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The Innovation-Friendly BoardRoles and Responsibilities, Opportunities and Challenges
Facilitated by Jeff De CagnaChief Strategist and Founder, Principled Innovation LLC
2005 CUNA Volunteer Cruise
April 24, 2005 ms Oosterdam Mexican Riviera Cruise
What will it take foryour credit union
to thrive in the 21st
Century?
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Innovation distinguishesbetween a leader and a follower.
--Steve Jobs
By the way, Apple is now the#1 global brand, edging out Google.
Managers are not paid to make the inevitablehappen. In most organizations, the ordinaryroutines of business chug along withoutmuch managerial oversight.
The job of managers, therefore, is to makethe business do more than chugto move itforward in innovative, surprising ways.
Heike Bruch and Sumantra GhoshalBeware the Busy Manager
Harvard Business Review(2/02)
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My credit unionsgrowth dependson innovation.
BCG Innovation Survey (12/04)(500 senior executives in 47 countries and all major industries) 73 percentof companies worldwide will increase
spending on innovation in 2005, up from 64 percent in2004.
67 percentof executives ranked innovation as one oftheir company's top three strategic priorities for 2005.
On average, executives said that their companiesplan to boost spending on innovation by 15 percent in
2005.
More than 90 percentsaid that generating growththrough innovation has become essential for successin their industry.
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Past performance is NO
guarantee of future success
Of the original list of Fortune 500companies from July 1955, only 71are still on the list today, including
only SEVEN of the original top 20.
Leaders CANNOT afford to make assumptionsabout whether their organizations will survive.
What is your credit unionsdoomsday scenario?
What are you doing to prevent,avoid or prepare for it?
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What is your credit unionsdream scenario?
What are you doing to seek out,drive toward or organize for it?
How do youdefine innovation?
What does it mean to you?
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Do you recognize this list?1. Kinder Morgan Energy Partners (pipelines)
2. FedEx
3. Apple Computer
4. Starbucks
5. Alcoa (metals)
6. Nike
7. Fortune Brands (home equipment and furnishings)
8. Pactiv (packaging and containers)9. American Express
10. Procter & Gamble
The unthinkable willnever occur.
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Remember the Walkman?
As of today, Apple has sold morethan 10 million iPods and morethan 250 million songs throughiTunes.
Apple has a 65% share of the USdigital music player market, whereasSony's market share is so small inthis marketplace that they just get
lumped into the 'other' bucket," saysMichael Goodman, an analyst withYankee Group.
Given your personaldefinition of innovation,what are some of thebeliefs you hold aboutwhat it takes to makeinnovation happen?
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Some beliefs about innovation
Innovation and creativity are thesame thing.
Innovation is a one-time orhappenstance occurrence.
Innovation is all about products.
Innovation ignores the customer.
Innovation is expensive.
Innovation involves risk.
True False
Questionsfor leaders
GREA
TERLE
VELSO
FINNO
VATION
RELEVANCE
RENEWAL
RESILIENCE
What will make thiscredit union RELEVANT
in the 21st Century?(VALUE PROPOSITION)
What will RENEWthis credit union for
the 21st Century?(PLAUSIBLE PROMISE)
What will make thiscredit union RESILIENT
for the 21st Century?(DEEP CAPACITY &
VALUES REALIZATION)
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The Sigmoid Curve
TIME
B
DA
CC
C
RELEVANCE
RENEWAL
RESILIENCEDANGER ZONE
Living up to our idealsThe credit union idea has grown tomillions of people, but there is nolimit to what the movement can
achieve in terms of growth, service,and most important, as an
instrument of cooperation andharmony between peopleeverywhere.
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Innovation Values Cycle
Imagination
Insight
Opportunities
Impact
Seven credit union principles Voluntary membership
Democratic member control
Members economic participation
Autonomy and independence
Education, training and information
Cooperation among cooperatives
Concern for community
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Edward Filene
He haddeep faith in the capacity of people toimprove themselves as long as they had goodinformation and the discipline to use it effectively.
What do you think hewould say about the
need for innovation incredit unions today?
Vision is not enough, itmust be combined with
venture. It is not enough tostare up the steps, we must
step up the stairs.Vaclav Havel
Former president of the Czech Republic
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What is your personalattitude toward risk?
What is your professionalattitude toward risk?
Is there a differencebetween the two?
Factors influencing attitudes toward risk
Personal life experience
Family attitudes and beliefs
Attitudes about money
Education/field or discipline of work
Experiences of friends, co-workers
External events in field/community/society
Perceptions and perspectives of people wedont know personally
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Being thoughtful about risk
Novelty implies nothing aboutrisk. Risk is a function of
uncertainty, multiplied by thesize of ones financial exposure.
Gary Hamel
HBR, September 2003
The relationship betweentalent and risk at Google
The best way to manage ourbusiness risk is to have the bestpeople working on the problem.
Thats always the best answer.Eric Schmidt, CEO
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Language is onlysecondarily the means bywhich we communicate.
It is primarily the means bywhich we think.
Dee HockFounder and CEO Emeritus of VISA
What are your thoughts,questions, agreements
or concerns?
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What will it take foryour credit union
to thrive in the 21st
Century?
What are the mostsignificant obstaclesto innovation in your
credit union?
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Cognitive
The inability to escapedenial and nostalgia
Cant see the future
The four biggest obstacles(Adapted from Gary Hamel)
Strategic
The inability to developnew strategic options
Cant overcome CW
PoliticalThe inability to moveresources away from
what isnt working
Cant invest/afford
Ideological
The inability to getbeyond optimization
Cant question what we do
What are the brutal facts of your
credit unions current reality?
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Some of the current reality
The number of credit unions fell 3.8% in 2004,the fastest rate of decline in over 10 years.
Credit union membership grew only 1.4% in2004, the slowest rate of growth in over 10years.
Credit unions have less than 10% market sharein consumer savings.
25% decline in the number of credit unions
since 1994. A decline of nearly a third in the number of
total credit union volunteers since 1994.
How do youdefine innovation?
What does it mean to you and to your credit union?
Innovation lives in the careful
balance of systemic freedom and
systemic discipline necessary fordiscovering and developing ideas to
create new value.
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Innovation is changingWhen I say that innovation isbeing democratized, I mean thatusers of products andservicesboth firms andindividual consumersareincreasingly able to innovate forthemselves. User-centeredinnovation processes offergreat advantages over themanufacturer-centric
innovationsystems that havebeen the mainstay of commercefor hundreds of years.
Considering innovation democracy
BLACK BOXOF INNOVATION
INPUTS OUTPUTS
What happens inside here?
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Innovation democracy at Google
Google has no strategic-planning department.
CEO Eric Schmidt hasn't decreed whichtechnologies his engineers should dabble in orwhich products they must deliver. Innovation atGoogle is as democratic as the searchtechnology itself. The more popular an idea, themore traction it wins, and the better itschances.
Keith H. HammondsHow Google Growsand Growsand Grows
Fast Company (4/03)
Two views of innovation
CORESTRATEGY
TRADITIONAL VIEW
OF INNOVATION
INNOVATION AS AN OPEN AND
DEMOCRATIC PROCESS
CORESTRATEGY
R&D
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Systemic discipline
A shared perspective on the importanceof innovation to the associations future.
A clear framework for understandingthe dynamics and demands of innovation.
A flexible and open system for engaging ininnovation that involves the whole organization.
The leadership will to make it all happen everyday.
Principled Innovation Framework
TECH CULT
FIN INTEL
PACE PEOPLE
REACH
R
ESOURCES
TRANSFORMATIVE VALUE/GROWTH
LEADERSHIP
STRATEGIC
CONTEXT
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Innovation principles I
Strategy is a coherent portfolio of experiments
developed across the organization.
Technology supports the socialarchitecture of distributed innovation.
Organizational culture remains vibrant by
emphasizing variety, transparency and inclusion.
Innovation principles II
Curiosity, inquiry and discovery shape the
organizations intellectual environment.
A high return on engagement is a criticalfactor in directing financial investment.
Organizational leaders create leaders
by distributing responsibility for innovation.
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The view from the boardroom
The principal finding of a McKinsey
Quarterlysurvey of more than 1,000
directors is that having focused for a time
on accounting-compliance issues, they are
now determined to play an active role in
setting the strategy, assessing the risks,
developing the leaders, and monitoring the
long-term health of their companies.
The role of the board I A strategic approach to governance
that does not limit innovation.
A knowledge-driven perspective on thestrategic challenges facing the creditunion.
An open-minded view of the future and
what is possible. The courage to give up a measure of
control in favor of a greater level ofinfluence.
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The role of the board II A willingness to ask management hard
questions about key strategic issues anddirections and to raise the issue of innovation inthose discussions.
A discipline of policy and practice developmentthat is infused with a respect for innovation.
A commitment to the intelligent investment ofcredit union resources through an innovationagenda.
A focus on both qualitative and quantitativemetrics of innovation progress that look atprocess, system and outcome.
The innovation agenda A clear expression of the boards belief
about the importance of innovation.
The endorsement of certain keystrategic innovation priorities in whichthe board is willing to invest.
A tool for management, staff andmembers to use in making decisions
about where to direct innovationefforts.
A mechanism for managing theuncertainty of innovation.
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What are your thoughts,questions, agreements
or concerns?
What will it take foryour credit union
to thrive in the 21st
Century?