To Simplify is to Innovate
By: Dr Abdul Rahman for https://blogs.retailbanking-academy.org/
The OECD, in its Oslo Manual, defines innovation as the “implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations”. (Refer to the Oslo Manual, 2005, ISBN: 92-64-01308-3.)
I believe that one of better definitions of innovation is proposed by John Egan, Head of Innovation and Foresight at Lafferty Group. He succinctly states that innovation removes frictions between two points. In other words, innovation removes complexity and dissonance and ushers in simplicity and clarity.
In the context of retail banking, this implies that any action that reduces impediments to creating superior customer experience is an example of innovation. There is less noise in the process or system.
In our view, innovation does not have to necessarily require creative destruction in the sense meant by the Austrian economist, Joseph Schumpeter. In other words, something new that replaces something old is not the exclusive domain of large-scale, path-breaking events that create severe disruptions such as we see in transportation, telecommunications and music. Of course these events create a new paradigm for all players – banks included.
But retail banks can innovate by reducing frictions or noise by simplifying processes so as to deliver positive customer experience; simplify product portfolio to remove value-destroyers that only clutter the bank’s IT infrastructure; and simplify their operational structure so that information flows are unimpeded and better decision-making can take place.
Indeed, at the Retail Banking Academy, we view actions that ‘decomplexify’ processes, products and structure as hallmarks of operational excellence.
Simply put, to simplify is to innovate.
Advice for Senior Management:
- Pay constant heed to political, economic, sociological and technological changes (ie, PEST) that impact the banking space. This is obligatory.
- But do not forget that innovation does not have to be only path-breaking. The elimination of all sources of frictions between the bank and the customer is also innovation and just as obligatory.