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The State of Innovation in Financial Services

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financial services innovationAs we are now deep into Q1 2017, analyst firm Celent recently released the results of a survey on the state of innovation within financial services. The findings, compiled and authored by Mike Fitzgerald, show that while the industry overall has been slow to adopt and promote innovation, firms understand that clients have come to expect a higher level of technological integration and service; therefore, progress to meet that demand is underway.

Imperative to the adoption and practice of innovation is the presence of an influential individual or team within an organization that can promote and champion technologies. More often than not such persons reside with a firm’s C-suite, and this survey shows which titles are currently most aligned with the pursuit of innovation and which ones have become increasingly so over the past three years.

The survey was completed by nearly 200 financial services professionals and can be accessed by Celent clients here. For those who are unaffiliated, the following bullets are highlights from the report.

Industry Assessment:

  • Eighty-two percent of respondents said customer expectations are changing rapidly, so firms are under pressure to keep up.
  • During the 2013 survey, 26 percent of respondents saw innovation as critical to their firm’s strategy. That figure doubled to 52 percent in 2016.
  • While 92 respondents (roughly half) believed that their respective firm innovated the same as peers, 100 said that financial services on the whole innovated worse than other industries.

Organizational Assessment:

  • In terms of a formal program to spearhead innovation, 28 percent of respondents said their firm had no such entity. Surprisingly, of those without a program, almost one-fourth earned more than $5B in annual revenue.
  • Of firms with formal programs, 75 percent of respondents said innovation occurs at an 80/20 (incremental/disruptive) or greater effort allocation ratio.
  • What might be the most disconcerting finding is that 28 percent of those with no formal program were satisfied with their firm’s management of innovation.
  • In terms of YoY (2013 to 2016) C-suite net promoter scores—those executive leadership roles that publicly support a company’s innovation efforts—CIOs rose from nine to 44 percent, COOs -17 to 24 percent and CEOs 12 to 40 percent. Chief Innovation Officers have continued to stay at the top, inherently so; however, only 36 percent of those with innovation efforts currently in place had such a title in their C-suite.

But What Does It All Mean, Basil?

Two conclusions can be drawn from this survey’s data: The full adoption of innovation within a firm seems to occur over the course of three stages; and the existence of those stages allows for the careful, incremental introduction of technology.

Initially, the market dictates a need for innovation. Firms can ignore this directive for only so long before realizing they should and must embrace the promise of innovation if for no other reason than to remain competitive. Lastly, in order for an organization to achieve success in managing innovation, they need to construct an effective internal support network and allocate the appropriate level of resources. Based on this latest survey, it’s clear that the leaders of innovation within financial services have already entered this third stage.

This gradual approach to fostering innovation is not exclusive to financial services. As one UI executive recently noted, individuals will more often than not only embrace change if it doesn’t drastically disrupt their normal day-to-day movements and activities. Thus, only those technologies that can be broadly implemented but individually tailored to the behavioral norms of employees will achieve success both in terms of operational ease and user adoption. It will be very interesting to see how this innovation momentum plays out amongst financial services leaders and laggards in 2017.
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