Leverage technology to drive innovation.
That’s easy to say, and a lot of credit union thought leaders are saying it. But beyond that, it’s a big challenge, which is why CU leaders are listening to intellectuals, tech-savvy CU veterans, tech gurus and each other to find the directions that will bring results, add value and solidify their CU’s market position.
As you might expect from an MIT associate professor of technological innovation, entrepreneurship and strategy, Pierre Azoulay takes a broad, conceptual view of how CUs need to embrace technology to drive innovation and market success.
“It requires a change in mindset and culture,” he insists, “recognition that innovation is everyone’s job. Cost is just the tip of the iceberg. IT innovation has to go hand in hand with innovation in organization, hiring, training and business strategy. Simply installing new software probably won’t bring much bang for the buck. A CEO can’t be a pure administrator any more. It takes ... managing multiple innovations, recognizing how they are complementary and ensuring that they are integrated.”
But Azoulay is quite pragmatic when it comes to action plans. Leveraging vendor products is a fact of life.
“It’s not affordable for many CUs to take a completely build-it-yourself approach,” he says. “Outsourcing sometimes makes sense, but you should avoid a hands-off approach and look for a hand-in-glove relationship. If your vendor doesn’t accept that you need some customization, it’s probably time to change vendors.”
Upgrading software may be easier but less productive than upgrading staff, but it’s fine to replace or train staff gradually, Azoulay thinks.
“You go to war with the army you have,” he observes. “It could be traumatic and prohibitively expensive to replace a staff.”
Yes, the required skill set is changing, but you might not want only Millennial whiz-kids running the shop. Normal turnover, sensible training and legacy staff members simply keeping up with the times can do the job, he points out. Legacy culture and the politics that go with it are facts of life. Survival requires innovation, but CU executives need to lead change, pushing innovation without destroying legacy value, he suggests.
The biggest obstacle to innovation may be all the resources, especially staff time, required to maintain the status quo, Azoulay admits.
“It’s hard to create time for training, thinking and planning when you’re in fire-fighting mode,” says Azoulay, who co-leads CUES’ Strategic Innovation Institute I at MIT in Cambridge, Mass. “The CEOs I see are incredibly pumped up when they finish the course. Hopefully, they sustain their vision and adopt a far-sighted strategic course. That’s what leading an organization today requires.”
That’s a thinker’s insight. What does a doer recommend? As director of IT leadership for Cornerstone Advisors Inc., Scottsdale, Ariz., Weldon “Butch” Leonardson is now a consultant, but until last year was best known in the CU world as the longtime head of IT at $12 billion BECU, once a CU for Boeing employees.
Leonardson’s advice in a nutshell? Be a visionary.
When it comes to keeping the horse before the cart, technology is the cart. The horse should be ideas, even dreams about the ideal member experience.
“A lot of people look at what technology can do and try to exploit that,” he says. Instead, start with the dream you want to realize. Then find the technology to make it happen. The greater challenge is to come up with the imagination, not the tech. “When you know what you want, you can usually find the technology to make it happen,” he insists.
But you do need to be aware of the technology. When CU leaders look for promising technology, speech analytics stand out, says Leonardson, who co-leads CUES’ School of IT Leadership.
“When you find the member pain point, you know where to innovate, but first you have to listen,” he notes. Listening used to be manual and anecdotal, done without technology. New software can actually identify and process content of incoming calls at call centers, he points out.
Old tech could measure the length of calls and compute efficiency metrics. New tech can actually capture content. For example, it can pick up repetitive terms like “bill pay” if that feature is generating a lot of calls. It can also measure how upset members are by the intensity of their speech. “That reporting provides awesome opportunities for innovation,” he observes.
To build an innovative CU staff, Leonardson suggests, start by hiring smart people who have “a heart for service,” and then introduce this heart-centric staff to tools like speech analytics and let them work. The results will be “awesome,” he predicts.
Leonardson has strong opinions about how to put those people to work. “Don’t build software,” he insists. “Buy it, but be really good at integrating it, and be sure to control the final user interface. That’s where the magic sauce is.”
Size is all in your mind, not on your balance sheet, insists CUES member Ronaldo Hardy, the 30-year-old CEO of $30 million Shell Geismar FCU, Gonzales, La. So Hardy doesn’t think he’s running a small CU. He’s thinking about stimulating interaction among members, not just with P2P payments but with a crowd-funding operation within the CU. “There’s an opportunity to host a peer-to-peer lending site,” he says. “We could process our loan applications and make the ones that meet our credit criteria,” he explains. “Then we could post the others so that members with a higher risk tolerance than we have could invest in loans that they liked. We would have scored the credit, collected the documentation and could service the loan. They could pay us a fee for being their broker and servicer.”
That’s big thinking, but the CU is moving prudently. “It could be a lot of work to pull that off,” Hardy says of the idea. “I don’t know any CU that is doing it yet, but electronic crowd funding is working in social media, and CUs are the original social network—people helping people. Sometimes a huge win follows a huge effort.”
What Shell Geismar FCU is doing innovatively is sending staff into the market with smart tablets that have all the power of a terminal in a branch. “We worked with Fiserv (a CUES Supplier member based in Brookfield, Wis.) and found a way to run our core system on a tablet, so employees now can go to where the opportunities are—a car dealership, a member’s home or workplace—with full functionality. They can complete the transactions in the field, not take them back to the office. We’ve moved past work-arounds and call-backs.”
So Shell Geismar FCU, with its nine-person staff, is building a “culture of innovation” and has dedicated some space to “an innovation center” and painted “think out loud” on the wall. Its role models are Apple and Google, not Bank of America, Citibank or bigger, richer CUs.
“The rewards will go to whomever does the best job of connecting people to people,” Hardy insists. “We can’t be obsessed with the bottom line.”
If CUs want to see more innovation, they need to arm IT staffs to do more than keep operations centers humming, argues tech guru Chris Sachse, principal and co-founder of Horsetail Technologies, Baltimore. “They need to arm IT people with greater resources and visibility. That will bring results.”
There is a methodology to innovation—identifying a problem, getting to the root of it, developing potential solutions and testing them—that IT people understand, Sachse observes. Relying on innovation to trickle down from tech vendors will be appropriate for some CUs but not the entire industry, he notes. If all CUs relied totally on vendors, they’d start to look like banks, since vendors are doing the most research and development on the bank side, where they’ll get the biggest payback.
But don’t try to patch together vendor solutions and internal solutions, he warns, using a tennis analogy. “Either charge the net or play back. Don’t get caught in the middle of the court.”
Nonbank tech companies absolutely are getting into financial services and covet CU members, Sachse warns. And Millennials are open to getting services from nontraditional providers. GoFundMe is the CU model dressed up in contemporary technology, he points out—groups financing themselves. With the right innovations, it can happen at CUs, he suggests. (See “Transcending Size”)
With so much advice available from so many quarters, what are innovative CUs actually doing? $1 billion USAlliance Federal Credit Union, Rye, N.Y., is quick to embrace member-facing technology.
“We’re innovating all over the place,” boasts President/CEO Kris P. VanBeek, CCE, CIE, a CUES member. “We were out of the gate with Apple Pay, Google Pay and Apple Watch. We’re pursuing a mobile-first strategy, partnering with GroBanking.” That means, among other things, that prospects can join using a mobile device.
“It’s a simple three-step process,” he explains. “They take a picture of their driver’s license, and the app reads the image.” USAlliance FCU also offers a mobile preauthorization app for credit seekers. With this alternative to the traditional electronic credit application, members can get “a soft score” that indicates how much they probably would be approved for, along with coaching for what it would take to qualify for a higher amount. “It lets the member save face and protect their credit score,” he points out.
Customer-facing innovation is USAlliance FCU’s priority, but the CU is also using double robotics effectively for internal efficiency and convenience. What’s a robotic double? “The head is an iPad and the body is a Segway,” he explains. “It can telescope up. It can go in any direction the remote user chooses. The user can hear people talk, see their gestures.”
The CU has its headquarters in New York, but its operations center in Massachusetts. Rather than commute, employees can use the robot to effectively be either place, VanBeek claims. When other CU managers want to see USAlliance FCU’s new operations center, they can travel to the site for a traditional tour or use credentials the CU provides to take a virtual tour. (Still having trouble picturing the robot? See a photo; watch a video).
As a $4.5 billion CU that made the decision to go branchless and interact with members almost exclusively through electronic channels back in 1975, PSECU boasts an IT staff of just under 100 and a ratio of over 700 members per FTE. (The CU has 440,160 members, 614 full-time and 85 part-time staff members.)
Well established as an efficiency leader, the CU now focuses on being “at least a fast follower” in the member services it offers, according to CEO Greg Smith, a CUES member and CUES board member. To that end, members can use the CU’s person-to-person payments service among members. It takes less than a minute and is free. P2P transactions involving a nonmember are routed through PayPal and take one or two days to set up and execute the first time; after that a transaction takes one day, he reports.
PSECU, based in Harrisburg, Pa., is not so much trendy as it is solid. A lot of its IT spend goes to data security. Two Trusteer products, Rapport and Pinpoint, protect member computers. The software “doesn’t replace anti-virus programs or spyware, but it can scan members’ systems in milliseconds and protect users if their computers become infected,” Smith explains. “It notifies members and prevents them from sending passwords and other credentials from an infected machine.” Such detections occur “hundreds of times a year,” he notes.
While high-tech, PSECU is not a hotbed of innovation, according to Smith. Although the IT staff is “incredibly talented, we’re not competing with Google for the same people. Our needs are different,” he observes. “We need experts to support our goal of quality service at a fair price, without gimmicks.”
Perhaps the most important ingredient of innovation is not technology or even brilliant thinking but trust, Leonardson concludes.
“Trust is the great fuel of an organization,” he says. “Some executive teams are dysfunctional because they don’t really trust each other, which makes them defensive. With trust, you can dare to be great and accept some failures without worrying about who will be blamed.”
People think about how to use technology, but technology can also help with the thinking.
“Coming up with innovative ideas no longer needs to be tied to one place, one time or one group,” notes Scott G. Isaksen, president of Creative Problem Solving Group Inc., Orchard Park, N.Y. Collaborative suggestion systems can be simple and cheap or elaborate and expensive, he says. The first generations focused on collecting ideas, but later iterations provide feedback loops for screening and evaluating suggestions, he reports. Think of it as an electronic suggestion box in which employees or members can make suggestions, from anywhere any time, and then see and evaluate each other’s suggestions.
Simple versions can be implemented internally using email or a CU’s website. More complicated versions can be purchased from software vendors like Brainbank and IdeaGlow, Isaksen says.
“This is very practical for small credit unions,” he insists. “There is low-hanging fruit for credit unions that listen better. Normal staff can handle it; it doesn’t take IT specialists.”
The secret to getting useful results, explains Weldon “Butch” Leonardson, director of IT leadership for Cornerstone Advisors Inc., a CUES Supplier member and strategic provider in Scottsdale, Ariz., is “framing” the brainstorming group so that exactly the people who are most qualified and experienced participate. Otherwise, there will be too much chaff.
“You can shrewdly define a community that is most likely to come up with winning ideas,” notes Leonardson, who co-leads CUES’ School of IT Leadership. For example, to bring innovation to indirect car loans, you might invite the last 500 members to take out such loans to join an online brainstorming community, he suggests.
Once CUs have listened, they have to respond, Isaksen emphasizes. “People need to be trained to reply and give feedback. Experience shows that such systems typically are used heavily at first, but input drops off quickly if users don’t feel that anyone is paying attention.”
PSCU, a CUSO and CUES Supplier member based in St. Petersburg, Fla., started using Intuit’s “Brainstorm” to facilitate collaborative innovation among its CU clients using a virtual setting several years ago. It graduated to “KnockOut” events that primarily put real people in real rooms rather than expand the electronic platform, explains Mindy Weaver, strategic innovation program manager. Teams of up to five people work together to develop concepts and prototypes; then they present them to a panel of judges the following day, she explains.
Richard H. Gamble is a freelance writer based in Colorado.