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How Blue Is Your Ocean? Value Innovation and Credit Union Strategy Development
Stagnant credit union growth and undifferentiated strategies magnify the need for credit unions to innovate. However, we cannot simply point to the trends occurring in the credit union industry and say,“Go innovate.” The Filene Research Institute’s role as a “think-and-do tank” is to provide you with the tools and venues to understand innovation and growth. For example, the i3 initiative is an exciting field-research project that tasks the movement’s next generation leaders with designing tomorrow’s credit union innovation pipeline. i3 operates under an open innovation model whereby we heartily encourage credit unions, credit union organizations, and credit union vendors to take i3 ideas as their own and implement in the marketplace. Since 2004, the i3 initiative has introduced close to 30 specific credit union innovations, ranging from process improvement to new market/product development. i3 is just one tool available for credit union innovation. This research project similarly aims to provide you with the inspiration and the tools to “go innovate” in a deliberate and creative manner. Several months ago, a number of credit union leaders, academics, and industry watchers alerted us to the book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renée Mauborgne. The innovation processes reviewed in the book (commonly termed “value innovation”) are appealing concepts that could be successfully applied to credit unions. The authors introduce a framework whereby organizations can explore the creation of uncontested market space by pushing for a quantum leap in consumer value concomitant with decreasing industry cost structures. Does this sound too good to be true? Kim and Mauborgne contend that this deceptively simple idea boils down to four questions organizations rarely examine:
Stagnant credit union growth and undifferentiated strategies magnify the need for credit unions to innovate. However, we cannot simply point to the trends occurring in the credit union industry and say,“Go innovate.” The Filene Research Institute’s role as a “think-and-do tank” is to provide you with the tools and venues to understand innovation and growth. For example, the i3 initiative is an exciting field-research project that tasks the movement’s next generation leaders with designing tomorrow’s credit union innovation pipeline. i3 operates under an open innovation model whereby we heartily encourage credit unions, credit union organizations, and credit union vendors to take i3 ideas as their own and implement in the marketplace. Since 2004, the i3 initiative has introduced close to 30 specific credit union innovations, ranging from process improvement to new market/product development. i3 is just one tool available for credit union innovation. This research project similarly aims to provide you with the inspiration and the tools to “go innovate” in a deliberate and creative manner. Several months ago, a number of credit union leaders, academics, and industry watchers alerted us to the book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renée Mauborgne. The innovation processes reviewed in the book (commonly termed “value innovation”) are appealing concepts that could be successfully applied to credit unions. The authors introduce a framework whereby organizations can explore the creation of uncontested market space by pushing for a quantum leap in consumer value concomitant with decreasing industry cost structures. Does this sound too good to be true? Kim and Mauborgne contend that this deceptively simple idea boils down to four questions organizations rarely examine:
- What elements should we eliminate that our industry takes for granted?
- What elements should we reduce well below the industry standard?
- What elements should we raise well above the industry standard?
- What elements should we create that the industry has never offered?
Aided by the expertise of Roch Parayre, Ph.D., a director at DSI, senior fellow at the Wharton School and close academic colleague of Kim and Mauborgne, this report puts credit unions under the “value innovation” lens of analysis. To ensure that we created a realistic and useful framework, the research team conducted in-depth interviews with industry leaders in fall 2005, and hosted a two-day workshop with 75 credit union senior executives from around the United States in January 2006. The resulting insights of this research are set forth on the pages that follow. Specifically, this report will:
- Introduce the value innovation framework and its applicability to credit unions;
- Furnish examples of value innovation at work in the financial services marketplace; and
- Provide a set of tools that can be used to revitalize credit unions’ strategy development.