This Is Why It Is Hard For Your Bank To Come Up With Creative Innovation or Strategy

Preventing The Vanilla Effect

It is fairly common for a bank to want to be more innovative or take on a new strategic direction and the first thing they do is form a committee. They then decide who should be on that committee and in the desire to be all-inclusive, management invites each department head and maybe a board member or two. The thinking is that this structure will ensure the greatest number of ideas and that those ideas will be vetted. You know what happens? A great number of ideas, good vetting but very little innovation. The innovation that does come out of committee will be so boring that it will barely classify as “innovation” and it was likely only chosen because the competition is already doing it. The bank following this route will likely fail 90% of the time because of the process. There is a better way.


Choosing Vanilla Everytime


If you doubt any of the above, try this experiment – At the meeting announce you will be bringing in lunch and for dessert, you will serve ice cream. It has to be one flavor. Have everyone try to decide on the best flavor. The group will throw out a variety of ideas but will likely decide on vanilla. The more people in the room, the more likely vanilla will be your choice. Worst yet, the newer or more exotic the flavor, no matter how good, the less likely the flavor will be chosen.


Cinnamon apple swirl, a flavor that only one person has tried will lose to Rocky Road if three people have tried it. The process of having a large number of people with diverse backgrounds almost assures the group will choose the lowest common denominator not because it is the best choice but because it is the choice with the greatest familiarity.


The same is true for bank innovation and strategy.


A Better Process – the Confidence Quotient


Vanilla is often the choice because of the process. From a mathematical perspective, the algorithm of decisioning revolves around a “confidence quotient.” That is, the stronger a group of people feels about an issue set for a decision, the more likely that choice will get approved. A large group and/or a large number of choices waters down the confidence level of any single choice. Everyone has confidence in vanilla ice cream which is why it is often chosen. The takeaway here is to create a system that allows for the preservation of “confidence” for any given choice. If you can do that, the better ideas, not the most common ones, will emerge.  The result will be more innovation.


To build choice confidence into your framework, here are eight ideas to implement that will likely result in creating a better innovation process:


8 Ways To Improve Creative Decisions At Your Bank


Limit The Decision Team: When it comes to getting creative, whether it be marketing, strategy or innovation, limit the number of participants that will decide on ideas. To come up with a non-vanilla choice, experiments we have done show you need three people. If you have to, you can go up to five, but after that, vanilla will be chosen the majority of the time. You can still have your large group from diverse backgrounds brainstorm, or give the pros and cons of an idea, but get large groups out of the decision process.


Educate: The biggest reason why people choose vanilla in groups is that everyone has knowledge of the flavor. The newer or more innovative the idea, the less confidence people will have to make the right choice so they will advocate for something they know. Counter this effect with having some education around each idea so that group members understand, and feel confident in their knowledge about the risks, ability to execute and opportunity of the choice.


Provide Pros and Cons: Instead of letting a large group decide, have them play “Devil’s Advocate” for each idea. Have them come up with pros, cons, and considerations. Once done, have that feedback go back to the small group to decide.


Break It Down: If you have a large number of ideas, group them by some logic and have the group take them in waves. One common problem with the innovation process is the generating and then decisioning on a large number of ideas. Each idea dilutes the individual’s confidence and so Person A’s confidence in a choice is negated by Person B’s confidence in another choice. To manage a large number of ideas, group them into sets of two or three and then decide on choosing the best one. The winner will then compete with the winner from another group in almost a playoff style structure.


Post Your Goals: Large groups often lose sight of their goal as everyone has their perspective. To prevent this, decide on the objective and then post the goal of the effort for all to remember. Is the goal of new product design or strategy to gain market share, please customers, produce revenue or produce profit? Each goal might lead to a different choice so keep the objective front and center to prevent defusing confidence into choices that maximize different objectives.


Agree To Weighting A Perspective: In the process of deciding your objective and what is important, the group should have a clear understanding of the priority of various goals as well. From this ranking, it should be agreed that a certain perspective should carry more weight in the final decision. For example, if profit is the most important item, then the CFO’s analysis and recommendation might carry more weight for the group to consider. Alternatively, if the customer experience is most important, then bring in a group of customers to “advise and consent.”


Agree to Pilot: To de-risk the process for all participants, agree beforehand that you will “pilot” any new idea and provide data back to the committee. This dramatically improves the confidence of the group to know that their decision can be reversed and that a pilot program will provide more data and educating for validation.


Drop the Rank: If you don’t choose vanilla, it is likely because there is a strong personality in the group that has loads of confidence either because of their status or because of their personality. Choosing a bad flavor is worse than choosing vanilla, so set up your process to prevent one person from influencing the outcome. Using the Devil’s Advocate technique and breaking down choices into small groups are two good ways but the long-term goal should be to train the group to have a culture where everyone is equal for certain efforts such as choosing ideas or debriefing for quality improvement.


Proof That You Are Doing Innovation Correctly – The Innovation Bell Curve.


To improve innovation, strategy, marketing or any creative process, utilize the ideas above to prevent picking the lowest common denominator. Design a superior process, and you will get superior results.


To test whether you are generating courageous enough ideas, after the process if over, take a look at your results and gauge them for courageousness. What you should see is a portfolio of ideas spread out over the risk spectrum. You should see a bell curve of ideas where the bulk of ideas are grouped in the middle of your risk tolerance (f.e. online accounting opening or digital lending). These should be a little risky, but well within your comfort zone and execution ability.


Then you should have a few “safe ideas” on the left side of basic innovation that you have to get done but will not differentiate your bank (f.e. more cloud computing). Finally, you should have a set of ideas on the right side that are truly unfamiliar and a little risky. These are the 10% of ideas that will set your bank apart, are transformational and are for products, services or processes that don’t exist yet.


While many of these transformational ideas will fail, some will bring untold franchise value.


Consider the above to create a better process that will result in a more innovative bank culture. Whatever you do, don’t let “group think” hamstring your creativity and force you into vanilla choices.