Customer Benefits Versus Revenue Growth in Innovation
When financial services companies look for benefits from new innovations, it frequently comes down to choices between revenue growth and customer benefit. The vast majority of companies I work with instinctively lean towards revenue when faced with this hard decision.
Revenue growth is an easy objective to target if you are in a large company. Why? Strategic objectives are based on it, performance goals are based on it, and the company's well-being rests on its financial viability, which revenue growth supports. The quarterly earnings and annual statements echo the importance of revenue growth. The culture of most large financial institutions lives and breathes on revenue growth and financial measures.
In comparison, customer benefits such as the customer experience or customer service are not so easily seen. They don't jump out from the financial statements and aren't required for GAAP. They don't make it into quantifiable objectives. When is the last time you have heard an accountant clamoring for more customer value? Have they ever in the history of accountancy? And while most organizations have a good elevator pitch on why the customer is important, their new product ideas and services usually stem from their business desire to earn more.
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But the best innovations are those that take care of the customer’s needs first. When I led the innovation program at USAA, a large financial services firm, we earnestly put the customer needs first, although it wasn't easy. I witnessed how serving the customer first ensured new products that truly met their needs, and weren't in conflict with the revenue objectives in the organization.
It's as if there are two gods that want to be served: a revenue growth god and a customer benefit god. The revenue growth god is more powerful and demanding within the organizational culture. It demands sacrifices and many innovations. Meanwhile, the customer benefit god is more unassuming and modest, entering the picture only when the organization invites its viewpoint into the decision cycles.
Though quiet and unassuming, the customer service god is actually more important and powerful, because when an innovation doesn’t benefit customers, they quickly notice the lack of benefit and migrate elsewhere. But when customer service is put before revenue growth, then customers magically gravitate towards the new innovations. And whenever that happens, revenue growth will follow.
A practical example of this is the smart phone check deposit function that was launched while I was leading USAA's program. The smart phone check deposit function was initially a revenue loser. It cannibalized the tech savvy customers from one segment of our bank and moved them to a less developed segment. It actually cost money and time to initially accept checks through smart phone pictures. But the customer benefit was the reason we did it. Our customer was everything. They told us they were in remote places without access to banks and needed to deposit checks. That resulted in the creation of the smart phone check deposit capability. It was a customer pleaser and a revenue loser...at first. After the customer used it and loved it, they told other customers and soon the business grew from it. Now billions of dollars are deposited through that innovation, and it has spurred on other great innovations in the mobile wallet space. By pleasing the god of the customer, we were able to make the god of revenue jealous; thus both were pleased.
For innovations that make a difference, the customer must be considered first. Revenue can be a very powerful motivator, which is why the language of financial services is built around earning revenue and reducing expenses. However, the smart companies will make sure that the unassuming god of the customer is served first.
Mick Simonelli is an independent consultant on innovation in financial services. He previously worked as the head innovation executive at USAA.
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