【 Thesis - Defense Deck 】 The Culture of Innovation in Retail Banking

Culture of Innovation: Transforming Retail Banking

MFA Design Management Savannah College of Art and Design | Spring 2020 Thesis Committee: Tom Hardy, Peter Bartlett, Joshua Crafford Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Background & Initial Research

Art + Economics + Design Management

Creative Industry Banking Industry

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

The Impact of New Competitors

Fintech companies accounted for 38% of all US personal loans in 2018.

- Rooney, 2019

Incumbent banks are at risk of losing billions of dollars in retail revenues in the next 3 ~ 5 years.

- Accenture Fintech Report, 2020

40% of tech-savvy or Gen Z customers are ready to leave their current bank.

- Techwire Report, 2020

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

The Impact of New Competitors

Just 21% of banks say their systems are agile enough for collaboration, and just 6% have achieved the desired ROI from partnerships.

70% of fintech disruptors (unsurprisingly) don’t see eye-to-eye with their bank partner’s culture or organization, and the same amount are frustrated by process barriers.

- The World Fintech Report 2020 by Capgemini

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Problem Statement Retail banking has poor efficiency, structure & process, which all roll up into CULTURE to support disruption and innovation related start-ups and fintech to maintain competitive advantage.

Š Alan Liu

How might we use design management to create the culture of innovation in retail banking?

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

DMGT How to Define:

• Design Management • Creation of Culture

Competitive Advantage

Culture of Innovation

Retail Banking

• Culture of Innovation • Retail Banking • Culture in Retail Banking • Innovation in Retail Banking

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Research Process

Understand

Analysis

Synthesis

Storytelling

Prototype

Validation

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HMW use DMGT to create the culture of innovation in retail banking?

Stakeholder Map Shareholders

Suppliers

Venture Capital Facilitators Associations

Consultant

Fintech Companies

InsurTech Companies

WealthTech & CreditTech Companies

Big data & Al Companies Compliance & RegTech Companies

Retail Banking New Customers

Bankers

Universities

Accelerators & Innovation Labs

Payment & Remittance (E-Wallet) Blockchain & Digital Assets Companies

Regulators Media

NeoBanks/ Challenger Banks(Digital-only Banks)

Government Other Type of Banks

Direct Support Primary

Indirect Support

Secondary Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Secondary Research

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Secondary Research - Focus Areas

Retail Banking - Relationships & Trends - Competitor Analysis

Design Management - Design Thinking - Design Strategies

Culture of Innovation - Definitions & Examples

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Current Relationship

CreditTech Companies

BANK

Innovation Lab

Competition– Cooperation Relationship

WealthTech Companies

Fintech Companies

Regtech Companies

Inefficient

Inefficient

InsurTech Companies

Highly Efficient Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Ideal Circumstance

CreditTech Companies

Create a Culture of Innovation by DMGT to enhance efficiency & agility

BANK

Innovation Lab

Effective Partnership

WealthTech Companies

Fintech Companies

Regtech Companies

InsurTech Companies

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Competitor Analysis & Trends of Innovation

1. Personalization 2. Credit card management 3. Empathetic chatbots 4. AI advices for investment 5. Voice payments 6. Budget & money planner

Technology

Trust

7. Context-aware notifications 8. Gamification 9. Biometrics 10. Advanced geolocation (ATM or branches‌) 11. Combining with other fields (Daily life/ Ecosystem) (Bank 4.0)

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights – Secondary Research

• Customer behaviors are changing: lifestyle & mindset segmentation • Corporate culture is playing an important role in innovation processes: competitive advantage, competency & efficiency of innovation • Design thinking is one of the crucial tools to create a culture of innovation in retail banking: awareness of innovations, multi-disciplinary collaborations, sustainable competitive advantages

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Primary Research

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Participants:

Primary Research Methodology

Retail Banking Other Financial Institutions Customers Activities - Experiences

Survey

In-depth Interview

Cultural Probe

Workshop

Observation

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

23

30

In-depth Interviews

Types of Roles Participated

47 Banks involved

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Amarillo National Bank

Atlantic Union Bank

Citizens Bank

Centerstate Bank

Gateway

Fubon Bank (TW)

O-Bank (TW)

Sperry Federal Credit Union

Ogaki Kyoritsu (JPN)

Swedbank

Bank of Newington

Bank of America

Chase

Capital One

Citi

CTBC Bank

ConnectOne Bank

DBS

Diamond Trust Bank Tanzania

E.SUN Bank (TW)

Fifth Third Bank

HSBC

Hua Nan Bank

Key Bank

Lake Michigan Credit Union

Melli Bank

PCSB Bank

Presidio Bank (Heritage Bank)

Bank of Montreal

Patelco Credit Union

Sinopac (TW)

Truist (BB&T & SunTrust)

TCF Bank

Pinnacle Bank

Taiwan Cooperative Bank (TW)

PNC Bank

US Bank

NBT Bank

Standard Chartered

Wells Fargo

CIT Bank

First Bank (TW)

Office of the Comptroller of the Currency (OCC) Bank

Signature Bank

Yes Bank

ZA (HK) © Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

103 2200 300 Responses from survey

Data points

Synthesized Data Points

829 Cups of coffee

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Online Survey (Demographics): - Voices from:

55%

3% 2%

27%

49%

6%

Age:

6%

51%

18 ~ 24

14%

25 ~ 34

1%

40% 29%

35 ~ 44 45 ~

17%

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Online Survey (Roles of Participants):

PARTICIPANTS Others 16% IT Analysis/ Digital Channel Owner 5%

Branch Manager 26%

CEO/CIO/COO/ SVP/ BU-Head 5% Client Service/ Sales Representative 10% Innovator/ Designer/ Researcher 16%

Bank Teller 22%

Auditor Accountant Account Manager Branch Personal Banker / Bank Teller Branch Senior Manager CEO CIO COO Collector Client Service Representative Community Engagement District Manager Digital Channel Owner Designer Financial Analyst Group Director-SVP

Head of Consumer Finance Human Resources IT Analyst Innovator International Business Promoter Loan Officer Marketer/ Marketing Manager Mortgage Manager Product Owner/ Manager Relationship Banker Risk Management Officer Researcher Sales Representative Treasurer

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Online Survey (Results):

52% of bankers haven’t seen innovation culture at every department level of the bank, while

38% of bankers haven’t seen innovation culture in their banks.

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Online Survey (Results):

38% of bankers don’t think they fit into the current corporate culture.

20% of bankers don’t think every employee in the banks needs to be innovative.

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

In-depth Interviews: (Heart-based & Future-oriented Questions)

Quotes Comparison - Innovation (Between different level management)

“We are always remodeling our financial centers to make them more technology-based, and I believe we stay very far ahead of the competition because we are one of the only banks opening branches rather than closing branches.”

- Catherine, Relationship Manager, Bank of America ( 9 years in banking )

“Think different, think outward in, think of customer experience first, then invent solutions. What Innovation is not: chasing shiny tech toys as a fix.”

- CIO, Wells Fargo ( 6 years in banking )

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Other Quotes from Interviews:

Customer-centric

“Overall, the retail banking culture is still very much a sales-first environment. I’ve experienced a culture of sales-first which can, and often does, create a poor customer and employee experience.”

- Branch Manager, Chase ( 6 years in banking )

Hierarchy

“People feel more equal. Titles are removed and no one is treated differently. There is freedom of when and where you work. Ideas are listened to, valued, and acted upon.

There is laughter, fun, and joking around sometimes.”

- Researcher, US Bank ( 6 years in banking )

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Other Quotes from Interviews:

Cultural Barriers

“Large retail bank are not have mono-cultural - ie they do not only have one culture. They have many cultures across different parts of the organization. In some parts of the organization it is not always desirable to have continues innovation.”

- Researcher, A Large Multi-National Sub-Saharan African bank ( 16 years in banking )

Collaboration & Participation

“Although we are charging of the digital transformation for our bank, it is not enough if only the IT department pays attention to this because it is totally not efficient by back and forth. Everyone needs to participate and be innovative.”

- IT Analyst, E.SUN bank ( 7 years in banking )

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

論文研究 Research for a Thesis

銀行創新體驗調查 Customer Experience with Innovation in Retail Banking Survey

Other Methods - Cultural Probe:

您現在常用的是網路或實體銀行？您滿意嗎？ 請於下方貼上 (若兩種都常用的話 可兩種都貼） Do you use online banks or physical banks more? Do you like them? (You can attach on both if you are using both)

•

Do you use online banks or physical banks more often?

Do you like them?

•

What is your current experience of interacting with banks?

What is your imagination of the future banking?

Location: Randomly (In the apartment complex, stores, library, etc.)

網路銀行(Online Bank, App)

實體銀行(Branch, ATM)

請寫下您的使用/互動經驗 和 您想像未來的銀行是如何 在便條紙(請註明是網路/實體)(可寫多張） write down your current experience of interacting with banks and your imagination of the future of banks on sticky notes and then put it into the hole. 並投入孔內 Please (Please note online banks or physical banks) (You can write more than one)

如您是銀行員請掃描此QR Code >> Please scan the QR code if you are working in a retail bank >>

*此調查僅為學校學術論文研究用途，不具名調查，且與銀行商業用途無關，非常感謝您的寶貴經驗！！ 如有任何問題請聯繫 Alan 0912-945-962

©school Alan Liu *All responses will be anonymous and confidential so please be as honest as possible. The use of your responses will be limited to this project.

Thank you so much for your valuable insights and help with my thesis! Please contact me if you have any questions. Alan 0912-945-962

HMW use DMGT to create the culture of innovation in retail banking?

Other Methods - Remote Workshop (Role-Play Activity):

Participants: 7 people from various fields Location: Line - video conference Time: 9pm (AT), Friday, April 3 Period: 1 hour

Participants from various fields:

The roles participants played:

• • • • • • •

• • • • • • •

Carpenter (@Australia) IT (First Bank) Key Opinion Leader (Food Acc) Project Manager (Pou Chen Co.) Project Manager (Foxconn) Product Manager (BNP Paribas) Software Engineer (HTC)

Bank Teller Branch Manager CEO Client Service/ Sales Representative Marketing Manager IT Analyst VP-Branch Manager

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Data Analysis - Affinitization Process

HMW use DMGT to create the culture of innovation in retail banking?

Affinitization Process

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

• Free flow of ideas not being promoted

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

• Free flow of ideas not being promoted

• Lack of education

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

• Free flow of ideas not being promoted

• Lack of education

• Lack of collaboration

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

• Traditional hierarchy

• Free flow of ideas not being promoted

• Lack of education

• Lack of collaboration

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

• Traditional hierarchy

• Free flow of ideas not being promoted

• Obsolete leadership

• Lack of education

• Lack of collaboration

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

• Traditional hierarchy

• Free flow of ideas not being promoted

• Obsolete leadership

• Lack of education

• Insufficient support

• Lack of collaboration

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Insights • Conservative mindset

• Traditional hierarchy

• Free flow of ideas not being promoted

• Obsolete leadership

• Lack of education

• Insufficient support

• Lack of collaboration

• Sales-oriented thinking

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Opportunities (Design Criteria)

• Shift to an empathetic mindset

• Build effective collaboration

• Build an inclusive environment

• Minimize hierarchy

• Build education for innovation

• Bring trust to customers

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Key Opportunities (Design Criteria) + Ideation

Empathy

Inclusion

Hierarchy

Education

Collaboration

Trust

Must have Should have Nice to have

Š Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Ideation

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HMW use DMGT to create the culture of innovation in retail banking?

Ideation/ Prototype - Framework Development

Š Alan Liu

THE HEXAGILITY FRAMEWORK FOR THE CULTURE OF INNOVATION AUTHOR: ALAN LIU Copyright © 2020 by Alan Liu. All rights reserved.

HEXAGONAL PATTERNS PREVALENT IN NATURE DUE TO EFFICIENCY In a hexagonal grid, each line is as short as it can possibly be if a large area is to be filled with the fewest hexagons. This means that honeycombs require less wax to construct and gain lots of strength under compression

© Alan Liu

HEXAGILITY FRAMEWORK

2 Hierarchy

Empathy 1

3

Inclusion

Education

6

4

Sustainability

Collaboration

The Hexagility Framework is inspired by the insights from thesis research and the classic double diamond of design thinking process. The framework is fundamentally creating the culture of innovation to enhance the efficiency of disruptive innovation and the agility of the organization.

5 Reflection

Š Alan Liu

HEXAGILITY FRAMEWORK

INTRODUCTION

Hierarchy

Corp.

Empathy

Inclusion

Problem(s)

Education

Value of the framework • Create the culture of innovation • Develop innovation strategies • Monitor and track the process

Who is this framework for • Multi-level leadership • Innovation directors • Culture builders

How to use this framework • There are 6 phases in total.

Discuss and build the consent with team before move on to the next phase.

Tips before you start • Build a diverse team for the process • Keep a humble and respectful mindset

Branch/ Department Team(s)

Team/ Customer Idea(s)

Trust Beliefs & Norms

Sustainability

Prototype

Collaboration

Shared Values

Test

Strategies

Opportunities

Insights

Reflection

© Alan Liu

HEXAGILITY FRAMEWORK

Problem (s) Pr ob

ob Pr ) (s lem

Empathy

Stake -holders

lem (s)

Empathy & Inclusion - Define problems and stakeholders

Every innovation started with empathy which derives from people's curiosity, or observation. This phase helps to create empathy in retail banks through the practices of defining problems and matching with stakeholders.

Corp.

Inclusion Stakeholders Branch/ Department

How to do: • List out the problem(s) encountered/ observed during daily work and working environment at multi level • Identify the stakeholders in each level respectively

Stakeholders Team/ Customer

© Alan Liu

HEXAGILITY FRAMEWORK

Hierarchy - Take away the boundaries

Hierarchy Bank tellers CIO

Inc lus ion

Corp.

Market Manager IT Analyst Branch/ Department

Market Manager IT Analyst CIO Problem(s)

Bank tellers

After defining problems and stakeholders, participants might notices that there are problems could be associated with different roles in different levels in organizations. This phase helps to rethink the traditional hierarchy in retail banks by eliminating the boundaries and developing the problem-oriented organizational structures.

How to do: • Clean your mind to take away the boundaries • Group the problems you defined with the stakeholders • Write again into the inverted triangle. At this point, it is an opportunity allowing you to redefine the stakeholders again.

Team/ Customer

© Alan Liu

HEXAGILITY FRAMEWORK

Education - Share visions and knowledge

Hierarchy After taking away the boundaries and redefining the stakeholders, this phase helps to rebuild the team to solve problems through sharing visions and knowledge.

Bank tellers Market Manager IT Analyst

Education

CIO Problem(s)

Team(s) Problem(s)

How to do: • • • •

Build the team based on the problems and stakeholders Share visions and knowledge on this problems Align everyone’s knowledge for the topics related to problem Everyone is equal in this problem-oriented team

© Alan Liu

HEXAGILITY FRAMEWORK

Collaboration - Generate and validate ideas

Education

With adequate foundation knowledge, participants can start to collaborate with different parties to generate ideas and access the workability of the ideas

Team(s)

How to do:

Problem(s)

Idea(s)

• Each team generates idea according to the problem • Co-create quick prototypes to experiment the ideas • Conduct user testing to validate the idea

Prototype

Collaboration Test

© Alan Liu

HEXAGILITY FRAMEWORK

Reflection - Develop strategies

Idea(s)

After various user testing, participants can reflect on the result with their main group and further optimize their operation & ideas.

How to do: Prototype

Collaboration Test

Strategies

Opportunities

• • • •

Back to main group Generate insights from the testing Identify Opportunities Develop innovation strategies based on the opportunities

Insights

Reflection

© Alan Liu

HEXAGILITY FRAMEWORK

Sustainability - Bring trust to customer

Developing trustful relationship among customers would be the last step in an innovation plan in order to establish a stable business for a long time and retain existing customers.

Trust

How to do: Beliefs & Norms

• Create shared values • Build Beliefs & Norms • Establish long term relationship

Sustainability Shared Values

Strategies

Opportunities

Insights

Reflection

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Validation - Testing & Feedback from Bankers

• • •

Went through each step Shared the experience Collected Feedback

“I think it’s really good to develop innovation strategies by this framework because it builds consensus with all levels in the organization. I just wish our C-suite can really involve.”

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Validation - More Feedback from Innovation Experts

Head of Innovation, HSBC (Dubai)

“I think it's valuable. I think it follows some of the things that we've put in place already in terms of an innovation process. But there is also one thing that you included that probably we can also think of incorporating, I think one thing that maybe doesn't happen quite enough as it should is the better way to let customers adopt the solution that you're proposing.”

“I think it's like a good high-level reminder for our team. I think I would take this and then second guidelines from my team of how to make sure that they're checking the box. I see most of the value not in necessarily the I don't know the big picture culture of change type stuff but more in driving culture of innovation through consistency of execution on project work.”

Innovation Lead, Bank of America

SVP, Head of Innovation, City National Bank

“Make sure that when we create change that we can sustain it and it can be adopted.”

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Validation - More Feedback from Innovation Experts

Senior Manager, Partnership Development & Innovation, HSBC (HK)

“I think the framework's really good. I think it's very up to date. If you look at like the consulting firms that work for us. They use very similar method.”

“If including the regulatory knowledge for each market in your framework, and it's going to be better than most of the ones I've seen.”

“Simplify further.”

“It might difficult to justify to the senior leadership of the value in implementation, if you don't reflect the business values/outcomes/ROI in such a framework.”

Experience Design & Innovation Manager, DBS (SG)

© Alan Liu

HMW use DMGT to create the culture of innovation in retail banking?

Future Development •

Remember to form teams including regulators and customers

•

Compare the business values/outcomes/ROI of the projects after practicing the framework

•

More proof of concept to showcase how it works

© Alan Liu

HEXAGILITY FRAMEWORK Hierarchy

Corp.

Empathy

Inclusion

Education

Problem(s)

Branch/ Department Team(s)

Team/ Customer

Idea(s) Trust

Beliefs & Norms Prototype

Sustainability

Collaboration Shared Values

Test

Strategies

Opportunities

Insights

Reflection © Alan Liu

HEXAGILITY FRAMEWORK Hierarchy

Corp.

Empathy

Inclusion

Education

Problem(s)

Branch/ Department Team(s)

CULTURE OF INNOVATION

Team/ Customer

Trust

Beliefs & Norms

Idea(s)

Prototype

Sustainability

Collaboration Shared Values

Test

Strategies

Opportunities

Insights

Reflection © Alan Liu

Thank you! - Q&A - Alan Liu