A bank asks its customers what it could do to improve and then awards a prize for the best suggestions. Another includes its employees in the development of new service standards. Just two examples that are rooted in the idea of ‘open innovation’. What is special about this: external partners, with all of their experience, expertise and skills, are specifically included in the innovation process. The potential that open innovation yields for banks has been captured in a new study released by GFT, a leading international IT solutions providers to the financial sector.
“The market conditions for financial service providers are changing increasingly rapidly,” states Marika Lulay, Chief Operating Officer at GFT. New technologies are forcing their way into the market and compelling bankers to make a move or be left behind – digitally. “The financial crisis had a rapid impact on customers, whose loyalty plummeted. That’s why it’s increasingly important for financial institutions to differentiate themselves with innovative products and services – including from new competitors.” Examples of such competitors are e-commerce companies or businesses offering payment services. In essence, everyone wants a piece of the action.
The GFT study, “Open Innovation in the Financial Services Sector – why and how to take action”, reveals how banks can deal with the new pressures of innovation. Momentum to change does not just come from within, i.e. from in-house development departments, but rather from external sources. External partners – suppliers, customers, designers or partner companies from different industries – are the ones shedding new light on the issue of innovation. The advantage: they are often much closer to the target group or can infuse stale ideas with fresh, new, out-of-the-box thinking.
According to Marika Lulay, “Traditionally, banks do tend to be early adopters of new technological solutions, but these innovations are generally geared towards the institution itself and the processes it has running in the background. In the digital economy, however, it’s important to make the customer benefit more visible and tangible. In other words, in many cases banks must completely rethink their approach to innovation.”
The study includes examples of successful open innovation programmes, revealing just how broadly the new methods can be applied. These range from crowdsourcing (where end-customers are included in the development of products and services) to corporate venturing (where companies invest in start-ups). For companies thinking about implementing open innovation themselves the important thing to note is that the approach taken must tie in closely with the company’s overarching strategy. After all, the key to successful open innovation is a willingness to open the door to ideas from outside the business.
