Few industries have experienced digital disruption as financial services have. In recent years, established banks have had their lunch served to them by smaller, more nimble start-ups such as Mint.com and Bankrate.com, which rely on digital to provide services such as money management. But the big brands can win by disrupting themselves, according to Forrester Research Vice President Catherine Graeber, who spoke November 5 at the 2013 Forrester Research eBusiness & Channel Forum, a marketing event whose theme is “Lead the Digital Business Revolution.”
“Gone are the days when all you had to worry about was the competitor down the street,” she said to attendees such as State Farm and USAA. “We have digital disruptors coming at us from other industries. To build the next generation of financial services, you must digitally disrupt yourselves.”
To underscore the threat of digital disruption, Graeber reviewed the many ways that unknown firms have taken on big players via digital. And the examples are legion. They include startups such as Bankrate.com and comprethemarket.com, which have disrupted by helping consumers make better financial decisions. Others, like mint.com, provide digital money management services — just to cite a few examples.
What the smaller, more nimble technology firms have in common is a keen understanding of how to service consumers who comfortably rely on digital (and, increasingly, on their mobile devices) to manage life events such as buying homes. The disruptors, which include device makers and platform providers, know how to capitalize on digital’s low barriers to entry to “come between you and your customers in a big way.”
But the nimble startups don’t own the future of financial services. In Graeber’s view, the big brands can succeed also by adopting an innovator’s mindset and disrupting themselves. “The ability to create an innovator’s mindset will separate the winners from the losers” in financial services, she said. She cited three companies that are doing just that:
USAA: Innovating for a Better Insurance Claim Insurance Experience
USAA was challenged by customers who were frustrated with the process of filing claims for automobile accidents. Customers said it took multiple phone calls into USAA to provide all the information required to report an automobile accident. And multiple, lengthy phone customer service calls increased costs for USAA. So USAA created a mobile app that allows customers to use animation and voice-over to describe an accident, including details such as the vehicles involved the circumstances that caused an accident. USAA got the idea came from a competition among employees to develop innovative ideas.
The employee who generated the idea was inspired by a child’s video game. The results: an increase in customer satisfaction with the claim experience and a reduction in USAA’s costs to take a claim (because fewer phone calls with representatives are needed). Moreover, the experience differentiates USAA from its competition. No one else allows you to make a mini-movie of your own accident.
Australia’s Commonwealth Bank: Innovating Around Mortgage Lending
Commonwealth Bank realized that consumers need more guidance when searching for a home. So the bank created a mobile app, the Property Guide, that uses augmented reality to help home buyers tour potential homes and research details ranging from home prices to neighborhood property value.
Commonwealth Bank creates value by being a utility for the consumer. The bank makes the home shopping decision easier for digital consumers, and empowers them with relevant data. According to Graeber, Property Guide has helped the bank establish itself as the preferred lender and build brand equity around its reputation as a customer service provider.
Isracard: Providing Service though a Digital Personal Assistant
Isracard, based in Israel, realized that its digital consumers could not get “human-assisted” help without exiting their password protected sites and calling customer service representatives — which was frustrating for consumers who wanted to address problems while they were still online, and also costly to Isracard.
So Isracard worked with Peronetics to create a digital personal assistant that provides web and mobile help for more than 200 customer needs, such as answering questions about unrecognized fees — akin to “Siri for the secure site.” The digital personal assistant handles 88 percent of customer service sessions without relying on a call center representative. Results: the bank has created a faster, easier user experience and reduced credit card servicing costs.
So what do these companies have in common? According to Graeber, they all generate ideas adjacent to their businesses. They don’t try to build entirely new businesses from the ground up or try to create new customer segments — they find ways to “innovate the adjacent possible.” Innovating the adjacent possible means uncovering an unmet customer need related to services you provide already. Firms that innovate the adjacent possible ask three questions:
- What is desirable to users?
- What is viable in the marketplace?
- What is possible with technology?
“Many firms excel by creating technologies that are viable, but they fail because they do not meet a consumer need,” she said.
Being successful like USAA, Isracard, or Commonwealth Bank means adopting an innovator’s mindset. Having an innovator’s mindset means that you:
- Think through your innovation energy, skills, and policies.
- Harness open innovation by generating more ideas, more quickly.
- Look for ways to give customers more of what they need, more conveniently than before.
- Don’t get obsessed by a search for “big” innovation; look for adjacent possible innovations.
- Don’t aim for perfection; get your idea out there and learn.
- Partner promiscuously.
“To innovate, you don’t need to be like Apple and change entire industries,” she said. “Innovators examine what services they provide today and find an adjacent way to innovate.”