Directors & CEOs' conference continues
Day two of the 40th edition of the Directors & CEOs Leadership Convention in Las Vegas was all about innovation. From teaching leadership lessons to millennials to the latest developments in mobile banking to practical ways for credit unions to infuse their organizations with new ideas, attendees were given numerous ways for their CUs to compete in today’s environment.

CU Journal’s previous conference coverage is available here.
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CUs' secret weapon
For the last decade, credit unions have been instructed on methods of getting millennials to join CUs as members. Lynn Heckler says today millennials no longer are so young, so it is time for CUs to train them to be future leaders.

Heckler, the chief talent officer for St. Petersburg, Fla.-based PSCU, cited recent research that found by 2020, 46 percent of the U.S. workforce will be millennials. “That is only a few years away,” she said. “Millennials are transient, more diverse, socially connected and tech savvy. They learn differently, so we have to take a different approach to leadership development.”

According to Heckler, there is a decline in confidence in leadership, just as expectations for leaders are increasing. She noted there are more responsibilities for leadership teams, changing roles and increased complexity. “Ten years ago there were few chief information officers or chief security officers; Now those are common. The challenges today are a lot like growing amazing leaders on Mars. It takes a different mindset toward leadership than we had in the past.”

As baby boomers continue to retire in large numbers and millennials increasingly join the workforce, there is a 10-million-worker deficit. At the same time, changes are happening in business, Heckler continued. She said millennials have unique demands toward career and lifestyle.

“Notice I said ‘demands.’ When I entered the workforce in 1985, my employer was not worried about my lifestyle,” she recalled, drawing a laugh from the crowd.

Millennials want a socially conscious employer, which Heckler said is credit unions’ secret weapon. “This generation is known as a job-hopper generation, and turnover is costly. They want to do meaningful and interesting work right away. They want career advancement.”

The millennial mindset toward learning is different, Heckler said, adding they want short, technology-based, micro-learning events. Also, millennials are used to learning collaboratively, meaning CUs will have to integrate leadership development with business strategy. “Give them experiential learning and simulations, often involving multimedia,” she said.
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Big banks, fintechs setting the pace with mobile banking
Credit unions will have to become better students of the marketplace if they hope to capture consumers’ business.

That was the message from Dave DeFazio, partner with StrategyCorps, who during a Thursday breakout session on mobile banking noted that fintech companies are “changing the way people do business,” DeFazio said, and Amazon Prime has changed shopping by going outside boundaries.

“We are in the digital-assistant era. People interact with their devices in a different way from five years ago,” he said, including using voice texting instead of typing, talking to Siri on some Apple devices, and Amazon Echo. “Companies are making apps easier and more intuitive. You can order coffee in advance by talking, and then pick it up at Starbucks.”

Industry estimates say 24.5 million voice-first devices will be shipped in 2017. DeFazio said sooner rather than later will come the birth of a hands-free banking era. One example: Bank of America is preparing to launch voice banking on its mobile banking app later this year. The service will be known as “Erica.”

“Big banks are setting new expectations, so credit unions will have to figure out how to get those capabilities into their mobile banking,” he advised.

And, he said, the battle for top-of-wallet status is about to get tougher.

“One of those things credit unions have always been able to count on is the member reaching into his wallet at the point of payment and seeing the credit union logo on his debit card. But with many apps – including Starbucks, Uber and Amazon Prime – there is no need to pull out a card.”

The next wave might be automated advice apps. Current examples include Acorns, Simple, Dave, Penny and Digit. DeFazio noted big banks and “Shark Tank” entrepreneur Mark Cuban are investing in or buying these companies. Acorns lets users send small amounts of money to an investment fund without thinking about it.

One hundred percent of financial institutions need fee income, but the problem is zero percent of customers/members want to pay. DeFazio said this is seen with checking accounts – people want them to be free and get angry if they are not. On the other hand, Netflix has 100 million paying customers, which he said indicates people are willing to pay if they see perceived value. He noted Capital One is offering 50 percent off Spotify Premium subscriptions to those who use their Capital One card to pay. Georgia’s Own Credit Union in Atlanta created a checking account that offers cell phone protection, roadside assistance and other benefits for a fee of $5.95 per month, and the CU has been successful with it.

“There are interesting new things happening because of how and where people are spending their money,” he assessed.
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CUs threatened by new competitors
Most adults tell sociologists they feel they lost their creativity in fifth grade. According to Andrew Downin, managing director, research, for Filene Research Institute, Madison, Wis., this is because at about that grade schools start teaching to the test.

“We are taught the correct answer must be A, B, C or D,” he said. “We see a lack of creativity at credit unions, where we are just trying to keep NCUA out of our offices. We want to do what is best for members.”

Downin said he wanted to demystify innovation for CU leaders. On one hand, he asserted, there probably is not a better time to be a credit union. “There are 108 million credit union members, and the message of doing what is right for people is resonating due to the Wells Fargo scandals and other news involving banks.”

However, he continued, CUs are being threatened by many new competitors, including Kabbage, a fintech he said wants to be the best at small business lending, and Acorns, which wants to be the best at small-dollar investing. These competitors are not trying to be credit unions, or banks, he said. In most cases they do one thing very well, and they do not need any branches.

“They live in apps on our smart phones,” he said. “Walmart is the No. 1 retailer in the world for tires, engagement rings and shotguns. It also is moving into banking. Walmart is offering Bluebird, an alternative checking product.”
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Innovation and creativity are key
Downin said there are three types of innovation across industries: incremental innovation, architectural innovation and disruptive innovation. Disruptive innovation is showy and sexy, but even a company such as Google puts 70% of its investments and incremental innovation.

Credit unions need creativity to overcoming several roadblocks that are limiting them. Downin said these range from overconfidence to stubbornness to extreme risk avoidance.

Overconfidence – examples of this roadblock include CUs relying too much on the past, or CEOs who make a good salary assuming they know how low-income members feel. “Radio Shack offered a wide variety of products to a narrow market and thought it was going to be successful into the future,” he said.

Shunning New Ideas – the phrase “We have always done things this way” is a killer, Downin said. Far too many companies tend to shoot down marginal ideas from the get-go, without letting them grow into something better, “and that is a shame,” he said.

“We need to keep the right folks in the room and the wrong folks out of the room. Walt Disney was fired two weeks into his first job as a cartoonist by an editor who said Disney didn’t understand what is entertaining. He kept that experience in mind when he founded his movie studio. He knew to keep the editors out during creative brainstorming sessions.”

Downin said the financial folks at the credit union are important, but the ability to think creatively and not shoot down ideas is a hurdle many companies do not overcome.

Unnecessary perfectionism – CUs have to be perfect when it comes to members’ balances, but when it comes to developing new products Downin suggested they to follow the model of many technology companies and implement rapid prototypes. “This is an imperfect process, but know that Google and Apple do not try to go for perfect on the first try.”

Risk avoidance – CUs are risk adverse in many areas, including new products and services, Downin assessed. “In direct mail campaigns we are happy with a 2 percent response rate, which is a 98 percent failure rate. So why won’t we take a risk? If we can take a risk, it is going to pay off not only for our own credit unions, but for the members we serve.”
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What CUs can learn from the vacuum cleaner business
According to Denise Wymore, founder of 6 Story and former VP of marketing at First Tech Credit Union, CUs are “fast followers,” not leaders in innovation.

“The way I see it, R&D stands for rip off and duplicate,” she said with a laugh. “Innovation can begin by solving a simple problem.”

Vacuum maker Dyson’s motto is, “Our mission is to solve the obvious problems others ignore.” Wymore said James Dyson noticed as a vacuum cleaner bag filled up, suction declined. He used the model of a sawmill to create a new type of vacuum cleaner that worked on the principle of cyclonic separation – eventually.

“Dyson went through 5,127 prototypes,” Wymore said. “Many companies say, ‘we tried that once and it did not work.’ They have a long way to go.”

Instead of fighting metaphorical fires in the office, dealing with day-to-day work emergencies, credit union leaders need to look to the future, Wymore argued. One problem: “We do not allow ourselves time to just think.”

There are four levels of innovation, Wymore said. Level 1 innovators are the Problem Solvers. They say, “I can do this.” At Level 2 are the Preventers who declare, “Not on my watch.” Level 3 innovators are Improvers, who insist “Good enough is not good enough. Finally, Level 4 innovators are Creators. They know to ask, “Where must we be in 10 years?”

Wymore said an important lesson she learned while at the Filene Research Institute was to say “how might we” rather than saying “how can we.” As in, “how might we…solve this problem?”

“At the end of the day, we move insured money,” she told the crowd. “We can be creative.”