By Bill Waid
It’s been almost a century since Thomas Edison left us, but he left behind an idea that banks ought to be cashing in on.
To some financial services executives, it can feel like a punch in the gut to watch digital-first fintech upstarts — many of which offer just a slice of what traditional banks have in their product portfolios — picking off their customers, friends, even family members.
For more than a century, large traditional banks had all the advantages to become a one-stop shop for every conceivable cradle-to-grave financial services product customer could ever need: broad offerings, decades-long customer relationships, and deep community roots. But fintechs continue to gather market share with clever, sticky and ubiquitous solutions for mortgages, car loans, HELOCs and every other banking product.
How can traditional banks retain their customers, and quickly create digital user experiences to entice new ones? The key to building game-changing user experiences lies in banks’ abilities to collaborate, innovate, and accelerate the creation of enticing new offerings, presented in a compelling digital manner.
They need what Thomas Edison, one of history’s most prolific inventors, called an “invention factory.”
Back to the future
Nearly 150 years ago, Edison conceived the idea of “applying the principles of mass production to the 19th century model of the solitary inventor” or, put simply, a non-stop assembly line for innovation. In March 1876 in Menlo Park, New Jersey, Edison opened his own R&D lab, hiring top scientists, engineers, physicists, mechanics, machinists, and draftsmen, and giving them a single mission: research, develop and manufacture ground-breaking new technologies, all under one roof.
Did it succeed? Once in operation, Edison’s laboratory began unleashing astonishing new inventions at a dizzying pace: he and his associates quickly introduced the electric copying machine (1876), phonograph (1877), incandescent light bulb (1879), electric utility (1880), motion pictures (1888), and hundreds of other innovations. In all, Edison secured 1,093 patents in an astonishing array of different fields, earning him the nickname “Wizard of Menlo Park.”
But it wasn’t wizardry: Menlo Park was successful because it enabled Edison to harness the talents of a dream team of the smartest engineering minds from all over the United States and Europe. Together, they worked as a collaborative team — sharing their expertise and the results of their many experiments — while scrutinizing colleagues’ ideas, challenging one another’s assumptions and pushing for better answers. The result was mass-produced ideation and invention at a breakneck pace. More than any single product, Edison called this approach to innocation his most important invention.
A platform for banking innovation
Edison’s 19th-century scheme for innovation applies in the 21st century as well. Granted, modern banks cannot bring everybody under one roof, as Edison did, to make all the decisions needed to foster and prioritize innovation; they have thousands of employees, business divisions and branches spread out all over the world.
But banks can create a “virtual invention factory,” using cloud computing and an enterprise decisioning platform to seamlessly connect domain experts from around the globe. Instead of engineers, banks can use a platform to coalesce the thinking of their best IT personnel, risk and fraud experts, credit analysts, loan processors, underwriters, marketers and many other types of knowledge workers who bring unique expertise to the customer experience challenge.
A growing number of companies worldwide are finding that the platform approach fosters enterprise-wise collaboration and synergy among people, processes, and legacy technologies, in order to maximize:
- Collaboration. Banks like to say that “our people are our greatest asset.” A platform makes that come true, by unifying all domain expertise across a bank, and making it sharable and interoperable across all departments and applications. By fusing customer insights from every vantage point, banks enjoy a composite¸ omnidirectional view of every customer and prospect in real-time. This allows them to maintain a complete, actionable strategy for every consumer, and identify personalized up-selling and cross-selling strategies before the needs even emerge.
- Innovation. Armed with a unified view of the big picture, and a 360-degree understanding of each customer’s needs, domain experts are able to think and work synergistically, feeding off one another’s ideas to create ingenious new customer-facing strategies and products. A platform provides the foundation upon which they can experiment with new ways to repurpose and repackage data, to quickly create compelling new customer solutions, services, and entirely new business lines.
- Acceleration. But as the saying goes, a great idea delivered too late becomes just another ho-hum idea. In digital business, speed is a formidable and insurmountable competitive advantage. A platform dramatically accelerates ideation, project development and deployments… ensuring strategies that get the right offers the right customers at precisely the right time. Armed with the capabilities their platforms provide, banks can outpace and out-maneuver their competitors and win business opportunities before rivals even identified them.
However, now that we are in the automation age, there is a fourth pillar available to banks that wasn’t available to Edison: simulation and optimization. When Edison set out to invent a better light bulb, he ended up building 10,000 prototypes. Though he put a happy face on the experience — famously saying “I have not failed. I’ve just found 10,000 ways that won’t work” — it was a costly and time-consuming ordeal: it cost Edison $40,000 (nearly $1 million in today’s money) and 14 months, after he’d estimated it would only take “three or four months.” If Edison had access to modern simulation and optimization tools, he might have found the right answer in days.
Simulation and optimization give companies the ability to quickly model decisions and strategies — based on their actual, real-world data — before they are implemented. Variations can be easily tested until the optimal outcomes are identified, typically in hours or days, depending on complexity. This gives all stakeholders the opportunity to see what the future holds, form consensus and devise a go-forward plan from the business ROI perspective.
Turning good ideas into huge opportunities
What made Edison’s approach so unique and so successful wasn’t just its ability to make existing products more desirable, but to create entirely new products that didn’t exist before, which in turn, gave birth to the entirely new industries.
Think about that: before Edison, the only way to hear a singer or see a play was in-person, by purchasing a concert or theatre ticket when a performance came town. This was restrictive for fans, and financially very limiting for performers. But by allowing fans to purchase a mass-produced record and play it anywhere on a mass-produced record player — or see a play turned into a movie — new business models were born, and that was a win-win for everyone involved.
In recent years, innovators in the banking industry have also been repackaging their data to create innovative new business models like BNPL, spare change investing and astonishing new self-service capabilities. By unifying the ideas of their most creative personnel, whatever their role and wherever they work, banks that master collaboration, innovation and acceleration will be continually at the forefront of creating win-wins for their customers — and perhaps their competitors’ customers, as well.
Bill Waid is chief product and technology officer at FICO.
