/ BANK TECH /

Many traditional banks riding the wave of tidy recent profits may be tempted to put their faith in business as usual. But

that would be a mistake. More than ever, f inancial institutions that are unpre-pared to accelerate innovation at speed and scale face serious—even existential—business threats.

The banking industry is squarely i n t he pat h of a per fec t s t or m of disruption: increased exposure to geopo-litical uncertainty, dramatically shifting sociodemographic trends, the accelerat-ing pace of technological advancement, the pervasiveness of data, and the evolv-ing nature of risk.

Among the threats today are fintech disrupters and nonbank competitors, which are challenging the banks’ tra-d i t ion a l m a rke t p o s i t ion , ju s t a s

millennial customers demand increas-ingly novel products and ser v ices. Moreover, the mountains of data that f inancial institutions are taking in require constant and effective collec-tion, analysis, and utilization.

In response, organizations are trying to upset their own status quos. Banks know they need to innovate to continue growing and thriv ing. According to Ernst & Young’s Global Banking Outlook 2017, a recent survey of senior executives shows that 63% are prioritizing hiring or retaining key talent to drive innovation, and 60% are investing in new customer-facing technology.

Clearly, many banks are innovating. But just how they innovate could mean the difference between success and fail-ure. To gain the maximum benefits of innovation, banks need to do a better

job br inging together what we ca l l their “suits” and “jeans.”

Weaving different threadsSuits represent the traditional busi-ness functions, such as operations, accounting, compliance, and tax, which enable an organization to operate at scale. Jeans represent the disruptive trends, such as digitization, blockchain, artif icial intelligence, robotics, and advanced analytics, which are enabling new ways of working and challenging business models.

The integration of suits and jeans is critical for an organization to scale inno-vation across the enterprise to unlock significant business value.

A s EY ’s Global Banking Outlook shows, many firms have already ramped up hiring in jeans’ functions to encourage

UNITE “SUITS” AND “JEANS” Two pairs of “them” must become an “us.” Otherwise your innovation may miss the mark By Roger Park, Financial Services Innovation Leader, EY Americas

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innovation, both internally and at the enterprise level.

But to truly industrialize innovation, jeans cannot operate in a specialist tech silo. Banks must be intentional about linking their jeans to their suits, who have direct insights into the specific busi-ness challenges facing the organization.

5 tips on uniting culturesSo how can banking executives trans-form their operations by creating a culture where suits and jeans can accel-erate innovation? Leaders need to introduce and embed these five concepts across their organizations:

1. Take a fail-fast portfolio approach.Innovate like companies do in the Sili-con Valley. By continually testing and experimenting with business technology and allocating incremental funding to opportunities that demonstrate a prod-uct-market fit, organizations can turn innovation into a core revenue genera-tor and get initiatives to market more quickly and cost effectively.

The faster you are able to f ind out something is going to fail, the sooner you can stop wasting time and energy and apply your lessons learned to the next idea in the pipeline.

2. Provide a more collaborative, diver-sity-minded team culture.Bring together to the table the suits and jeans to pull from all available knowl-edge and get everyone aiming toward the same goal. This helps turn cultures of “no, because” to “yes.” The buy-in created by ensuring every function has some skin in the game will help teams collaborate and discover how they can make work the seemingly impossible.

3. Product management is the new project management.Instead of simply relying on the proj-ec t ma nager s who a re foc used on delivering assigned tasks, get more d ay-t o - d ay i nvolvement f r om t he produc t managers who clearly see

business challenges, opportunities, as well as needs.

P r o duc t m a n a g e r s c a n put t he full-stack team on the path toward innovation by employing tools like agile development systems, while helping the enterprise keep up with the pace of change. This approach allows work to occur simultaneously, in place of tradi-tional methods that have work streams completed sequentially.

4. Focus on design thinking.Emphasize design thinking and agile development principles across the orga-nization. This starts from the top of the organization, and helps create a work-place culture that fosters innovation, encourages collaboration, and breaks down silos among different groups.

5. Put in physical innovation labs.The se phy sic a l spa c e s , wh ich a re extended by virtual tools, create a place outside the bank’s traditional centers where a dynamic, innovative culture can accelerate and grow.

Innovation labs act as hubs where a bank can eliminate organizational walls, bring together suits and jeans, and

conduct controlled experimentation in an environment of accelerated learning.

Pay attention to disrupters Many traditional banks may be enjoying healthy profits today, but remember, dis-rupters lurk around every corner. To stay ahead of the game, financial institutions must disrupt themselves before external forces do it for them.

Uniting suits and jeans should be a critical part of a bank’s necessary transformation efforts. In an era when business and technology move at light-ning speed, banks must keep in mind that one of us is not smarter than all of us together.

By more effectively connecting the different kinds of expertise across orga-nizations, f inancial institutions can bring to bear their best thinking on their business challenges, and help ensure that innovation becomes a con-tinual, accountable, and dynamic core function today.

Roger Park, Financial Services Innovation Leader, EY Americas

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Reprinted from Banking Exchange December 2017/January 2018