disney’s approach to innovation unleashed and everyone understands it, it leads to tremendous creativity,” he says. “We’re not just talking about big ideas, although those happen. We’re talking about innovation throughout the organization at multiple levels. That’s a powerful formula for value-creation.”
Disney’s six-step approach:
1. Listen and learn. Continuously identify customer pain points and ways to do things better. “We tell our cast members that regardless of their role internally or externally, they’re really listening posts,” Jones says. “That brings information into the organization and helps employees be receptive to new ideas when they hear them.”
2. Measure. What impact is this issue having on the company? Measuring can be as simple as documenting the number of times customers complain about something.
3. Act. In many cases, front-line staff can take immediate action to try out their ideas rather than first taking everything to a higher level in the organization. This improves efficiency.
4. Re-measure. Has the idea worked—or worked well enough? “This is where creativity comes in,” Jones says. “We might come up with an idea that works to a certain degree, but there might be an even better idea out there. So part of re-measuring is pushing the envelope even farther.”
5. Recognize and celebrate, although not necessarily with monetary rewards. “Celebrating and recognizing innovation creates a culture of innovation,” Jones says.
6. Share. Highlight ideas in your employee newsletter, website, and elsewhere so others can take advantage of them and build on their success.
“Employees know their ideas will get acted on, and that builds trust,” Jones says.
Once people see their ideas are taken seriously, “it becomes a sort of virtuous cycle of creativity and innovation,” he adds. “When ideas aren’t acted on, they dry up.”
NEXT: A 'suitcase' of evidence

A ‘suitcase’ of evidence

Seeing new ideas to fruition requires compiling a “suitcase of evidence,” Davis says. You need proof that a problem exists, possible solutions, strategies to test the solutions, and lessons learned along the way.
“The more evidence you have, the easier it will be to sell your idea to someone, whether it’s a CEO or the board,” he says. “If you’re not selling the idea, you might as well not have the idea at all. It’s really about proof. Process really does matter. Some people can create without a strict process, but not everyone will buy into it unless they see proof.”
Assembling that proof is where having a process is especially valuable. Davis cites Filene’s five-part method for innovation, developed over the past decade through i3:
1. Insights. Find people who are intellectually curious— those who constantly seek out new insights by reading, gaining new experiences, and talking to those smarter than themselves. “If you’re not constantly looking for new insights, you’re not getting information to help you solve problems, nor are you identifying problems that need to be solved.”
Davis recommends starting the process with “sparks” of insight—interesting research studies that participants read and discuss as a group to see what might apply to the credit union or its members.
2. Ideation. Take the definition of the problem or issue from your insights and explore new ways to address it. This is where intellectual curiosity is especially important.
“If you’re not exposing yourself to new industries, new ways of thinking, or new insights,” Davis says, “then you’re at a disadvantage when you try to solve problems. The more unrelated stimuli you have, the better equipped you are to solve unique problems in unique ways.”
3. Gut check. This is the simplest, but most powerful, step in the process. Once you’ve identified a problem and solution, ask, “do you love it?” Davis advises. “It’s a gut check because you’re going to spend the next six to 12 months or longer trying to solve the problem and implement the solution. If you don’t love it, it won’t work well.”
4. Fact check. Check your hunches. Does data support your assumptions and confirm that your solution might work? “Or has someone else already done this and failed miserably at it? This is a really an introspective look,” Davis says. “Do we really love this, and is it worth it to move forward?”
5. Rapid prototype. Test the idea with a quick, cheap, and easy prototype in a real-world environment, get feedback, and report what happens.
Too oft en, new ideas are expected to be unveiled with no rough edges. This can cause delays, increase costs— and even lead to “huge, colossal failures,” Davis says.
“Credit union leaders need to build an environment in which small bets are placed all the time,” he says. “That’s how you learn and can justify making the bigger bets—buying a new technology or investing in a new idea. Ultimately, if you make enough small bets, one or two will emerge as things you should invest in.”
Some risk taking is required, Jones adds.
“By defi- nition, innovation doesn’t come with 100% certainty. Our approach is ‘80% and go.’ That means understanding the risks involved but realizing it’s better to be 80% sure and go ahead rather than 100% buttoned up with the idea. If you’re 100% certain, you’re probably repeating yourself.”
NEXT: Small bets

Small bets

Sometimes, small bets turn into windfalls. Just ask Shari Storm, senior vice president at $400 million asset Verity Credit Union in Seattle.
While on maternity leave in 2003, Storm read about a trend called “blogging” in a parenting magazine and immediately saw its potential for connecting with members on a more personal level. “Most people didn’t know what this meant at the time,” she says. “But it was free to try and it caught on quickly.”
Verity’s corporate blog—the industry’s first—garnered the credit union an “innovator of the decade” award from NetBanker. “It’s a good example of something small growing into something big,” Storm says.
It also gave Storm a reputation as an innovator among industry peers and co-workers. Employees would approach her regularly with ideas to the point that she had to find a way to handle all of the feedback.
“There’s a lot of responsibility when someone comes to you with an idea,” Storm says. “If you accept the idea, you have to do something with it— get the decision makers to sign off on it, research it, or pull together a team. On the flip side, I didn’t feel it was appropriate for me to be the gatekeeper, saying ‘no’ to the ideas I didn’t agree with.”
Enter the “ideation team.” People submit ideas through the help desk, which creates a ticket that’s sent to the ideation team. This team (which includes Storm, CEO William Hayes, and two other executives) discusses each idea and awards $150 to every idea that’s implemented.
That’s the basic structure—but the program’s true value lies in the “secret sauce,” Storm says. The ingredients for this sauce:
• Promote innovation during new-employee orientations. All top-level executives address new hires during orientation, and each talks about the ideation team. “This sends the message that we’re proud of how we embrace new ideas,” Storm says.
• Provide a home for new ideas. Without this team, staff might not know where to submit ideas—especially if their managers aren’t idea people. Storm quickly responds to each submission via email.
• Give staff access to the credit union’s top executives. The ideation team oft en invites those who submit ideas to its monthly meeting to discuss the ideas in depth. This helps the credit union find innovators within its ranks.
• Stipulate the types of ideas the credit union wants and will pay for. This year, Verity is seeking ideas to grow membership, cut costs, and boost loan volume.
• Invite midlevel managers to team meetings. This infuses the team with different perspectives.
The ideation team typically receives about five new ideas each month from its 125 employees, and it discusses every one. “It’s easy to think why an idea won’t work, but we don’t let ourselves do that,” Storm says. “We talk about each idea because coming up with good ideas takes discipline.”
About one-quarter of submissions are approved. It’s not the big ideas that impress Storm most but the continuous flow of small ideas that create value over time—those moments when someone steps back and asks, “Why do we do it this way?”
A teller, for example, noticed that few members kept, or even looked at, their receipts aft er conducting transactions; most simply threw them away while leaving the credit union. “So you’re printing something and handing it to a member so they can throw it away two seconds later,” Storm says.
Now tellers ask members if they’d like a receipt and, overwhelmingly, they don’t. “So our receipt printing costs went down and I’m sure member satisfaction went up because there’s something slightly irritating about having to throw something away if you don’t want it.”
Another idea involved a cumbersome process of scanning certain documents. A new employee asked “why,” and Verity did the math, finding that 60 employees were needlessly scanning these documents daily. “That really adds up over time,” Storm says.
Then there was the new branch manager who asked why the credit union printed so many brochures and suggested placing iPads in the branches instead. That idea is in the works.
All organizations need someone to lead the innovation charge, Storm says. 
Ideally, it’s someone at a senior level “who’s curious and slightly adventurous, and who understands the difference between a wacky idea and something that will enhance your business. You don’t want to be innovative just for the sake of being innovative—these ideas have to improve your business. 
This person also has to create a culture where people aren’t afraid to fail. If you’re going to be innovative, you’ll inevitably try things that don’t work.”