Jeff Judy

Jeff's Thoughts - September 6, 2017

Innovation I: Why Now?

Is innovation in your credit business a current priority for your institution?

Oh, I am sure it is on your list of values. I am certain that every member of your leadership team is "committed to innovation."

But are you taking action? Are you trying to make changes in your credit practices? Are you developing and implementing new business strategies?

In most organizations, change is largely a reaction to events, rather than a strategy that anticipates events. Without clear immediate threats, it is human nature to settle into "business as usual," and it takes real effort and foresight to get out of that rut.

For most financial institutions at the moment, immediate pressure to change how they do things is low. The economy may be a little quirky, but it is basically sound and profits are good. Why change when things are going well?

Change is hard. It takes time: time to formulate the best plan, more time than you ever think to implement the change, including time to make corrections when the original plan is not perfect. Change is best made from a position of strength, when you have the time and the resources to get the best outcomes.

Right now, while things are good, is the perfect time to craft strategies against potential threats.

And make no mistake, the threats are out there and significant challenges to your business are inevitable. Take fintech, for example. Especially among the younger customers you need to build your future, more and more of them are keeping their money in on-line only deposit accounts, while they think of "getting a mortgage" as something you do on a smartphone.

Or consider the next downturn. Somehow we always forget that ours is a reliably cyclical industry. The last downturn taught us some powerful lessons, but how many of those lessons have faded away in the last ten years? When the next downturn arrives, will you be re-inventing your responses to conditions all over again?

For a double whammy, put these threats together: when the next downturn comes, how will your fixed costs compare to your fintech competitors? Do you think can you cut back enough to hold your own against this technology?

Don't be forced into desperate, hastily improvised responses to threats that will grow over the next few years. You will need new ideas, new products, new actions, new practices, and you will need them to be adopted by your entire workforce. Start preparing for those changes right now.

In the next issue of Jeff's Thoughts, I'll have more to say about the role the workforce plays in innovation.