The Decision Maker

Disrupt… for the Future of Credit Unions

Posted by Anne Legg (Thrive) on Mar 14, 2016 12:53:16 PM


As we look at the future of the credit union industry (or the entire retail financial sector for that matter), it’s pretty clear that innovation is going to be one of the main driving forces of sustainability and relevance.

For example, smartphones have transformed the phone from an audio connecting device to one of the most interactive and powerful delivery channels available to members. Innovation in phone technology is not only redefining its own industry, it’s forcing others (like the financial services industry) to redefine how they do business.

You might be thinking that your credit union doesn’t have the resources to be Apple. If that’s the case, remember that in the beginning, Apple didn’t have a lot of resources either. What the company had was imagination, passion, and a different way of doing things. So what kind of innovation can credit unions participate in? Any kind they can imagine.

Innovation is simply one of four things:

  1. Discovering a new way of doing something.
  2. Taking an existing product/service and giving it new uses.
  3. Reframing a problem or an issue.
  4. Reorganizing the same information in another way.

Traditionally, innovation was thought to occur in a linear fashion.  It started with a manufacturer of innovation and ended with the user. Then Harvard Business School professor Clay Christensen proposed that there are non-linear or disruptive ways to innovate. By improving a product or service in unexpected ways, this type of innovation helps create a new market or value network and eventually disrupts an existing market or value network. 

Traditional innovation favors the incumbent provider or a product or service. Disruptive innovation, however, can be anybody’s game.

For disruptive innovation to happen, leaders have to be open to new and unconventional ideas. Rather than fostering a climate of “how do we make a better widget” your organization’s climate has to embrace challenges to the status quo that ask questions like “why do people use a widget and what if we gave them something else instead?” A group of researchers from MIT found that leaders who are open to disruption were more than likely to see an increase in creative innovation by their employees.

Here are three basic strategies from Christensen on how organizations can produce disruptive innovation.

1.The back-scratcher approach.

Look for ways to offer a better solution to a problem that consumers have. Is there an itch that isn’t being scratched or that could be scratched in a more satisfying way? This type of innovation is most effective when competition in the market is either fragmented or otherwise deterred from responding to your approach. FedEx and instant messaging are both examples of back-scratcher innovations.

Credit unions: What problems do your members have? What solution can your credit union provide to this problem?

  1. The extreme makeover.

This type of innovation occurs when products or offerings are reimagined to become more affordable to a low-end market. Often, there is little competition to serve the market segment in question. In finding ways to rework offerings in a way that serves a lower-end market, companies may also find themselves with a product that displaces traditional competitors in other segments. One example of this type of innovation is the $3,000 Nano car developed by Tata industries.

Credit unions: What do you offer to your lower-end market? A rebuilding checking account? Or offer a loan product to the C and D paper where the loan rate decreases based on longevity of on-time payments? What do you currently offer that could be re-packaged?

  1. The bottleneck buster.

Consider how you can use new technology or a different approach to remove a previous constraint to market growth. With this type of innovation, consumers are no longer excluded from the market because they lack skills or access.  Blogs and other forms of self-publication are an example of this bottleneck busting innovation.

Credit unions: How can you use technology to improve your processes? What constraints or obstacles limit your growth and how can you overcome them?

Credit unions need leaders who are open to innovation, cultures that support it and channels that deliver it effectively. If you aren’t comfortable with disruptive thinking, find other leaders within your credit union who are and encourage them to speak up. By cultivating a culture that encourages disruptive thinking and channels it into improving your credit union, you’ll develop a sustainable strategic advantage.

About the Author

Anne Legg is founder of THRIVETM Strategic Services. THRIVE leads organizations to goal attainment via data translation resulting in innovative and transformational business strategies.   Anne is a recognized credit union expert and thought leader with an MBA thesis on the credit union business model as well as two internationally published whitepapers on credit union business strategy. To learn more about her or THRIVE visit

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