To Lab or Not To Lab


TECHNOLOGY IS something of a blessing and a curse in the banking industry.

The blessing part comes in the form of opening up new ways to connect with and provide convenience to customers. The curse part comes in the form of how in the heck does anyone keep up, much less lead?

No small number of prominent banks—Capital One, Chase, Wells Fargo, and Citi, to name a few—are pinning their keeping-up-and-leading hopes on innovation labs. That’s “labs” in the literal sense: They have created designated, physical spaces geared to spur out-of-the-box thinking. There, words like “disruptive” and “creative” are rallying cries. You can read overviews and view photos in this piece from The Financial Brand.

Innovation labs have as many critics as defenders. Are they breeding grounds for great ideas, or another hollow trend doomed to go the way of ropes courses?

Defenders claim or project success. Citi, for example, boasted:

A recent example of a solution developed was a new mobile collections solution for Coca-Cola that was a ‘market first’ in India, Korea and China to capture its C2B digital payment flows. The mobile browser-based application allows clients to receive notifications and authorize payments using their mobile phones.

And an American Banker article quotes Citigroup’s Debby Hopkins:

“Citi’s Innovation Labs, and our global network that connects them, play a critical role in our ecosystem by providing a focused, rapid experimentation environment that explores, validates and brings to market the most promising new ideas for Citi’s businesses around the world.”

Yet American Banker gives equal time to critics. In the same article, it cites Bank of America’s Cathy Bessant’s remarks from an interview with Fortune:

“We are different from some firms in that we are not big believers, and I’m not a believer personally, in innovation labs—the whole idea of innovation for innovation’s sake and the idea of one success for every 10 tries. Banking is a thinly margined business. Our innovation has to be directed innovation, and solving a market issue or creating a capability that is magnetic to customers. The whole idea that we would devote a tremendous amount of money to something with a 10% hit rate is not, in my view, economically viable. The other thing is: in banking the people who best know banking are the people closest to the customer. Our lines of business are the most accountable people for innovation.”

It’s not unusual for proponents to defend innovation labs with an appeal to the need for ongoing innovation. That moves the target: The importance of innovation is not in question. The question is whether innovation takes place best in a lab. Psychologist Richard Wiseman’s highly recommended book :59 Seconds suggests that brainstorming sessions, which I would argue are a precursor to innovation labs, are less effective than presenting a problem to employees and then sending them off to come up with ideas on their own, in their own space. But then, perhaps the similarity to brainstorming sessions is superficial, and innovation labs will prove an entirely different animal.

Who is right? Neither proponents nor opponents are inexperienced or naïve. Time, as it always does, will tell.

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