‘Back-Stage’ Innovation

Don’t overlook process innovation in the quest for process improvement.

July 17, 2012

There’s little doubt that continuously improving processes to maximize efficiency is a necessary and valuable effort.

For many credit unions, it’s now a core value, and they’re using formalized process improvement methodologies such as Six Sigma and Lean Sigma.

But process improvement isn’t enough to stay competitive. Here are two examples:

► Smith Corona was a leader in the typewriter business. One of its last improvements to typewriters was embedding a white strip into typewriter ribbons for easy corrections.

For all its process improvement, Smith Corona eventually stopped manufacturing typewriters when word processing and personal computers took over the market. It transitioned into the word processing world, but now specializes in manufacturing other office supplies.

► Encyclopedia Britannica once was considered the most scholarly English-language encyclopedia. The company announced in March 2012 that it would stop publishing printed editions, instead focusing on the online version.

Britannica missed the opportunity to convert to a CD format when that became popular in the 1990s, and missed another opportunity in the early 2000s when consumers embraced the Internet. Britannica allowed Google and Wikipedia to make it completely irrelevant.

The lesson? There’s an important difference between improvement and innovation. Improvement is an ongoing act of making something better.

Innovation, in contrast, is an ongoing process involving an orderly, organized, and continuous activity that commercializes ideas.

We tend to think of products first when we think of innovations. For many of us, Apple immediately comes to mind as one of the world’s most innovative companies. But we tend to overlook process innovation—particularly involving the member experience.

I recently discovered an example of this through a workshop led by Adam Lawrence of Work-Play-Experiencea design firm that helps companies design customer experiences using theatrical methods. The firm suggests you might have to work a little harder back stage to make things work smoothly for the customer front stage.

To illustrate this, at my previous credit union, where I served as senior vice president of technology and operations, over time we made the online channel the primary member transaction channel. More than 75% of all transactions were online.

But we had an antiquated online loan origination process. The lending department needed to make the loan process easy for nonmembers. The challenge was the fact that nonmembers had to become members to get loans. But some consumers didn’t want to bother with this step, so they didn’t follow through.

For weeks, our project team reviewed best-in-class financial sites doing loans online. It became clear that to provide each member with the best experience, we needed to own that experience. We needed to make the process seamless—allowing members to apply for loans and simply accept becoming members within the same application. In other words, we needed to integrate the loan origination process with the new member application process.

To truly create a memorable “front stage” experience, the “back stage” needed a completely new approach. Increasingly, loan origination systems allow credit unions to do this.

Ultimately, to make the member experience a priority—a key differentiator today and going forward—credit unions need to look at their organizational structure. Is there an executive who’s fully responsible for the member experience across all delivery channels?

As Brett King points out in his book, “Bank 2.0,” the customer/member experience is the total experience the customer/member has with the bank or credit union.

The member experience is not just a satisfaction score, or the experience a member has in the “branch.” It’s the experience each member has at every channel, every day, for every transaction or service—the total experience.

RUDY PEREIRA is president/CEO of Royal CU, Eau Claire, Wis., and vice chair of the CUNA Council Forum. Contact him at 715-833-8105. For more information about CUNA Councils, visit cunacouncils.org.