Dangerous Minds

Credit unions must balance good judgment with calculated risk to stay relevant.


Fresh off the flash and excitement of Finovate New York, it can be easy to forget that great ideas - no matter how innovative - aren't always successful. 

But as factors like lower levels of human capital and research weigh down U.S. innovation levels, according to Forbes, it’s also important to remember that nothing worthwhile happens without stepping out on a limb at some point.

Here are three factors that can balance the chaos of the innovation process.

#1 Know Your Market
Sometimes innovation is reigned in by external limitations in your marketplace or business model. For example, Michelin had no problems designing a high-tech, sensory-enabled tire that could run damaged for 125 miles without going flat. What it could not create was enthusiasm among the mechanics and auto shops that would have to invest in hardware and training to support this innovation, reports Forbes.

#2 Attack Barriers Like Someone With Nothing To Lose
Act like a criminal and that risky behavior will likely land you in jail. Think like a criminal and you may stumble across untapped opportunity.

Several non-profits exist target rehabilitated ex-felons for job training and entrepreneur opportunities, translating innovations learned in their law breaking days into competitive advantages for legitimate small businesses. The founder of one such program described its participants to the NY Times as “charismatic, independent, resourceful, and willing to take risks” and thus “much like her colleagues in the business world.”

Take the energy that criminals demonstrate in finding ways around the law and put that same enthusiasm into finding legal solutions for your own innovation barriers. You’ll be amazed how quickly they crumble.

#3 Remember You Have Everything To Lose
Once you determine how to do it, ask yourself if you, as a cooperative financial institution, really should do it.

Taking risks in business is not all that different from gambling at the race track (at least to your subconscious mind). Studies on the Favorite Long Short Bias show how variations of equal amounts can be interpreted by our brains as more or less substantial, depending on their presentation and our perception of the factors involved. These biases can cloud or magnify the real level of risk, particularly in cases where people quickly become caught up or personally invested in a idea.

In these cases, you might be tempted to sweat the details of a small improvement, consuming valuable innovation resources for something that feels substantial but that few members will notice. Or you might let the perceived risk of a big change overshadow what would actually be a wise investment for the institution.

Remember, although the end decision belongs to credit union leaders, it’s the members’ resources that will ultimately be enhanced or depleted by the institution’s innovation strategy.


Sept. 28, 2012



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