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1.2 Thought Traps

1.2.1 Thought Trap: Innovation Is Possible Without the Customer

Based on Gassmann and Sutter (2008), innovative companies grow disproportionately and are more profitable than their competitors. For Vahs and Burmester (2005), innovations contain essential driving forces for economic but also social progression. Against the background of a saturated market in the financial services sector and the more critical customer, the issue of innovation is gaining in significance, also for banks, even if the sector has already been successful so far in simply continuing the systems of the past in the area of customer care. The pressure to innovate is becoming ever greater due to the customer's desire for integrated solutions, the banks' striving for an expansion of their market share, and growing international competition—for example from direct investment banks in Germany—in combination with the pressure on margins resulting from the informed customer (Gassmann and Sutter 2008). It is astonishing that the customer is considered to be a source of innovation only in very rare cases. Banks fall into the thought trap of wanting to develop everything themselves, involving the customer in innovation development either too late or not at all. But why should they stew only in their own juices? Outsourcing the development of ideas and innovation to the intelligence and labour of the customer is an exciting option. Access to knowledge and the sources of knowledge is a potential factor of success in terms of innovative capability—not only in knowledge-intensive sectors. Many banks have recognised this fact and have begun in recent years to optimise continually their internal processes in knowledge and innovation management and in adjacent subjects. Some banks[1] already integrate external sources of knowledge such as customers, partners or suppliers. While this is not a completely new approach, it demonstrates the tendency for banks to reject isolating themselves from the outside world, as well as the new role of external sources of knowledge and innovation.

The key question when it comes to implementation is: What drives customers to get actively involved in the innovation developments of banks? There is a variety of opinions on this matter. Specialist articles and discussions with experts have produced the so-called “four Fs” of online participation, which Marsden (2009) summarised in a white paper on ideas platforms:

• Fame

• Fortune

• Fulfilment

• Fun

Only very few employees or customers derive their motivation solely from monetary incentives (Wilkesmann and Rascher 2005). Yet these are nevertheless important in order to show that the ideas and suggestions are welcome and taken seriously. Furthermore, the unchecked attractiveness of reality and casting shows also demonstrates that people strive for public fame and status. Thus some banks motivate their staff not with monetary incentives, but instead with the opportunity to contribute actively to the development of ideas and innovations, with the chance of becoming a known force in the bank and expanding their personal network.

For the most part, the willingness to participate in developing ideas and innovations is based on the opportunity for personal fulfilment. This can be expressed by helping to develop a solution, establishing contact with interesting people or unleashing one's own creativity. Without doubt the most important motivation is and remains fun and the joy of communal, playful work. Boring questions, or laborious and time-consuming participation should be avoided where possible (Eckstein und Liebetrau 2012).

Co-creation or open innovation and joint innovation development excites customers, partners and employees and sets change in motion. The boundaries between the bank and the customer become more penetrable and blurred. Something new emerges simply from the fact that old situations are seen with new eyes (Reichwald and Piller 2009). Therefore those responsible for innovation in banks should take a closer look at the phenomenon before rashly deciding for or against it. As with every new management instrument, co-creation also has advantages and disadvantages that demand conscious consideration. Whether one calls it co-creation, user innovation or open source: in each case the new, open innovation model means a drastic change in the way a bank deals with its customers.

The following three key theories summarise the chances for the idea and innovation management of the finance industry that are provided by the integration of customers and other external sources:

1. Access to creativity, that “vital raw material”

Banks that wish to continue operating profitably must learn to gain and use “creative capital”. “In the creative and knowledge economy the value of a company is assessed according to the degree to which it succeeds in being a magnet for creative people and provides structures in which the “creative capital” can best evolve and drive innovation.” (Liebetrau and Hirsig 2012). Irrespective of whether the creativity and the ideas come from one's own employees, from external sources, or from joint interaction: co-creation can provide sensible access to external creativity and knowledge.

2. Magnet effect for high potentials and experts

The attractiveness of tasks or clients is being redefined. It occurs wherever creative people encounter an inspiring environment: in innovative banks with other creative thinkers in their own organisation and among external partners. Creative people attract other creative people. The tasks that are set and the available innovation culture are also decisive. Boring tasks and bank attract only one thing: boring ideas, boring staff and even more boring customers and partners.

3. No fountain of youth for non-creative banks

Banks that are already considered not to be very creative or innovative today are not likely to get better with co-creation. The extension of an insufficient innovation culture or strategy by means of co-creation is rarely successful (Liebetrau and Hirsig 2012). In order to be able to raise the potential of co-creation, one's own strengths and competencies must first be examined. What is my innovation strategy? What does my innovation culture look like? How do I deal with ideas and know-how? What drives me/us? Only when the bank has a firm grip of its knowledge and innovation management, and can implement innovations and creativity without outside help, can it successfully outsource creative tasks to its customers. If co-creation is done well, the innovative strength necessary for survival and the image in general are increased in the long term. The bank is then open to new impulses and not only “listens” to its customers but starts a true dialogue among equals. Dealing with increasing uncertainty in product and process design with previously unknown touchpoints,[2] short-term decision-making pressure in the speed of implementation (time-to-market orientation) and the increased flow speed of the markets and processes determine a new, open form of organisation for fresh innovations, with the early involvement of customers and other partners. The call in the finance industry to be clearer, more creative, more courageous, faster and more decisive is getting louder. The integration of the customer in the development of ideas and innovations is a clear step towards a more flexible bank. Bankers and customers can all work together on the same issues and problems. The boundaries with customers, partners—and in some cases even with the competition—are becoming more penetrable.

  • [1] The Royal Bank of Scotland (RBS), for example, attempts to involve its customers actively in the improvement of existing products, and the development of new ones, by means of the IDEAS web platform. There customers can post their ideas for improving bank services. They get an overview of the topics being discussed the most, but also of the implementation measures taken by the RBS in 2013
  • [2] By touchpoints the authors mean points of contact between the bank (company, brand, employees or products/services) and the customer
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