A story goes that the ice cream cone was invented at the St. Louis World's Fair in 1904 when an ice cream vendor's product was so popular that he ran out of bowls. No bowls, no way to provide his confection to customers. In the next stall, Ernest A. Hamwi was selling tartlets similar to waffles. He realized he could shape one of his pastries into a cone and use it as an edible bowl for his colleague's ice cream. Thanks to this chance collaboration, Hamwi could sell his waffles, the ice cream vendor could continue meeting a consumer need on a hot day at the fair, and one of America's favorite summertime treats was born.
Like the merger of ice cream and the tartlet, credit unions today often do their best when working together for a common good. It is, after all, one of our cooperative principles. Individually, our industry is confronted with the challenge to think of better ways to meet members' demand for multiple access points and ease of use, all the while keeping costs down. Unlike the ice cream cone, many of today's solutions involve significant research and development costs or extensive learning curves, or both.
When competing with other financial institutions that have heftier budgets, how does a credit union decide which of several promising projects to fund with limited resources? The answer is in the question itself: One credit union will have a hard time going up against big banks, big retail or big tech; but a group of credit unions willing to pool resources and share ideas can be much more successful.
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Surviving Requires Willingness to Adapt
As financial institutions, we know keeping our doors open depends on keeping up with technology and adapting to consumers' changing expectations. Some loyal members may patiently wait for our credit unions to catch up – for a while. But taking a twist on Charles Darwin's premise about survival of a species, it isn't the strongest companies that survive, nor the one with the most resources, but those most responsive to change.
Even among very large credit unions, survival means collaborating to find new ways to provide better service and greater value. It means exchanging ideas and sharing experiences. It also means participating in the costs of development, testing and implementation so the best solutions bubble to the top.
There's no doubt that companies with a strong commitment to research and development outperform those with a sporadic or nonexistent commitment. Consider this:
The 2015 Global Innovation 1000 study from Strategy& reports the United States spends more than any other country on corporate R&D. And, according to a Business R&D and Innovation Study, developed and cosponsored by the National Science Foundation and the U.S. Census Bureau, American companies spent $323 billion on domestic R&D in 2013.
R&D costs are hard to control for two reasons: It's difficult to accurately predict which projects will accomplish their desired results, and it's also challenging to forecast the profitability of a new idea. So, because a portion of new projects don't turn out to be successful, it can be an expensive proposition for even larger organizations to innovate alone.
Thriving Takes Working Together
And that's where collaboration within our cooperative movement can really pay off. Here are a few of the benefits:
- Pooled resources. Because resources are shared, not only is there more funding to put toward pioneering innovative solutions, but it frees an individual credit union to tolerate more risk while tracking a new idea. And if a project doesn't pan out, the entire cost of the research and testing doesn't fall on just one credit union.
- Smart brainstorming. By participating in an intentional group effort, credit union leaders can generate ideas that become workable solutions to shared problems – first working independently to bring alternatives to the table, and then collaboratively to determine the best R&D opportunities.
- Access to others' strengths and experiences. Through collaboration, a credit union's expertise in daily operations or data security can combine with another's background in compliance or risk management. By crowdsourcing ideas and experience, all participants benefit – much like individual credit union members do by pooling their funds.
Technology in the 21st Century is a moving target. Futurists, scientists and think tanks keep trying, but nobody really knows the rate of change. Let's just say, it's fast! For credit unions, collaboration is the key to not just surviving, but thriving.
Jeff Kline is CEO of MEMBERS Development Company. He can be reached at 512-751-4160 or [email protected].
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