While everyone thinks they understand what innovation is, pinning it down and actually trying to measure it proves to be rather harder. Haydn Shaughnessy, the author of a recent report, “The Bluefin Solutions Elastic Innovation Index, 2014: Global top 50 most innovative companies” and a scheduled speaker at Innotribe, thinks he has cracked the problem.
“What most people do when they write about innovation or they create indexes is they tend to be very output based. They measure the number of patents, or something like share price differentials,” he says. The problem with that, according to Shaughnessy, is that it doesn’t really tell you very much.
“What I have attempted to do is to create one that’s almost entirely based on inputs. It’s really trying to measure the capabilities to innovate. It makes it easier to identify the problems. That’s what the aim is.”
Having investigated some 5,000 companies, and by applying five criteria, his team identified the criteria to judge a company’s innovation capability and created a new set of metrics to judge corporate adaptability.
The bad news for the financial sector is that only three companies made it into the top 50. The good-ish news is it is not bottom. Other sectors fare worse, notably pharma/healthcare and consumer goods. Not surprisingly technology was the most innovative sector.
Good News Is That Time Is On The Banks’ Side
Banks have a low rating because they are failing to make the most of the relationship they have with customers, says Shaughnessy.
While some banks were very innovative, “when you go beyond those you drop off quite quickly. There is not a wide range of capability. There are good examples, but a lot of mediocre performance as well.”
So what should banks be doing? The key, says Shaughnessy, is to make more of their very strong relationships with customers. “You have exemplary cases like American Express which does extraordinarily well in the social area.”
“Because of global connectedness the relationship with customers has changed dramatically and that has to be integrated into processes in an entirely different way. What tends to happen is that banks use social media, and say we have this many followers on Facebook, or on Twitter, but that’s just replicating the patterns of the past. It’s not changing the customer relationship.”
Instead, he says, banks need to think about their customers as highly-connected people and devise services and products that match those needs. ‘That will lead to new types of services,” and presumably a whole new set of innovation capabilities.
The good news is that time is on the banks’ side.
“I think that there is a lot of exaggeration and a lot of unnecessary pain in the financial sector,” he says. “I don’t think it’s that’s bad actually. They have a legacy problem … [but] they are probably not going to be disrupted in any profound sense for at least another four or five years.”