Innovation and the future proof bank a practical guide to doing different business as usual

P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come Innovation and the Futureproof Bank A practical guide to doing different business-as-usual Dr James Gardner A John Wiley and Sons, Ltd., Publication iii P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come ii P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come Innovation and the Futureproof Bank i P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come ii P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come Innovation and the Futureproof Bank A practical guide to doing different business-as-usual Dr James Gardner A John Wiley and Sons, Ltd., Publication iii P1: JYS FM JWBK404-Gardner C July 17, 2009 19:28 Printer: Yet to come 2009 John Wiley & Sons Ltd Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold on the understanding that the publisher is not engaged in rendering professional services If professional advice or other expert assistance is required, the services of a competent professional should be sought Library of Congress Cataloging-in-Publication Data Gardner, James Innovation and the future proof bank : a practical guide to doing different business as usual / James Gardner p cm ISBN 978-0-470-71419-5 (cloth) Banks and banking Technological innovations I Title HG1601.G37 2009 332.1–dc22 2009021629 A catalogue record for this book is available from the British Library ISBN 978-0-470-71419-5 Typeset in 10/12pt Times by Aptara Inc., New Delhi, India Printed in Great Britain by CPI Antony Rowe, Chippenham, Wiltshire iv P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come Contents List of Tables ix List of Figures xi Preface xiii Introduction What you will find in this chapter 1.1 What is innovation anyway? 1.2 What happens when you don’t futureproof 1.3 Five things that innovation is not 1.4 150 years of innovation in banks 1.5 The innovation downside 1.6 An overview of the futureproofing process 1.7 Where to go now Innovation Theories and Models What you will find in this chapter 2.1 The innovation adoption decision process 2.2 Personal innovativeness 2.3 Innovation from the perspective of the market 2.4 Characteristics of innovations 2.5 Innovation from the perspective of the firm 2.6 Case Study: The internal adoption of social media 2.7 Theory of disruption 2.8 Case Study: PayPal’s continuing disruption of the payments market 2.9 Thoughts before going further Innovating in Banks What you will find in this chapter 3.1 The innovation pentagram in banks 3.2 The Five Capability Model of a successful innovation function 3.3 Case Study: Innovation at Bank of America v 1 10 15 22 23 29 31 31 32 38 41 45 50 57 59 63 65 67 67 67 75 85 P1: JYS FM JWBK404-Gardner vi July 17, 2009 19:28 Printer: Yet to come Contents 3.4 3.5 3.6 3.7 3.8 Building out the futureproofing process Technology, business, and innovation Autonomic innovation Case Study: ChangeEverything, a project by Vancity in Canada The banking innovation challenge Futurecasting What you will find in this chapter 4.1 The purpose of futurecasting 4.2 An overview of futurecasting 4.3 What futurecasts should innovators be doing? 4.4 An example 4.5 Constructing the futurecast with scenario planning methods 4.6 Prediction methods 4.7 Case Study: AMP’s Innovation Festival 4.8 Some final words about futurecasting Managing Ideation What you will find in this chapter 5.1 An overview of the ideation phase 5.2 Campaign and create 5.3 Collect, catalogue, and compare 5.4 Scoring 5.5 Customer insight 5.6 Customer co-creation 5.7 Case Study: Royal Bank of Canada’s Next Great Innovator Challenge 5.8 Concluding remarks The Innovation Phase What you will find in this chapter 6.1 Should we? Can we? When? 6.2 The innovation portfolio 6.3 What happens next? 6.4 Tools for ‘Should we?’ 6.5 Tools for ‘Can we?’ 6.6 Tools for ‘When?’ 6.7 Selling innovations 6.8 Case Study: Bank of America and the Centre for Future Banking 6.9 Wrapping up the innovation phase Execution What you will find in this chapter 7.1 Ways to manage execution 7.2 Building the new thing 7.3 The launch 7.4 Operations post-launch 7.5 Signals for futurecasting 89 93 102 104 106 107 107 108 111 112 114 119 125 131 133 135 135 136 137 140 143 153 155 156 157 159 159 160 163 171 173 176 182 185 188 191 193 193 194 198 208 213 222 P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come Contents 7.6 Case Study: Innovation Market 7.7 The end of futureproofing Leading Innovation Teams What you will find in this chapter 8.1 Leadership styles 8.2 Things the leaders should 8.3 Signs of a bad innovation leader 8.4 What next? The Innovation Team What you will find in this chapter 9.1 The changing shape of the innovation workforce 9.2 Creators, embellishers, perfectors, and implementers 9.3 Team working 9.4 When innovators go bad 9.5 A last word about innovation teams 10 Processes and Controls What you will find in this chapter 10.1 Oversight 10.2 Metrics 10.3 Rewards and recognition 10.4 Innovation and the organisation 10.5 Funding innovation 10.6 The visible face of innovation 10.7 And finally 11 Making Futureproofing Work in Your Institution What you will find in this chapter 11.1 Case Study: Civic banking at Caja Navarra 11.2 Starting your innovation programme 11.3 Making ideation work 11.4 The innovation stage 11.5 Execution 11.6 Doing futurecasting 11.7 Innovation leaders and teams vii 223 225 227 227 228 235 240 244 247 247 247 253 256 261 265 267 267 268 271 275 277 280 283 284 285 285 285 287 290 294 297 300 302 Some Final Words 305 References 307 Index 311 P1: JYS FM JWBK404-Gardner July 17, 2009 19:28 Printer: Yet to come viii P1: JYS bm JWBK404-Gardner 306 July 13, 2009 17:43 Printer: Yet to come Some Final Words In the past, the most senior jobs in banks – chief executives and their direct reports – have usually been appointed from the ranks of the business people in charge of the revenue It is a rare circumstance when the computer guy takes the top job, for example, but there are lots of chief executives who have worked their way up from the teller window Being connected to the money in a substantial way is what it takes to get to the top of the industry, apparently I am of the view that innovation will drive the greatest part of future revenues for our industry It seems no great stretch, then, to imagine that some of the future leaders of our organisations will come from the ranks of the career innovator Theirs will be leadership that is firmly grounded not in the traditions of the past, but systematised consideration of what it takes to be successful in the future In the meantime, though, there is no time like the present to start putting the tools and processes in place that will make innovation a core competency in your institution It is my hope this book has provided some of the necessary insights required to accomplish this task P1: JYS ref JWBK405-Kemp July 13, 2009 17:45 Printer: Yet to come References Jaruzelski, B and Dehoff, K (2007) The customer connection: the global innovation 1000 In Strategy + Business Booz Allan Hamilton McGreggor, J (2008) The world’s most innovative companies Business Week, April SRI International ERMA and MICR: the origins of electronic banking Available at http:// www.sri.com/about/timeline/erma-micr.html B´atiz-Lazo, B and Wood, D (2002) Information technology innovations and commercial banking: a review and appraisal from an historical perspective EconWPA Christensen, C.M (1997) The Innovator’s Dilemma: When new technologies cause great firms to fail Management of Innovation and Change Series, eds M.L Tushman and 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65 Bart, A.G.B (2007) Leadership for sustainable innovation The International Journal of Technology Management & Sustainable Development 6(2): 135 66 Jeroen, P.J.d.J and Deanne, N.D.H (2007) How leaders influence employees’ innovative behaviour European Journal of Innovation Management 10(1): 41 67 Lancaster, L.C and Stillmann, D (2003) When Generations Collide: Who they are Why they clash How to solve the generational puzzles at work Harper Business: Wheaton, IL 68 Roach, I and Carol, S (2000) Enabling innovation: leadership, tasks, and tools Annual Quality Congress Proceedings, p 289 69 Wikipedia (2008) Wireless Application Protocol [cited 30 November 2008] Available at http://en.wikipedia.org/wiki/Wireless Application Protocol 70 DeCusatis, C (2008) Creating, growing and sustaining efficient innovation teams Creativity and Innovation Management 17(2): 155 71 Kratzer, J., Leenders, R.T.A.J and Englelen, J.M.L.V (2005) Information contact and performance in innovation teams International Journal of Manpower 26(6): 513 72 Andrew, J.P et al (2007) Measuring Innovation 2007 – A BCG Senior Management Survey Boston Consulting Group: Boston 73 Chan, V., Musso, C and Shankar, V (2008) Assessing innovation metrics McKinsey Quarterly 2008(Nov) 74 Gardner, J (2009) Bankervision [cited January 2009] Available at http://bankervision typepad.com 75 Bank of America (2008) Future Banking Blog [cited January 2009] Available at futurebanking.bankofamerica.com P1: JYS ref JWBK405-Kemp July 13, 2009 17:45 Printer: Yet to come 310 P1: JYS ind JWBK404-Gardner July 18, 2009 20:55 Printer: Yet to come Index Note: Figures and Tables are indicated by italic page numbers authority asymmetry 27–8 authority structure 51 effect on innovation 52 autocratic leadership style 229, 233, 241–2 autonomous innovations 102–4, 157, 159, 296–7 example 103–6[case study] factors affecting 103, 106, 177 Azaroff, William 104, 105 account aggregation 15, 21, 161 project to implement 161–2, 207 adopters of innovation, classification of 39–41 adoption decision process in firms 53–7 agenda-setting phase 53–4 clarifying phase 53, 55–6 matching phase 53, 54–5 redefining/restructuring phase 53, 55 routinising phase 53, 56–7 adoption decision process for individuals 32–8 confirmation stage 33, 37–8 decision stage 33, 35–6 implementation stage 33, 36–7 knowledge stage 33–4 persuasion stage 33, 34–5 adoption S-curves 41, 42 effect of innovation attributes on 45–6, 49 in Five Capability Model 76 Advanta (business credit card firm) 136–7, 154–5, 269 agenda-setting phase (in adoption decision process) 53–4 ‘ah ha’ moment 136 Alter, Dennis 154, 269 Amazon (online retailer) 111, 128, 203 AMP Bank, Innovation Festival 131–3[case study] ANZ Bank of Australia 269 Apple 5, 48, 54, 86, 213, 261 architectural design (of information system) 189, 218–19, 296 architecture, IT systems 97–8 ATMs 18 cash-handling technology 55 extension to facilities 6, 68 first introduced 18, 22, 61, 227 back-office procedures, mechanisation of 16–17, 18, 214 BACS (Bankers Automated Clearing Services) 18 bad innovation performers 261–5 types 262–4 Bank of America 85–8[case study] Centre for Future Banking 188–91[case study], 284 early computers 4, 17, 22, 181, 214–15, 227 ideas management 136 in-branch experimentation 154 Innovation Advisory Council 87 Innovation Community of Practice 87–8 innovation metric 86, 272 Barclays Bank 17, 18, 22, 70, 227 Basel II compliance 94 Bass, Frank 43 Bass model 43–4, 49 curve fitting for 44, 131 Beise, Seth Clark 215, 227 benefits, measuring and quantifying 174 beta testing 208, 211 big money innovation programmes, reasons for failure 91–3 blogs 113, 283, 284 Boeing 787 DreamLiner 15 Booz Allen Hamilton, predictions and reports 2, 10 311 P1: JYS ind JWBK404-Gardner 312 July 18, 2009 20:55 Printer: Yet to come Index Boston Consulting Group 173, 272, 273 branch network procedure changes 237 breakthrough innovation(s) 3–5, 69, 194–5 continuing involvement of innovation team 197, 213–14 costs 14 examples 17, 18, 19 execution of 195–6 people aspects of implementation 215–17 post-launch operations 213, 214–19 reward systems for 276, 277 risk level 3, 12, 109 team members’ attitudes 251 technology aspects of implementation 217–19 bureaucratic leadership style 229 business case for investment 166, 175–6, 295–6 as sales document 176 business-level signals, as input to futurecasts 113 business-model innovations 68–9, 74–5, 160 business plan 79–80 Caja Navarra 84, 285–7[case study] Calman, Matt 85, 86, 87, 88 ‘Can we get it up?’ test 177–8 ‘Can we?’ question 161, 295 requirements document and 199 tools for 176–82 capacity considerations 218–19 career paths 305–6 Carter, Jeff 189, 190 case studies AMP’s Innovation Festival 131–3 Bank of America 85–8 Casa Navarra 285–7 Centre for Future Banking (MIT/Bank of America) 188–91 Innovation Market 223–5 PayPal 63–5 Royal Bank of Canada’s Next Great Innovator Challenge 156–7 social media sites 57–9, 104–6 Vancity’s ChangeEverything project 104–6 cash curve 173–5 cash-dispensing machines first introduced 18, 22, 61, 227 see also ATMs cash-handling technology for ATMs 55 catch-up strategy 183–4 central innovation investment fund 91–3, 282 Centre for Future Banking (MIT/Bank of America collaboration) 188–91[case study], 284 CEO-led innovation effort 83–4, 154–5 challenges, innovation in banks 106 championing stage (in Five Capability Model) 76, 77–9, 90 leadership styles 230, 231 change, people’s reaction to 39–41, 204 change request process 205 chargeable service, innovation as 282 charismatic leadership 229–30, 234 cheques 111–12 Chesborough, Henry 181 chief innovation officer(s) 83, 233, 234, 269 Christensen, Clayton 6, 59–60 civic banking 286 clarifying phase (in adoption decision process) 53, 55–6 clearing services, automation of 18 cloud computing 81 clusters of ideas 293 collaboration 181, 189–91, 284 collaboration tools 224, 270 collaborative learning 251 collaborative working 102, 232, 236, 237 command-and-control organisations 52, 243, 249 social media introduced 57–9 command-and-control teams 259 compatibility, speed of innovation adoption affected by 45, 46–7 competitive advantage, factors affecting 16, 22, 283–4 competitive barriers, fall of complexity, speed of innovation adoption affected by 45, 47 compromise 193 managing 203–5, 298 concept leaders 87 confirmation stage (in adoption decision process) 33, 37–8 consensus predictions 126–7 consultant-innovators 262–3 consulting role of innovation leaders 237–8 contactless payment systems 69–70, 145 see also NFC-based mobile phone-based payments cooperative financial institutions 19, 51, 71, 72 coopertition strategy (for managing IT/innovation divide) 101–2 core banking IT systems 93 effect of ageing 94, 175 replacement of 175 corporate responsibility, investment decisions 286 corporate venturing 220–1, 277, 278 ‘cowboys’ 264 creator-embellishers 256, 264, 304 creators (of ideas) 253–4 credit cards 17 credit scoring 17–18 P1: JYS ind JWBK404-Gardner July 18, 2009 20:55 Printer: Yet to come Index credit unions 51, 104 critical mass point(s) 40, 42, 43, 44 Bass model and 44 in Five Capability Model stages 76, 78, 82 for Internet banking 131, 141 in launch of new product 212–13 in P2P example 115, 116, 118 crowd-based evaluation of ideas 152–3 crowd-based prediction methods 129 Crystal Ball software 130 cultural changes 202 culture gaps, failure caused by 202 curve fitting 44, 131 custom-built systems 182 customer co-creation 155–6, 291 examples 156–7 customer insight 153–5, 179, 293 customer lifetime value calculations 38 customer participation in investment decisions 286, 287 customer profitability, transparency rights 286 customer reaction using prototypes 179 Day, George 164 Day matrix 164 ‘deadpools’ for ideas 150, 151, 293 decision stage (in adoption decision process) 33, 35–6 decoupled debit 21, 72–3 deduplication of ideas 142–3, 293 defeatist-innovators 263–4 definition(s) of innovation 3–8, 288 delegating role of innovation leaders 238 delivery pace, in implementation phase 202 Delphi method 112, 127–8, 302 democratic leadership style 229 Deutsche Bank 72 development costs 164, 165 diffusion curves see S-curves diffusion of innovations 41–2, 213 digital credit cards 253, 254 Diners Club card 17 direct banking 5, 7, 11, 21, 195 direct connect 20 direct mail laboratory 155 dis-adoption 37–8 discouragement of ideas creation 142 Disraeli, Benjamin 129 disruption theory 59–63 disruptive innovation(s) 6, 7–8 continuing involvement of innovation team 197, 213–14 contrasted with sustaining innovation 6–7, 60, 61, 230 examples 21, 61, 220 post-launch operations 213, 220–2, 299–300 313 risk level 12, 14, 109 target customers 61, 83 team members’ attitudes 251, 253 timeframe for 23 distributed innovation teams 3, 277–8, 279 driving forces (in scenario planning) 120, 121–3 ‘drowning the puppy’ 171–2, 193, 221, 228, 295, 296 see also ‘puppy drowning’ process duplicate ideas, removing 142–3, 293 early adopters 39, 40, 41 in influence maps 185, 186, 187, 188 value of loss 215 early-delivery techniques 201 early-launch strategy 183, 184 early majority adopters 39, 40, 42 value of loss 215 eBay 9, 10, 64 ecological forces (in scenario planning) 122 economic forces (in scenario planning) 122 effort required in innovation process 168–71 electronic transaction processing 4, 17 see also ERMA email introduction in banks 56 payment via 63–4 embellishers (of ideas) 254–5 entry timing 183–4 ERMA (Electronic Recording Method of Accounting) computers 4, 17, 22, 214–15, 227 ‘escape hatch’ ideas 152 evaluator networks 143, 149–50, 292 execution, managing 194–7, 304 execution phase (in futureproofing process) 23, 27–8, 193–225 gunpowdered implementation 191, 195–6 hands-off approach 194–5 importance of 304 market reaction during 110, 113 monitoring of 240 reasons for failure during 32, 193–4, 200–3 recommendations on 297–300 executive support 83–4, 154–5, 289 expected returns calculating 164–8, 294 proxy value used in calculations 167–8 experience-based innovations 68, 72–3, 160 experimentation with new ideas 154 in prototypes 179 expert consensus 126–7 expert evaluation of ideas 149–50, 153 expert predictions 125–6 explanatory aids, prototypes as 179 P1: JYS ind JWBK404-Gardner 314 July 18, 2009 20:55 Printer: Yet to come Index Facebook 37, 42 failure constructive value of 32, 172–3 reasons for 32, 193–4, 200–3 fake-ware 179 fast-follower strategy 183, 184 feedback systems 238 fight-or-flee decision 62, 113 ‘firebrands’ 88 firm’s perspective on innovation 50–7 Five Capability Model (for innovation teams) 75–85, 90–1, 288 championing stage 76, 77–9, 90 exceptions 83–4 futurecasting stage 76, 80–2, 91, 301 innovation strategy and 85 inventing stage 76, 77, 90 leadership styles in various stages 229, 230, 231, 232, 233, 234 managing stage 76, 79–80, 90–1 S-curves in 76 venturing stage 76, 82–3, 91, 221 focus groups 153, 154, 293 forecasting by analogy 45 forecasts, compared with futurecasts 108 free business models 110 friendly relations between team members 260–1 friendships within innovation teams 260–1 front-office procedures, mechanisation of 16–17 fuel cards 17 funding of innovation programmes 280–3, 289 futurecasting overview 111–12 purpose of 108–10, 119, 300 recommendations on 300–2 futurecasting phase (in futureproofing process) 23, 24–5, 107–33 futurecasting stage (in Five Capability Model) 76, 80–2, 91, 301 leadership styles 230, 231, 233 team members and 253, 257 futurecasts 2, 24–5 business-level signals as input 113 compared with forecasts 108 constructing with scenario planning methods 119–25 example 114–19 individual-level signals as input 112–13 market signals as input 113, 222–3 as part of strategic planning process 82, 112, 214, 234, 301 predictions added to 130–1 signals as input to 112–13, 222–3, 302 futureproof institutions, characteristics futureproofing arguments against consequences of not doing 8–10 meaning of term as phase-gate process 24, 107 futureproofing process building out 89–93 execution phase 23, 27–8, 193–225 futurecasting phase 23, 24–5, 107–33 ideation phase 23, 25, 135–58 innovation phase 23, 25–7, 159–91 measures used in 13 optimisations in 26, 29 overview 23–9 gadgeteers 262 gadgets 10, 96 Gartner forecasts 125, 131 geeks 232 General Electric 181, 215 generation-Xers characteristics 248, 250 in main workforce 271 as team members 250–1, 252–3, 257, 259 generation-Yers characteristics 248, 251–2 in main workforce 271 as team members 252, 253, 258, 259 work practices 232, 252 genius teams 257–8 gift economy 110 goals of organisations 50, 51 goodwill 14, 177–8 Google 13, 86, 261 governance 196, 205, 268, 289 Grameen Rural Bank 19, 51, 71, 72 graphical user interfaces 57 green issues, cost implications 81–2 gunpowdered implementation 191, 195–6 hands-off approach to execution 194–5 HBOS (Halifax Bank of Scotland) 254 Heijden, Kees Van Der 119 high-effort innovations 170 example 171 high-level designs 180–1, 199 high-return innovations 167 IBM ATM magnetic stripe 18 ideas campaigns 138 idea creators 253–4 idea embellishers 254–5 idea perfectors 255 ideas capturing and evaluating 15, 138–40, 210–11, 291 disposition of 150–1 P1: JYS ind JWBK404-Gardner July 18, 2009 20:55 Printer: Yet to come Index execution of 14–15 gating criteria for classification 150–1, 292–3 keyword/tag assignment 139, 143 reason for not driving forward 135–6 ideas collection and cataloguing stage 140–3 ideas management system 135, 138, 143, 152, 291 ideas reward schemes 139–40, 224 ideation meaning of term 135, 290 role in futureproofing process 136 ideation campaigns 109, 132, 138 ideation phase (in futureproofing process) 23, 25, 135–58 campaign and create stage 137–40 collect/catalogue/compare stage 137, 140–3 customer insight stage 137, 153–5 futurecast used in 109 monitoring of 240 overview 136–7 recommendations on 290–4 scoring stage 137, 143–53, 291–2 impact of innovation, effect on likely returns 166–7 implementation mechanics, impact on launch process 211–12 implementation stage (in adoption decision process) 33, 36–7 implementers 255–6 improv teams 258 incentive systems 275–6, 293–4 incremental ‘escape hatch’ 151–2 incremental innovation(s) 5–6, 11 characteristics 12, 79, 90 examples 16, 17, 20 execution of 194 market innovations 71 product innovations 69–70 reasons to concentrate on 79, 90, 91, 152 reward systems for 275–6, 277 risk level 5, 12 team members’ attitudes to 249, 250, 251, 252 team structure for 259 incubators 221 individual heroics 77, 86 individual-level signals, as input to futurecasts 112–13, 140–1 industry–academic collaborations 189–91, 284 influence 14, 177–8 wasting 261, 262, 263, 264, 265, 303 influence maps 185–8, 297 influencing 186–7, 190 informal patterns 51 information asymmetry, failure caused by 201 ING Direct 5, 7, 11, 21, 195 Our Virtual Holland experiment 28 315 innovation characteristics 45–9 definitions 3–8, 288 difference from invention difference from optimisation 11 downside aspects 22–3, 162 firm’s perspective 50–7 history of in banks 15–22 market perspective 41–5 meaning of term 3–8, 288 misconceptions about 10–15 riskiness 11–12, 163–4 innovation adoption decision process see adoption decision process innovation antibodies 142 innovation business plan 79–80 innovation clusters 141–2, 293 innovation culture 270, 271 Innovation Digest email newsletter 211 Innovation Festival (AMP Bank) 131–3[case study] innovation influence maps 185–8 innovation infrastructures 87 innovation leaders collaboration fostered by 236 consulting role 237–8 delegating role 238 feedback organised by 238 knowledge diffusion fostered by 236 knowledge requirements 235 monitoring role 240 practices they should adopt 235–40 provision of vision by 236–7 recognition and rewards provided by 238–9 recruitment of 244–5 resources provision organised by 239–40 as role models 235–6 roles 235–40, 303 signs of bad leaders 240–4 innovation leadership McKinsey study 227–8 styles 228–35 Innovation Market 210–11, 223–5[case study], 256, 270 innovation models and theories 31–66 innovation pentagram 67–75 business models slice 68–9, 74–5, 160 channels slice 68, 73–4 experiences slice 68, 72–3, 160 IT systems and 94, 100, 207 markets slice 68, 70–2, 160 as means of managing innovation portfolio 69, 160 products slice 68, 69–70, 160 as threat map 69 usefulness 69, 160, 279, 290 P1: JYS ind JWBK404-Gardner 316 July 18, 2009 20:55 Printer: Yet to come Index innovation phase (in futureproofing process) 23, 25–7, 159–91 futurecast used in 110 monitoring of 240 objections raised during 110 recommendations on 294–7 innovation portfolio 12, 82, 159, 163–72 factors affecting 8, 29, 85, 260, 261, 294 managing 69, 79 monitoring of 240, 274 innovation programmes funding of 280–3, 289 recommendation for starting 287–90 survival times 13, 233, 259, 265, 283, 289, 290, 297, 303 innovation strategy 84–5, 288 innovation tax (funding) model 87, 281–2 innovation teams 247–65 basis of team member selection 247, 261, 265 continuing involvement after execution phase 197, 213–14, 299 different generations within workforce 247–53 effect of poor performing members 261–5, 303–4 Five Capability Model for 75–85 in Innovation Market 224, 245 involvement in compromise process 204 leaders 227–45 length of survival 13, 233, 259, 265, 283, 289, 290, 297, 303 members see innovators (team members) minimum number of people in 256 organisational configurations 277–80 people mix 230, 256, 289–90 relationships between team members 260–1 structures 256–9 team working in 256–61 innovation trauma 27, 203, 234, 298 innovativeness organisational 52 personal 38–41, 240–1, 244 innovators (adopters) 39–40, 42 in influence maps 185, 187 value of loss 215 ways of reaching/contacting 210, 211 innovators (team members) bad/poor performers 261–5, 303–4 generational differences 247–53 recruitment of 247, 261, 265, 289–90 types 253–6 insider trading, in Innovation Market 224–5 institutional politics 193–4 instrumental leadership 231 integration strategy (for managing IT/innovation divide) 102 intellectual property development 86, 221, 277 intellectual property protection 190, 283–4 interactive leadership 231–2 internal consultants, innovators as 282 Internet banking 7, 9, 20–1, 61, 73 bank-built system 182–3 compared with mobile phone banking 46, 47, 48 critical mass point for 131, 141 execution aspects 195 forecasts of use 128 perceptions about 35 security measures 34, 37, 47, 98, 196 value of lost customer(s) 215 interpersonal networks 42–3 Intuit software 20 intuitive predictions 125–6 inventing stage (in Five Capability Model) 76, 77, 90 leadership styles 229 team members and 252, 257 invention(s) difference from innovation(s) 8, 14–15 execution of 14–15 investment decisions, customer participation in 286, 287 iPhone 5, 48, 54, 213 IT/innovation divide 99–102 coopertition strategy 101–2 integration strategy 102 reduction strategy 100–1 IT innovation team 95–6 IT organisations cost cutting in 95 dry runs of new systems 97 innovation as sub-function 277 resource prioritisation in 93–5, 99, 101–2 standardisation in 97–8 IT security 98–9 IT systems architecture 97–8 reasons for change costs 96–7 ‘ivory tower’ innovation teams 257 jack-of-all-trades people 216 JavaStation 203 keyboard vs mouse practices 56–7 Killian, Annalie 131, 132 Kiva.org 71–2, 154 knowledge diffusion 236, 283 knowledge stage (in adoption decision process) 33–4 laggards 39, 41, 42 value of loss 215 P1: JYS ind JWBK404-Gardner July 18, 2009 20:55 Printer: Yet to come Index 317 late majority adopters 39, 40–1 value of loss 215 launch activities 196–7, 208–13 refining to optimise adoption decision process 210–13 leaders see innovation leaders leadership styles 228–35 charismatic 229–30 ideal style 234–5 instrumental 231 interactive 231–2 strategic 233–4 legacy system costs 22, 28, 94 lifetime-based mortgages 222 ‘lone rangers’ 264 low-effort innovations 169 example 171 low-return innovations 166–7 effect of innovation attributes on adoption 46–9 implementation issues 199, 254–5 UK market reaction 223, 254 mobile phone-based contactless payment system 22, 145–6, 147, 168, 169, 171 mobile phone-based payment service 70–1, 74, 171–2 mobile phone top-ups 5–6, 68 mobile-phone-as-wallet 22, 70, 145, 168 models and theories 31–66 Monilink 181 Monte Carlo analysis technique 130 mortgages lifetime-based 222 refinancing of 35–6 Moss, Frank 189 multiple innovation teams 277–8 M-Pesa mobile phone-based payment service 70–1, 74, 171, 184 McKinsey studies 227–8, 272–3 managing stage (in Five Capability Model) 76, 79–80, 90–1, 297 leadership styles 230, 231 team members and 252 market-based innovation 68, 70–2, 160 market intelligence 184–5 market perspective on innovation 41–5 market research 153–4, 206, 293 market signals, as input to futurecasts 113, 222–3 mass marketing 210 matching phase (in adoption decision process) 53, 54–5 measurement of innovation results 13, 271–4 mechanisation 4–5, 17 medium-effort innovations 169–70 example 171 medium-return innovations 167 meeting room booking system 177 mega-hits 13–14 metrics for IT 96 metrics (of innovation activities) 13, 271–4, 289 in Bank of America 86, 272 MICR (Magnetic Ink Character Reading) microfinance 18–19, 71 in combination with peer-to-peer lending 71, 72 Microsoft 54, 261 mistrust of subordinates 242 MIT, collaboration with Bank of America 188 mobile phone banking 21, 36, 45, 61, 181 compared with Internet banking 46, 47, 48 National Australia Bank 36–7, 47, 98 net benefit of innovation 174 Netbank network externalities 162, 184 new-product revenue, as innovation metric 272, 274 new things building 198–208, 299 innovation and 11 NFC (near field communication) systems 70 NFC-based mobile phone-based payments example effort requirements 171 hardware considerations 253–4 priority score 171 process considerations 219 return calculations 169 scoring 145–6, 147 Nokia, Venture Organisation (NVO) 221, 277 non-profit organisations, transparency requirement 287 normal distribution 150 ideas scoring 150–1 innovation adopters 39 Northern Rock 75 number of product and patents, as innovation metric 86, 272 observability, speed of innovation adoption affected by 45, 47–8 online address change [fictional] example effort requirements 171 priority score 171 return calculations 169 scoring 145, 147 online auctions 64 P1: JYS ind JWBK404-Gardner 318 July 18, 2009 20:55 Printer: Yet to come Index online banking 7, 9, 20–1 broadening of scope 203 forecasts of use 128 perceptions about 35 security measures 34, 37, 47, 98 online payment systems 9–10, 21 open innovation 181–2, 221–2, 278 operating cost-only funding model 281 opinion leaders 40, 43 opinion polls 128 optimisation difference from innovation 11 in futureproofing process 26, 29 organisational hierarchy, innovation and 277–80 organisational slack, effect on innovation 52 organisational will 178 autonomous innovations affected by 103, 178 organisations, characteristics 50–2 output metrics 86, 271–3, 274 oversight of innovation programmes 88, 156, 196, 205, 268–71, 279, 289 owning and operating innovations 197, 213–14 paired friends, as innovators 261 panel research 153 Parker, Janet 229 ‘parking lots’ for ideas 150, 151 patents 86, 272, 274, 277, 283 PayPal 9–10, 21, 63–5[case study], 184, 220 peer review of innovation team’s activities 238 peer-to-peer (P2P) lending 7–8, 24, 68–9 as alternative to bank lending 116–17 banks’ involvement 117–18, 287 in combination with microfinance 71, 72 effort requirements 170 expected returns 167–8 failure of experiments [futurecast] 115–16 futurecasts about 114–19, 301 priority score 171 pentagram see innovation pentagram people aspects of implementing breakthrough innovations 215–17 perfector-implementers 256, 264, 304 perfectors 255 performance gap 53 person-to-person payments 9–10 personal computers, workplace restrictions 271 personal finance management websites 72, 73, 162, 184–5 personal innovativeness 38–41 of leaders 240–1, 244 of team members 247, 303 persuasion stage (in adoption decision process) 33, 34–5 phase-gate processes 24 pilots 206–8, 299 as innovation metric 273–4 learning dimensions 207 play-not-to-lose (PN2L) innovation strategy 84–5, 170, 270, 288 funding for 282 innovation types 85, 294 metrics for 273, 289 rewards systems for 275, 293 see also incremental innovations play-to-win (P2W) innovation strategy 84, 170, 233, 270, 288 adoption by Casa Navarra 285, 287 funding for 282–3 innovation types 84, 294 metrics for 271, 289 rewards systems for 275, 293 pneumatic delivery systems 111 political forces (in scenario planning) 123 politician, as innovation leader 243–4 Pollock, Avi 156, 157 portfolio approach to innovation investments 12, 82, 159, 163, 294 post-launch operations 213–22 prediction markets 112, 128–9, 224 prediction methods 112, 125–31 predictions added to futurecasts 130–1, 302 meaning of term 112, 114 peer-to-peer (P2P) lending 130–1 prioritisation of innovations 170, 171 process-based innovation metrics 273, 274 process considerations, in implementation of breakthrough innovations 219 processes and controls 267–84 product innovations 68, 69–70, 160 project teams (for implementation phase) 198 factors controlled by 198 proofs of concept 178–80 Prosper.com (P2P site) 131 prototypes 178–80, 206, 296 prudence ‘puppy drowning’ process 171–2, 193, 221, 228, 295, 296 effect on team relationships 260, 261 idea perfectors’ attitudes 255 as performance measure 274 risk avoiders’ attitudes 241 QuantComm 189 quantum computing 254 question-set methodology (for scoring of ideas) 143, 144–8 Quicken software 20 P1: JYS ind JWBK404-Gardner July 18, 2009 20:55 Printer: Yet to come Index recognition for effort (of innovation team) 238–9, 275 recommendations (for starting new innovation programme) 285–304 recruitment, innovation team members 247, 261, 265, 289–90 redefining/restructuring phase (in adoption decision process) 53, 55 reduction strategy (for managing IT/innovation divide) 100–1 reinvention of innovations 37 relative advantage, speed of innovation adoption affected by 45, 46 reliability 217–18 request for information (RFI) 54 request for proposal (RFP) 55 requirements document 198–200, 298 resources provision (for innovation team) 239–40, 280 retail financial services 19 retail sector, online banking broadening into 203 return on investment, as innovation success measure 271–2 returns on innovations calculating 164–8 timing considerations 167, 280–1 revolutionary innovation(s) 5, 69, 194–5 costs 14 examples 16, 18, 19, 195 execution of 195–6 reward systems for 276, 277 risk level 12, 14 support required 14 team members’ attitudes 251 reward systems 139–40, 224, 275–6, 293–4 risk avoiders 240–1 risk and security 98–9 risky nature of innovations 11–12, 163–4 Rogers, Everett M 38–9 Rogers curve 39 role confusion, failure affected by 201–2 roles, organisational 51, 52 routinising phase (in adoption decision process) 53, 56–7 Royal Bank of Canada (RBC) 137, 156–7 Innovation Council 156, 157, 268–9 Next Great Innovator Challenge 156–7[case study] rules and regulations 51, 55 S-curves 41, 42 effect of innovation attributes on 45–6, 49 in execution phase 212, 223 in Five Capability Model 76 in futurecasting phase 128 319 in ideation phase 141 in predictions 131 scalability 218–19 scattergun approach to marketing 210 scenario planning 24, 81 books on 119 futurecasts constructing using 119–25 step 1: determine focal point 119–20 step 2: examine local environment 120 step 3: examine driving forces 120, 121–3 step 4: ranking of driving forces 120 step 4: scenario mechanics 120, 124 step 5: creation of futurecasts/stories 123, 125 step 6: flesh out stories with predictions 125 Schumacher, Hans 188 Schumpeter, Joseph 8, 14 Schwarz, Peter 119, 123 scope creep 202–3 scoring of ideas 143–53, 291–2 by evaluator networks 149–50, 292 deadpools 151 incremental escape hatch 151–2 more-advanced scoring instrument 146–8 parking lots 151 setting score ranges for idea destination 150–1, 292–3 simple scoring instrument 144–6 weightings 148–9 wisdom-of-crowds approach 152–3 screen-scraping application 15, 21, 161 Sears, Roebuck & Co 19 securitisation of loans 74–5 Security First Network Bank 20–1, 22, 183 security measures in Internet banking 34, 37, 47, 98, 196, 217 security and risk 98–9 security strategy 217 seed budget/capital 87, 283, 289 self-service 18, 19, 47, 61, 73–4 forecasts of use 127–8 selling of innovations 160, 185–8 shared innovation service 278 Shepherd-Barron, John 227 ‘Should we?’ question 160–1, 295 requirements document and 199 tools for 173–6 Shreero, Jim 155 silo-based innovation teams 3, 277–8, 279, 290 Six Sigma 86 smartcards 20, 128 SNS Bank, self-service kiosk cushions 74 social forces (in scenario planning) 121 social media sites 102, 104–6[case study], 114, 154, 157 internal adoption of 57–9[case study], 236 P1: JYS ind JWBK404-Gardner 320 July 18, 2009 20:55 Printer: Yet to come Index social networks 42–3, 52, 57 P2P lending on 116–17 restriction on use 271 speculative nature of innovation 11–12 staff suggestion schemes 138–40, 277 stage-gate processes 23–4, 25, 107, 109, 300 Stanford University 4, 181, 215 start-up companies, breakthrough operations similar to 216 statistical prediction methods 129–30, 302 STEEP analysis (in scenario planning) 120, 121–3 steering committees 196, 205 ‘stories’ for future thinking 81, 109, 123, 125, 301–2 in AMP’s Innovation Festival 132 strategic leadership 233–4, 278 strategic planning process, futurecasts as part of 82, 112, 214, 234, 301 strategy teams, innovation leaders recruited from 244 suggestion schemes 138–40, 277 anonymous approach 139 ‘spray and pray’ approach 138 Sun Microsystems 203 support during implementation process 212 ‘survival of the fittest’ approach 23 sustaining innovation 6–7, 22 contrasted with disruptive innovation 6–7, 60, 61, 230 in Five Capability Model 76 product innovations 69 switching services (moving to new product) 212 talkers (bad innovator type) 263 team working 256–61 teaming 251 teams see innovation teams technological forces (in scenario planning) 121–2 technological issues, high-level designs and 180 technology in implementation of breakthrough innovations 217–19 innovation and 93–102 technology-based innovation teams 279, 290 telegraph (messaging system) 16 telephone banking 19–20, 61 testing of end-product 205–6, 208 of IT changes 97 Threadless t-shirt company 156 threat map, innovation pentagram as 69 top-down innovation programmes 83, 233, 278–9 Toyota 11, 15 traditionalists characteristics 248–9, 248 as leaders 242–3 in main workforce 271 as team members 249, 252, 253, 258, 259 transparency tyranny 114 trends 108 recurring ideas as sign of 110, 140 in scenario planning 120 trialability, speed of innovation adoption affected by 45, 48–9 trials, effect on adoption 36, 206, 211 Twain, Mark 129 Vancity credit union, ChangeEverything project 104–6[case study] venture capital firms 12 venturing stage (in Five Capability Model) 76, 82–3, 91, 221 leadership styles 230, 231, 233, 234 team members and 253, 257 Videotex 19–20 viral marketing 64, 209–10 virtual banks 5, 7, 20–1 virtual stock exchange for ideas 224 visible face of innovation 283–4 vision, provided by innovation leader 236–7 WAP (Wireless Application Protocol) 254–5 Web 2.0-based ventures 57, 73, 189, 208 Wells Fargo 57, 72 ‘When?’ question 161–2, 295 requirements document and 199–200 tools for 182–5 wisdom-of-crowds prediction methods 112, 128–9 wisdom-of-crowds scoring of ideas 152–3, 155 word-of-mouth effects 37–8 workshops on innovation 89, 262 Yanus, Muhammad 18–19, 71, 72 Yodlee Corporation 15, 21 Zopa 7–8, 68, 74, 116, 167 ... likely to change the face of banking forever It was a sign, many thought, that the branch was dying, if not practically dead already Netbank failed in 2007 The failure, according to prominent analyst... wanted to was talk about doing innovation and have someone take his ideas and implement them Some of the things he was talking about actually were revolutionary But the problem with all of them was... revolutionary innovation has its challenges I once had someone come up to me and explain that he’d just joined the bank and wanted to ‘revolutionary innovation The problem was that what he really wanted