LAS VEGAS — Innovation clearly involves risks and can be costly, but knowing where to innovate is more important than figuring out how to innovate, one expert said during a keynote session at NACUSO’s annual conference here.

Nicholas Carr, former executive editor of the Harvard Business Review and author of the 2004 book Does IT Matter? Information Technology and the Corrosion of the Competitive Advantage, shared his perspective on “The Prudent Innovator.”

“Where we should innovate gets overlooked but it is the critical question,” Carr said, adding innovation “can be a stab in the dark” because there is the risk of bringing something to market that customers are not ready to adapt to.”

With their willingness to collaborate, credit unions are among the “early movers” in their networking efforts, Carr said. Forming CUSOs has helped to expand scale, temper risk and enter new areas such as in business lending and investments. Carr said some important considerations credit unions and others might want to consider going forward are identifying where bridges can be built to serve members, finding out what really distinguishes credit unions from their competitors and in what areas can the industry further collaborate.

“Be a bold innovator in those few areas where you can gain and maintain advantage,” Carr said, but there’s nothing wrong with imitation. “Be an imitator or collaborate where you can’t.”

In the long run, it’s more kosher to mend a disruption than to create one and Carr advises credit unions to be wary of “do-it-yourself ethics” because it can lead to “mindless competition” and creating the sometimes false premise that “everybody thinks they’re better than everybody else.” Combining the old with the new can be a strong path to innovation, Carr said, pointing to Netflix with its DVD rental system and Toyota’s hybrid cars.

“Don’t leap too far in the future,” Carr cautioned. “People tend to be overly optimistic when it comes to innovation.” –