It is no surprise that 'innovation' is the word on every leader's lips. We stand at a major inflection point in the history of business: the tipping point from businesses being human-led to being technology-led. This transformation has significant structural implications for today's organizations, especially in the financial services sector. However, organizations risk becoming overwhelmed not only by the ever-increasing number of technologies but also by the impact of those technologies throughout the business, from long-term strategic planning to day-to-day operations.

Simply put, many financial institutions are threatened by this pace of change. Innovate too slowly and risk losing market share to new entrants and faster competitors; innovate too quickly and risk failure on a large, even catastrophic, scale. Yet as financial institutions look to shape their paths forward, many overlook some of the greatest sources for signals of future change: our customers and employees.

Seeking signals of change

All innovation starts with direction, and proper strategic direction cannot be created without context. This context can take many forms, from macroeconomic, demographic and customer trends to ethnographic research and other targeted inquiries. These inputs are collectively known as signals of change. As discussed in KPMG's deep-dive report on changing customer behavior, Me, My Life, My Wallet (PDF 2.9 MB), these signals show the root causes behind customers' decision-making processes and provide insight into how and why customer behavior is changing. Armed with this information, organizations can predict not only current trends but also future demand, creating the foundation for a forward-looking innovation strategy that responds to emerging needs.

However, while many organizations have processes to track and monitor large shifts in markets and customer mindset, smaller signals of change – even those that form early signals of market inflection – can often go unnoticed for weeks, months or even years.

Today, institutions are waking up to the fact that micro trends surrounding customer behavior, employee feedback and more are all 'gold dust': seemingly inconsequential when viewed alone, but together creating something of far greater value. However, properly gathering, assessing and using this information requires a shift in mindset. Rather than thinking about customer satisfaction, employee feedback – or even, broadly speaking, innovation strategy – financial institutions need to think about the process of transforming insight into action.

Transforming with customers, for customers

Consumers, especially in younger generations, have fundamentally changed how we all interact with brands, where and how we shop, and what we expect of the organizations with which we engage. Digital firms and online retailers are increasingly raising the bar for what constitutes a great customer experience, from methods and ease of interactions to expected response times. Increasingly, these customer expectations are permeating the financial services industry – and many traditional players are falling short. As a result, customer feedback provides valuable insight into not only pain points and frustrations of today's consumers, but also their current expectations for base-level customer experience.

Employees, too, are a great source of signals of change for two reasons. Not only do they have direct on-the-ground experience with customer needs, wants and behaviors, but they are also consumers themselves. There may often be a disconnect between individuals' experiences and wants as a customer and their experiences in the workplace environment. Employees are generally underwhelmed by enterprise technology as compared to consumer technology; this is especially true in financial institutions for which legacy technology still provides the organization's operational backbone.

Employees with front-end customer engagement experience often have significant insights into not only patterns of customer behavior, but also the 'whys' of customer motivations and pain points that influence demand. However, while front-end employees understand the issues, they often lack the power to influence or create change. The failure to listen to the employee base or provide the mechanisms to enable them to spark transformational change is akin to washing gold dust down the drain.

Panning for gold

Organizations seeking to derive greater value from customer and employee insights are recommended to:

  1. View your customers as an external R&D department. While almost all organizations have customer feedback mechanisms in place, few make concentrated efforts to actively solicit customer ideas for innovation or change. It is time to look beyond the stale script. Instead, seek ways to harness the power of your customer base by creating a platform that allows your customers to tell you what they want from the organization. As in a true gold-panning process, finding value – whether gold dust or those precious, rare nuggets – requires sifting through a lot of silt. The results, however, often pay off far beyond the initial expenditures.
  2. Crowdsource employee insight and solutions. Crowdsourcing platforms and idea management tools inside the organization can create a powerful source for signals of change, as well as delivering a range of potential innovations. One example is HSBC's Spark Community crowdsourcing platform, released to more than 10,000 finance function employees across 70 countries, with users incentivized for creating ideas and generating discussions. The Spark platform has proven an excellent forum for sharing best practice ideas, breaking down barriers between regions, and creating an open and active forum for innovation. The benefit of this approach is that employees feel like they have a voice in shaping company innovation and an ability to contribute to change. The downside is that submitted ideas can be fragmented and attempts to implement recommended changes are often underfunded, occurring as they often do beyond the scope of larger transformation projects. This suggests two things: signals and suggestions must be funneled into the broader innovation strategy and used to influence direction, and organizations should use communication methods to demonstrate how submitted feedback is contributing to both quick wins and longer-term transformation. 
  3. Transform insight into action. Even the greatest insights are worth nothing if they do not prompt action – or if that action comes too slowly. History is littered with companies getting it wrong, from passing up opportunities to buy or invest, to choosing not to see innovation through to fruition. In finance, blockchain is a great example of a technology on everyone's radar, but with which few organizations have fully engaged. By misunderstanding the immediacy of the signaled changes and choosing to monitor and wait rather than act, organizations can swiftly fall behind.
  4. Listen beyond the echo chamber. While there is a lot of talk about top-down and bottom-up innovation, it is also important to develop an 'outside-in' perspective. As changing technologies, customer expectations and other factors put pressure on organizations to accelerate the speed of innovation, it is common for organizations to become too inward focused. Instead, this is the time to look outward to see how the same forces are shaping the broader patterns of thought and behavior in the world, and how these disruptive factors and technologies are playing out in other industries. Listen to your customers and employees, actively solicit feedback, and look to see how innovation is shaping organizations in other sectors and geographical regions.

Fact is, with the current pace of change, organizations need to constantly monitor their environments for signals of change that occur both inside the industry and without, and rebalance their innovation priorities at least once a year. Once this monitoring strategy is in place, customers and front-line employees can not only be great sources for signals of change, but they can also provide innovative ideas and inspiration for execution.

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