The five largest banks in the United States — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Bank of New York Mellon — have a combined asset base of $8.2 trillion. By comparison, the top five credit unions in the United States — Navy Federal Credit Union, SECU of North Carolina, Pentagon Federal Credit Union, BECU, and SchoolsFirst Federal Credit Union — have a combined asset base of $126.9 billion. The fifth-largest bank in the United States, Bank of New York Mellon, is more than six times larger than the largest credit union, Navy Federal, which itself is a clear outlier that is more than double the asset size of the second-largest credit union, SECU.
Yet despite the differences in assets, resources, and regulatory power, credit unions are holding their own against banks on the national stage. The strength of the cooperative model is proving there is power in constraint. Working within their limited means, these Davids are building a better slingshot while their Goliath financial brethren are hampered by a complicated network of processes, procedures, and investor expectations.
Nam deteriores omnes sumu licentiate. (translation: With too much freedom, we all deteriorate)
— author George Eliot in the novel Daniel Deronda
What Constraint Means For Creativity
Examples of how constraint encourages stronger performance abound. In a March 2014 Fast Company article, author Baratunde Thurston cites three examples — Snapchat, which destroys pictures after just a few moments; Twitter, which limits communications to 140 characters; and Vine, which gives video producers a mere six second to tell their stories — of popular platforms that constrain their users despite being founded in the era of the limitless Internet. But there just might be a method to their madness.
"For creativity to flourish, we need to embrace constraints," Thurston says.
Hop On Board
In a Harvard Business Review blog titled, "Why Innovators Love Constraints," author Whitney Johnson talks about how constraint leads to faster feedback. She offers skateboarding as a primary example and cites the "incredible fast and useful feedback" skateboarders receive as a contributing factor for why they learn so quickly.
"There are numerous instances of coaches in various sports shrinking the space their athletes train in to increase reps and improve feedback," Johnson says. "When there is less of a cushion between oneself and failure, innovation becomes a necessity."
Legendary skateboarder Rodney Mullen has more than a little insight about constraint and creativity. In addition to the traditional boundaries of skateboarding, Mullen had to contend with a disapproving parent.
"That pressure where I had to fight for it defines me today," Mullen says in a video produced by Adobe Creative Cloud."The most creative time I had in skateboarding is when [my father] said ‘this is it' at the end of the summer."
Mullen soared to notoriety by inventing more than two dozen tricks and winning nearly every contest he entered for six years. But when the sport changed, Mullen faced another constraint: starting from scratch to build a new style.
"When you think you know something, just change one little bit," Mullen says. "You realize how crippling that change can be."
Today, Mullen is back on top. The multimillionaire still skates, but he's also a business owner, researcher, and developer. In addition to the many awards and accolades he's received, he joined the Skateboarding Hall of Fame in 2013. Not bad for a skater who as a child had to wear braces to correct his pigeon-toed feet.
"Our perceived limitations may give us direction on where we might play, or want to play," Johnson offers as parting words in her HBR blog. "Indeed, if we will let them, constraints can (and will) drive us to disruption."
The Right Mix
Nobody, or no business, likes to be told "no." Our inner id wants what it wants when it wants it. Constraints? No thank you.
Fortunately, that's not the way the world works, and successful, creative, disruptive companies learn to work — and thrive — within boundaries. Of course, too much constraint can kill creativity, so it's important to find that balance between too much and too little freedom.
"The key to spurring creativity isn't the removal of all constraints," says Adam Richardson in his June 2013 HBR blog "Boosting Creativity Through Constraints." "Ideally you should impose only those constraints (beyond the truly non-negotiable ones) that move you toward clarity of purpose."
If you're working on a project or problem and you're not sure what constraints to impose, don't worry. The creative process allows you to add and subtract or rearrange roadblocks depending on what the situation demands, and here, too, Richardson offers some words of wisdom:
Get Back To The Basics — What is the one thing you want your customers to know or do? If you could communicate only via a mobile phone screen, business card, or Vine video (remember, six seconds), what would you say?
Break Your Habits — Changing your habits helps change your perspective and introduces new constraints you must overcome.
Step Out Of The Comfort Zone — "Creativity needs some grit," Richardson says. "An irritant to get the ball rolling and persistence to push through to completion."
The importance behind how constraints force individuals and organizations to return to the basics doesn't belong to Richardson alone. In a September 2013 op-ed that ran in the Washington Post, former T.C. Williams High School schoolteacher Patrick Welsh lamented the results of 40 years of education reform. He quotes a young colleague who quickly discovered all the resources in the world does not guarantee success: "I did more with far less at my previous school," Erika Dietz says. "In part because I had to, but also because I could focus on the basics of good teaching… at times, having so much [at T.C. Williams] was stunting."
In his September 2013 article on Good.Is, IDEO systems designer Sina Mossayeb says constraints can be a "great ally" and outlines five constraining principles that help him succeed in his line of work. They include:
I can't imitate forever — and when you stop imitating, you start innovating.
I can't know everything — and mistakes help you learn, so don't let mistakes discourage you.
I can't focus all the time — so take a mental breather to allow new ideas to present themselves.
I can't listen to everyone — so build out those in-person and digital networks and focus on listening to those people who will help you achieve your goal.
I can't be perfect — but you can practice perfection without expecting a perfect outcome.
If his professional success is any indication, then the constraints American musician Jack White puts on himself are certainly great allies. According to Richardson, the other half of the former duo The White Stripes has been known to use low-grade instruments that force him to try harder to elicit the sounds he wants. He also arranges equipment in a way that forces him to move further to reach it. Such practices ward off laziness and keep creative juices flowing.
"You may think you're making your team's life easier by removing constraints, but forcing a little hustle is good for creativity," Richardson says.
How Constraint Fosters Progress In Financial Services
As within any industry, small financial institutions that have fewer resources must think of new ways to tackle problems. But even large financial institutions are forced to think differently when they enter new markets with different sets of limitations.
In Africa and India, for example, large expenditures on brick-and-mortar locations can yield limited results because poor infrastructure makes it more difficult to move around as much as in more developed countries. The same infrastructure issues also present roadblocks to online banking adoption. The solution? Text banking and mobile banking. Those services are far more developed than what we are accustomed to in the United States because institutions and consumers in those countries live and breathe by their mobile phones. There is no landline dependence to move users away from. Instead, consumers have embraced simple, clear, straightforward solutions designed for mobile phones.
Good (Enough) Is Great
Sina Mossayeb's fifth constraining principle that he can't be perfect applies to institutions, too. When you're working with limited resources, sometimes you must settle for good enough. And as hard as it is for those Type A personalities out there to accept, "good enough" means exactly that: GOOD ENOUGH.
So the next time your credit union is struggling to complete those finishing details to take a new product or service to market, try going to market 95% done and take heed of Mossayeb's second principle — you can't know everything.
"Innovation requires not knowing what the right answer is at the outset," he says. So let your members and the market define what 5% is left to complete.
Define Your Own Success
Who says success has to look a certain way? Even established institutional staples such as core products, services, or mission statements offer some flexibility in how you define their success. So look for ways to introduce constraints and redefine achievement within your organization.
Planning season is fast approaching and credit unions across the country will enter fall with excitement and a list of to-dos to accomplish over the next year. Instead of launching that new product in 12 months, though, shoot for three. Or instead of launching five perfect products in 2015, choose one to launch before the end of 2014.
And when you're working on those products or services, embrace the Jack White strategy of limiting the tools at your disposal. This will force you to focus on results and identify those key things you want and can do well. It is these things that will differentiate the credit union in a competitive market in a way mere service won't.