As early as in 1967 Drucker formulated the famous notion: “There are only two value-adding activities in an organisation: “Innovation” and “marketing”. However evidence show that not much innovation are going on in the financial service industry, where banks and other financial institutions are absent form Business Week´s annual ranking of the Top 25 most innovative companies.
This statement is widely supported by both practitioners as well as theorists. Andy Maguire, global head of asset management at BCG, notes that: “Not a lot of innovation has gone on in the banking industry over the past 1000 years”. Eric Von Hippel further elaborates on this saying: “automating systems, processing loans more efficiently, designing new financial instruments and new trading programs are not innovation”.
It is believed that the reason lies in the business model of the financial institutions that can deliver consistent profit: Pay out less interest to depositors than is paid to them when they on-loan the money. This must be seen in the light that the industry has until recently been protected by complexity of product and prices, an advantage that has disappeared along with the emergence of the Internet.
As a consequence of the increased competition sparked by the globalization, even the financial institutions have been forced to think in untraditional ways. This has amongst other things led to the increased focus on active brand management but also on innovation. Deutche Bank and Citi Group have been among the peers and have long ago hired an CIO (Chief Innovation Officer). They have reached a few similar conclusions.
1: Proactive rather than reactive impulses are needed. & 2: Innovation should be customer driven.
The first conclusion is identified by Aaker (1996) as the solution to the wide spread problem of passive brands. “There are countless examples of strong brands that neither saw nor responded to opportunities, then watched competitors innovate and attack the core of their equity” (David A. Aaker
1996, pg 32).
The second conclusion that points at innovation must take its point of departure in the customers need is essential, as most financial service companies take the reverse approach, where innovation is a product of what technology allows.
Evolution and Trends of Brand Management read here
Brand Experience Management read here
Management of Touch-points read here
Brand values read here
Brand innovation management read here
New Research Techniques focused on Consumers as a Consequence of the trends read here
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