How to innovate through encouraging failure
Innovation is the lifeblood of the digital economy. In today’s digital economy business leaders need to adapt quickly to changing customer needs by embracing new technologies and adopting new ways of working.
As an established company, if you're not disrupting your market through digital innovation, you're likely to be watching it be disrupted by your competitors. But innovation doesn't happen on its own, nor can it be commanded.
Instead it’s the result of establishing a culture that supports experimentation, nurtures the creative impulse and provides smart creatives with the mental safety net to test an idea, fail, learn from the failure and try again. The acceptance of failure as part of experimentation is the central ingredient to innovation.
At this point let me explain what I do and don’t mean by ‘failure’. Failure doesn’t mean releasing products and delivering services that are sub-par, which circumvent laws and regulations, and which do not add value to our customers’ lives.
What failure means in this context is to rapidly test and trial products and services in an iterative manner, learning as we go and failing within the confines of our own four walls and through direct feedback from customer focus groups who are testing our ideas as we’re developing them.
In this way we learn what works and what doesn’t, what our customers like and want and what they don’t. By failing in this manner we avoid having to invest time, energy and resources into something which doesn’t come to market, or comes to market and under-delivers.
So, within this context, how does a company go about crafting an environment that nurtures this kind of experimentation and embraces a level of risk that might feel a bit uncomfortable, particularly in the highly risk averse and regulated banking industry?
At Bankwest we've implemented several changes to create an environment which will encourage and promote innovation. First, as part of our adoption of new ways of working (which we've named Bankwest Blaze), we have established the Bankwest Blaze Mindset. These are the values and principles that underpin how we work. They include a customer focus based on empathy, developing the entrepreneurial spirit in each of us, focusing on pace over perfection and accepting failure as a normal part of the pursuit of excellence.
Second, we've broken our work into three categories, one of which is explicitly experimental. Agile squads are encouraged (even expected) to include experiments in every increment of work to prove or disprove a hypothesis before investing the time, effort and money needed to deliver an outcome to customers.
If the experiment disproves the hypothesis, that's a failure we'll embrace, as we've now learned what our customers don't want and we’ve avoided wasteful development. In the end, we'll deliver better outcomes for our customers and generate new ideas at a faster pace while continuing to meet our regulatory obligations which will always be of paramount importance.
Last, as a financial institution we have an increased responsibility to stay within guardrails because we will never do anything to risk our customers’ privacy, money or trust. We have needed to find the right balance of embracing agile and pace over perfection, while continuing to prioritise our ongoing responsibilities and obligations to our customers and stakeholders.
To this end, we're containing risk by putting in place guardrails that ‘timebox’ experiments, make the pass/fail criteria explicit and the scope narrow, which limits the time and effort expended and ensures clarity around outcomes and potential courses of action. In the end, our success is based on the success of our customers. Customer needs and preferences keep changing so it’s up to us to stay one step ahead of their expectations.
Bankwest is already becoming a hub for people with different skills, mindsets and new ways of working who are helping us meet customers’ rapidly changing needs in this digital age and Perth is emerging as an exciting hub in this exciting and growing sector.
By tapping into the expertise of Perth’s smart creatives and through fostering a culture where autonomy and the courage to test, fail, learn and try again is encouraged, we’re in a much stronger and exciting position to continue to anticipate and respond to customers’ ever evolving needs and preferences in these rapidly changing times.