This past month at the Credit Union Leadership Forum'sEdu-Leader Leadership Learning Series we focused on innovation. Ithought it would be valuable to share some of the day's learning aswe all face the challenge of how to innovate, which can be one ofthe most challenging issues for credit unions.

There are three articles, “Microsoft's Lost Decade”, “IBM'sDecade of Transformation” and “Manage Your Energy, Not Your Time”that all provide critical insights into effective peoplemanagement, effective strategic focus and energy management.Provided below is a summary of key points that you may find helpfulas you work through innovation challenges within yourorganization:

• Be aware that you don't change your focus from member-centeredproduct development to an approach more focused on financialparameters
• Avoid a silo mentality where politics trumps innovation. Thisleads to long lead development times for new products andservices
• Ask whether you are creating a bloated, bureaucracy-ladenorganization that keeps executives isolated from growing problems,or creating a lean, competitive organization led by youngervisionaries of extraordinary talent
• Look at your evaluation systems and how your employees aregraded. What is rewarded and what incentives are you providing thatsupport innovation and collaboration?
• Are you creating collaborative strategies across divisions andgeography?
• Are you investing in your people and as a result, creatingvalue for your credit union when individuals bring all theirmulti-dimensional energy wholeheartedly to work every day? Alongthese lines, here are a few things to consider:

• Increasing performance demands often lead employees to put inlonger hours, which takes physical, mental and emotional toll,leading to less engagement, more medical costs and higherturnover
• To re-energize the workforce, companies need to shift emphasisfrom getting more out of people to investing more in them
• Rather than focusing only on employee skill development, thereis also a need to help build and sustain employee energycapacity

We were most fortunate to have as our featured speaker,Christina Mott, director of innovation at Marsh & McLennanCompanies. Christina is responsible for innovation managementincluding strategy, planning, processes, tools and methodologies tocultivate, identify and capitalize on innovation across the fouroperating companies of MMC.

Mott spoke about MMC's heavy focus over the past few yearsgetting as much of the costs out of the business units as possible.Now MMC is working on growth as the way to generate value andinnovation is essential to growth. She explained that innovation isnot just required for growth, but it's key to just staying in thegame. The greatest challenge in managing is both managing thecurrent businesses AND building for the future at the sametime.

At MMC, senior management realized they needed to create aconstant flow of opportunity. The broader workforce needed to beincluded in innovation with input from outside of the organizationas well. They created an office of innovation with a separatebudget and resources, which Mott directs. The senior executives didnot want to leave this critical function to chance, “moonlighting”or ad hoc committees.

It is difficult for managers to bring a high level of focus oninnovation while tending to the current business. This office hasbeen charged with channeling energy and enthusiasm within thecompany, across all levels, to create and manage meaningfulinnovation efforts. The goal is to have a culture of innovationpermeate the company and have the idea of continual innovation beinstitutionalized.

MMC is not unique in this regard; other companies haveestablished similar functions. For some it may report to the ITorganization or to the marketing organization instead of building aspecific innovation office.

MMC visited other innovative companies including 3M, IBM,Motorola, United Health Group and others. The organizations sharedwith each other what they were doing in innovation. In this fairlynew field, companies were willing to collaborate and share bestpractices. In the spirit of collaboration and “paying forward” MMCwas willing to participate in this BFCU Leadership LearningSession.

Christina had the attendees of the session perform an exerciseby asking: what are the biggest obstacles you face when it comes togenerating a return on your investments in innovation?

When the Boston Consulting Group asked 1,600 executives thissame question, the top 10 answers were as follows:

1. A risk-averse culture
2. Lengthy development time
3. Difficulty in selecting the right ideas to commercialize
4. Inability to adequately measure performance
5. Not enough great ideas
6. Lack of collaboration within the company
7. Ineffective marketing and communications
8. Compensation not tied to innovation results
9. Not enough customer insight
10. Insufficient support from leadership and management

This group identified lack of collaboration as theprimary obstacle, followed by a risk-averse culture anddifficulty in selecting the right ideas to commercialize,which was very similar to the results from MMC's executives.

Innovation is hard in general, but it's especially difficult forlarge, complex, diverse organizations. It requires dexterity,focusing on execution for the near-term while creating for thefuture. And by definition, it requires change, and inertia is apowerful force. Benefits are also deferred and progress is hard tomeasure. For organizations starting from scratch, investment mustcome from current profit streams or re-allocation of funds.

If innovation is so difficult, why bother? Without innovation itwould be very difficult to reach growth targets. Withoutinnovation, even the biggest and most respected companies can beovertaken: for example, GM and Ford were overtaken by Toyota;Barnes & Noble and Borders were overtaken by Amazon.com;MySpace was overtaken by Facebook.

Innovation is needed just to survive. Additionally, researchfrom BCG and Bain shows that innovative companies outperformedtheir peers on key financial metrics and generate a better returnto shareholders. I'm sure this would hold true for members ofcredit unions as well.

How does a company create a culture for innovation? Culturetakes a long time to change. However, climate changes more quicklyand is easily influenced by the leaders. When nurturing innovation,leaders must create a clarity of vision around innovation, adopt adisciplined approach to innovation, support idea generation, createa climate of safety in taking risks, reward and recognizeinnovators, and ensure an outside perspective to theorganization.

We brought the right issues of conversation to the table toencourage and stimulate innovative thinking and build a culture oflearning and engagement. Innovation means finding cost-efficientways to grow and be productive. Trust is the key issue acrosscredit unions. The successful credit unions are going to continueto grow and will take market share from the banks.