Innovation -- The Forgotten Strength -- December10, 2006 (Also appearing in the MBA NewsLink)
Innovation. This term conjures up passion and images of Alexander Graham Bell, Einstein, Silicon Valley, continuous manufacturing cycles, and highly specialized technologies. What about within the mortgage industry? How do we innovate and sustain an advantage? Do we understand what the consumer really is seeking and what are the economic models that support a product or service launch?
If we ignore the controversies surrounding the “patenting” of concepts and ideas (leaving that for the courts and lawyers), an internal examination of our organizational and industry innovative strengths would likely reveal sub-cultures that continually strive to improve products, processes, services, and customer relationships. Nevertheless in our organizational quest for improved margins, expanded top-line, and back-office efficiencies, mortgage executives are increasingly relying on non-innovative solutions including copy-cat offerings, functional outsourcing (e.g., HRO, F&A, IT), and even M&A’s. As a result, these innovative organizational areas and ideas within are left to chance blurred by a demand for profit at the expense of longevity. A mortgage executive recently pointed to a long-held axiom, “why innovative when the markets are good?”
Let’s be very clear, the relaxing of credit standards to increase production volumes is not innovation. Successful innovation must encompass a holistic approach not just for a product offering, but the entire delivery channel, customer service, risk tolerance, and the ability to embrace new technologies and architectures. Simply put, it is the “Relevance of Innovation” that is often times more important than the innovation itself. Of course, timing and market conditions play a material factor in adoption. So what can be done?
- Embrace the Culture: Organizational cultures must be created for the free-flow of ideas up and down the organizational structures. Employees must be able to continuously improve product and service offerings while delivering required operating results. Just as executives speak of a “sales culture,” we must understand and embrace an “innovation culture.” After all, is not the “e” in the mortgage industry (i.e., e-mortgage) a collaborative innovation that is finally coming of age with increasing relevance and capabilities?
- Identify the Tolerance for Risk: In an industry that thrives on risk – ratings, rankings, groupings, and automation – this task should be humdrum. However, the mortgage profession thrives on repeatability and conformance thereby placing lesser value on the out-of-the-ordinary approach or idea. Tempered by previously burgeoning markets, risk of innovation was inappropriately ranked creating a market driven by “also ran” offerings and ideas. Today, a fresh approach is being taken by several stagnant market makers in an effort to not only qualify the innovative opportunities, but formalize their potential merit using quantitative methods and techniques.
- Categorize the Channels: Regardless of our personal or organizational beliefs, the mortgage market has become a commodity business. The historical origination and servicing fragmentation has resulted in poor sustainability of the plethora of diverse direct and partner channels. For any innovation to obtain market share and relevance, precise customer and delivery channels must be identified, tested, and mapped to promote rapid adoption and consistent results.
- Define the Architecture and Technology: For most organizations, this is where innovation erroneously starts and stops. Examples of this thought process can be easily found at nearly every conference and trade show. Although while critically important to sustainability and scalability, the idea of architecture and technology as a panacea for innovation has become the catalyst for numerous failed ideas. Only after the idea has been mapped to processes and business benefits, can the technology valuation and expense be objectively determined in support of the innovation – not in lieu of it.
- Articulate Superior Customer Service: If we cannot service or support the innovation, it will fail. If we do not understand the on-going operational commitments in conjunction with evolving customer demands and profiles, the innovation will fail. If we holistically embrace the “Innovative Relevance” of superior customer delivery, we will greatly increase the chances of profitability and sustainability.
Mortgage innovation is not singularly about standards, committees, or people (only as a means to arrive at the conclusion unbiased by vendors, pundits, and events). Nor is innovation about prescriptive tasks involving global operations, offshore functions, or even the adoption of new ideas. Innovation is a catalyst, and our actions are the results. When we fail to innovate, we fail to achieve results. What has your organization innovated lately? How did you measure it?
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