How to boost creativity at your bank

Large corporations that lack the agility of startups often turn to “intrapreneurship” to make time and space for creative development in the workplace. Should community banks be doing the same?

By Roshan McArthur

Steve Jobs once described intrapreneurship as “a group of people going in essence back to the garage, but in a large company.” The term, which entrepreneur Gifford Pinchot III coined in 1978, describes what happens when executives and team members take the essential principles of entrepreneurship and apply them to their roles in a large, established company. Entrepreneurs, and intrapreneurs by extension, are known for their ability to look further than others, to take risks and to embrace disruptive ideas. They are innovators who drive change.

These concepts are commonly associated with Silicon Valley and large corporations—organizations that actively carve out time for their employees to get creative. Their stories are the stuff of business legend: the 10 percent dabble time given to employees at W.L. Gore (producers of GORE-TEX), the 15 percent at 3M that brought us Post-it notes, and the 20 percent at Google that spawned ideas like Gmail.

Then there are hackathons—intensive tech collaborations that can span several days—held by companies like Facebook and Shutterstock, and innovation labs or skunkworks, which are semiautonomous units for innovation within larger organizations (made famous by Skunk Works, the advanced development programs of Lockheed Martin).

And while some say the banking world is too risk-averse for this kind of innovation, the big banks have started mimicking tech companies.

In the past few years, Wells Fargo, Citigroup, Deutsche Bank and Barclays have started using in-house innovation programs, or internal accelerators designed to develop new solutions to challenges. Wells Fargo Labs, for example, was set up to turn “heady ideas into handy prototypes” and is currently working on video banking and queuing up banking transactions from smartphones.

In a world facing exponential technological growth, with customers expecting high-speed responses, experts have urged community banks to find ways of keeping pace with both larger banks and fintech companies. Does that mean hackathons and innovation labs will be springing up at community banks all over the country?

“I think seeing the art of the possible in action, seeing what we could do, transforming one of our core products at the bank—that opened people’s eyes.”
—Dan O’Malley,
Eastern Bank

Investing in innovation
Three years ago, Eastern Bank, a $10 billion-asset community bank based in Boston, hired the team from a tech startup called PerkStreet Financial to set up and run an innovation lab. Eastern Labs was given an annual budget of about $4 million to make innovation happen. Last year, it created a product that allowed approval for loans of up to $100,000 in as little as five minutes.

Dan O’Malley heads the lab, but he’s also Eastern Bank’s chief digital officer and sits on the bank’s management committee. Rather than being an isolated unit, he says, the lab interacts with almost everyone at the bank, helping to create an overall climate of innovation.

“We’re tasked with creating new technologies from the data and the digital assets of the bank that can transform Eastern and how we go to market,” he explains. “It’s heavily integrated into the bank. Our work has touched almost every group within the bank, and we’ve had a cross-functional team working together on a daily or weekly basis, as we have built out the lab’s platform.

Eastern Labs chose small-business lending as its first area of focus. Whereas the bank’s small-business loan process used to take three or four weeks and require four different groups’ input, the team built software that streamlined this process. “To do that, we had to work with all the people who had been doing small-business loans in the bank,” O’Malley says. “We had to take their insights, thought and expertise and encapsulate it in software.”

He has seen a change in team members at the bank, he says, and feels that smaller community banks could follow Eastern Bank’s lead.

“I think seeing the art of the possible in action, seeing what we could do, transforming one of our core products at the bank—that opened people’s eyes,” he says. “I think there’s nothing that would prohibit a bank from doing what we did. You have to figure out what level of investment that you’re comfortable with, and you need to figure out how you’re going to find and attract the talent to come in and do the work.”

One smaller bank already behaving intrapreneurially is the $31 million-asset CBW Bank in Weir, Kan. CBW was one of the three winners of Independent Banker’s Innovation Awards for 2016 and is currently ranked number two in its ranking of community banks under $300 million in assets.

Its chairman and chief technology officer, Suresh Ramamurthi, is getting attention for transforming the struggling bank after he purchased it in 2009. He’s been called a “visionary” for blending the worlds of banking and fintech. Alongside CBW, Ramamurthi runs Yantra Financial Technologies, a fintech company specializing in designing, developing and managing electronic payment systems, which works closely with the bank.

“Inspiration never comes when you have a particular time frame. It comes when you’re in the middle of five different things; some kind of cross-pollination happens at that time.”
—Suresh Ramamurthi,
CBW Bank

Weaving in creativity
Rather than setting time aside for innovation, he’s created a culture of innovation at the bank that permeates the entire operation, and he encourages every team member to get involved. “We don’t have a system,” he explains. “It’s part of what we do every day. Inspiration never comes when you have a particular time frame. It comes when you’re in the middle of five different things; some kind of cross-pollination happens at that time. You’re constantly looking at: how do we make it better, what kind of process do I need to make this faster and more efficient? How do I scale, replicate and sustain? How can I do this in a way that I can replicate across multiple titles? How do I break the cycles?”

Ramamurthi keeps lines of communication open, and if a team member has a great idea, he asks them to email him. He also encourages his employees to get to know how things work and to openly question every part of the banking process.

“The most important thing is for the manager of the bank to understand the meaning of the bank, what is the meaning of money, the meaning of the banking system in relation to money—and what is the role that you as an individual bank play in the banking system?” he says. “And therefore, how does it relate to the customer journey and how does it translate into what kind of services you provide in the context of what else is happening in the industry and technology?”

John Waupsh, chief innovation officer at wholesale financial services company Kasasa and author of Bankruption: How Community Banking Can Survive Fintech, agrees. “Anybody who works at a bank who does not consider themselves an expert in banking and an expert in their competitive landscape of today is probably taking up space at the bank,” he says. “In order to break the rules, you have to know the rules.”

He suggests that team members learn about the banking landscape as well as the wider competitive landscape that banks reside in. “Who do we compete against today? Guess what? It’s not the community bank on the corner; it’s not the credit union across the street. It’s the megabanks of this world that own 80 percent of the accounts in this country. They are competing with you on Google, where 88 percent of people who are looking for a new financial services product look. Even though Capital One doesn’t have a branch in your neighborhood, they’ve got one on that Google page.”

Waupsh suggests “kicking important people out.” More specifically, he explains, “People who have never gone to conferences or haven’t been in 10 years, send them to a brand new or existing conference to get a fresh perspective. Send them to something that is out of their element. If it’s a CFO, maybe it’s a marketing conference. The idea is to awaken them to new and fresh ideas. Get them to experience things like Uber while they’re there.”

“Anybody who works at a bank who does not consider themselves an expert in banking and an expert in their competitive landscape of today is probably taking up space at the bank. In order to break the rules, you have to know the rules.”
—John Waupsh, Kasasa

Breaking the rules
When these executives return, Waupsh advises holding off-site discussions, so that they get out of the bank environment and share their new ideas with each other. “That’s the number one way to start the idea of change: having a free, open discussion at the executive level,” he says.

Waupsh also advises paying attention to vendors. Instead of installing an “innovation person” in the bank, he suggests talking to trusted vendor partners about what’s happening in the industry, and what new products and services they’re offering.

“People forget that fintech has been around for about 50 years, even longer, in America,” he says. “And bankers have many fintech vendors that they’ve partnered with for forever. Talking with them and opening that dialogue may actually be very insightful to that executive team.”

Waupsh doesn’t think that Silicon Valley methods will necessarily work in community banks. “The number of community banks that would actually benefit from a hackathon or from carving out time to innovate I could count on two fingers,” he laughs. “It’s interesting and it’s fun to talk about, but to be frank, it hasn’t worked.”

And so for community banks, intrapreneurship can be translated as encouraging innovation in the workplace, keeping lines of communication open and educating teams about both the banking and technology worlds. Additionally, building dedicated teams to explore and experiment with new ideas can change the way the entire bank does business and bring new energy to the rest of the team.

“I think people can sometimes confuse the tools and the practices of innovation with the results of innovation,” says O’Malley. “It’s not about having hackathons, it’s not about having the cool, open-floorplan workspace. It’s about trying to change your business. Innovation means change, and driving that change as fast as you can.

“I think the best way to focus on innovation is to decide what change you want in the bank—and bring that change about.”

12 ways to create a culture of intrapreneurship

  • Change and innovation start at the top. Have a conversation at the board level first.
  • Ask what change you are looking for and commit to making it happen.
  • Know what role your bank plays in its market.
  • Encourage executives to attend conferences and explore new ideas.
  • Hold off-site open forums for executive-level discussion.
  • Talk to vendors about their new products and services.
  • Figure out if you need to bring in external talent, who they are and how to attract them.
  • Encourage team members to learn about the banking industry and technology.
  • Get to know what changes have worked for other banks.
  • Listen to ideas from all levels of the company.
  • Encourage collaboration among team members.
  • If you have intrapreneurs in your ranks, give them the support and resources they need to succeed.
  • Don’t empty that trash!

    Genius ideas rarely come out of thin air. Sometimes they start with accidents—or even failures. But with a little persistence and self-belief, they can turn into something great.

    • Post-it notes. Dr. Spencer Silver, a scientist at 3M, was trying to create a super-strong adhesive and instead ended up creating a reusable, “low-tack” adhesive. Silver tried to market his invention among 3M employees for five years, but it failed to catch on. Eventually, a colleague decided to give it a chance, applying it to paper. And Post-it notes were born.
    • The pacemaker. In the 1950s, medical researcher Wilson Greatbatch was experimenting with ways to record heart rhythms. While working on one prototype, he installed the wrong electrical component, and the device started to mimic the beat of a human heart, rather than recording it. Greatbatch spent two years refining his “mistake,” which resulted in the world’s first implantable pacemaker.
    • Velcro. While hunting in the Swiss mountains, George de Mestral wondered why burrs stuck to his pants and dog’s fur. He examined the burrs under a microscope and noticed they had tiny hooks and loops. Mestral spent years trying to mimic them, eventually creating synthetic Velcro fabric.
      —Sara Schlueter

    Roshan McArthur is a writer in California.