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Failure, Future and Cooperative Finance

When we joined the Filene Research Institute’s prestigious i3 (Ideas, Innovation, Implementation) Group in late 2012, we were excited. That’s because we were invited to join a group of peers and colleagues from credit unions across North America to focus on innovating concepts, solutions and advancements in service of credit unions.

And we didn’t mean to, but we started off by breaking some rules.

In i3, we were meant to work in six month cycles. Within each cycle, participants must ideate, innovate and implement ideas and report back on to the rest of the i3ers and industry leaders about lessons learned and results. This method is pretty cool, especially because it forces i3ers to slow down and focus deeply on the idea portion of the process.

In our i3 cohort, we started looking through that lens at how can we help our members’ overall well-being and reward and incentivize members based on a number of factors–that go way beyond the traditional thinking of consumer finance. We came up with the Credit Union Well-Being Incentive Program.

Our hypothesis was that members who make good choices by living more responsibly–in terms of their environmental footprint, community activities and personal actions–are less risky, highly aligned and more loyal members who will become stronger advocates and more profitable over the long term.

And according to the Filene Method, we totally failed.

Failure Fuels the Fire

The reason we failed is that we did not prototype and test. We didn’t implement anything within our six-month timeframe. We risked utter failure to invest quality time thinking deeply about our concept. We felt compelled to follow our innovative noses, focusing on the problem about which we were becoming rabidly obsessed.

We joined i3 because we felt it was a completely safe environment for taking bigger risks and flirting with potential failure than we can at our credit union day jobs.

But during the year since we wrote our paper on the Well-Being Incentive Program, we both implemented programs at our respective credit unions—Dupaco and Vancity—that sprung directly from our time working together on member well-being.

At Vancity, our work informed the Localty program, where members are rewarded for shopping at our local business members, discovering cool businesses and supporting the local economy. It also creates value from our cooperative network of members, connecting both people and businesses for mutual benefit.

The experience common to our time working on the Well-Being Incentive program, and launching the Localty program, is that we risked failure. The implementation of Localty wasn’t perfectly baked. We knew 80% of the answers and the rest would come from actually trying it out in a real environment. We launched Localty as a ‘test and learn’ pilot, far from being polished and complete, and are learning what works and what doesn’t in order to bake it into our other ways of rewarding members for their loyalty to Vancity and our community.

At Dupaco, we launched GreenBack Impact, a campaign appealing to members, who currently have numerous loans and other services scattered among different financial institutions, by leveraging consumer trends that show an increase in support for local businesses, community supported agriculture and cooperatives. It focuses on sustainable wellness for the individual, the cooperative and the community.

While the campaign’s primary objective was to boost loan balances and deepen member relationships, its secondary objectives were rapid prototyping tests for 1) a shared surplus concept; 2) long-distance member consult by appointment–using Skype or Facetime; and 3) a member’s savings tracker.

Consumer Finance Vs. Cooperative Finance

Through this process, we also realized something else:  As credit unions, we should innovate based on our business models. Innovation is necessary and essential to get back to our core values and rekindle our relevance. But if we’re setting out to solve a whole heap of problems that are happening in the world of cooperative finance today, some ideas simply take longer to percolate.

We say ‘cooperative finance’ and not ‘consumer finance’, as Filene does, because we believe, and maybe this is just the two of us, that there are many companies and organizations already focused on consumer finance.

But credit unions are cooperatives. We’re democratic and believe in economic participation and member education. As a result, we wanted to look at issues of governance, active participatory democracy and holistic member and community well-being that spring from our principles and values.

For so long, and to gain credibility as a viable financial institution in the eyes of mass consumers, credit unions shunned their cooperative identities in pursuit of being more like banks. Now, that attitude has permeated our ways of thinking and being.

The Credit Union Difference has Economic Value

Differentiated products command a monetary premium. But credit unions have led a rush to the bottom, towards the crowded landscape of homogenous financial products and a relentless focus on having the lowest rate.

Wouldn’t it be easier—and less expensive—to embrace that which makes credit unions authentically unique? To reach back to our roots and carry forward the inherent value we uniquely can offer in our modern context?

When credit union people get together, we end up talking about one of two things. We often talk business—the nuts and bolts of running a financial institution. Or we talk values and principles–you know, the granola stuff that feels good, but doesn’t necessarily appeal to the CFO types who are increasingly becoming our CEOs. But our real value is when we marry those two conversations together. That’s our core: Running values-based financial institutions that are sustainable for the long-term, because they focus on our members’ and communities’ well-being.

Gather People Already Obsessed with Problems

In the future, could Filene consider recruiting i3 participants who are already passionate about an issue and unite them around cooperative principles and our credit union roots?  Selection could (and should) consider how passionate an individual is about a problem—maybe even beyond passionate, maybe even a little pissed off. Remember that it was young, pissed off people who started cooperatives and credit unions in the first place, to address issues affecting them and their communities that no one else would take on.

Ideation and innovation without implementation are not very useful, but neither is jumping into implementation before we think about our values and principles and create added value—not as banks, but as financial cooperatives.

So, please know that in addition to lasting friendships, our experience in the Filene i3 program continues to make a positive impact in our careers, at our credit unions, and for our members.

About the Authors: William Azaroff is director of business & community development at Vancity Credit Union in Vancouver, British Columbia.  David Klavitter is senior vice president of marketing at Dupaco Community Credit Union in Dubuque, Iowa. Both joined Filene's i3 program in 2012.

Categorized: 'Policy' 'Products & Services' 'Strategy'

Comments on this Post

Thanks for this reflection William and David. Kudos to Filene as well for following up with this.

In my opinion, ideas are only great if they are shared. It gives others, even if silent in response, an opportunity to look at their own way of doing something and consider other ways of thinking.

I remember reaching out to you William when it had been written up as concept and you responded then as you did here. “We hope ...” I’d like to think that’s what credit unions offer - opportunities to hope through sharing of vision and ideas.

I passed on the Localty program to our IT department when you launched it and they were interested in seeing how it goes and learning from your lead. I look forward to hear more when you have some more insights from Localty and GreenBack Impact programs.

Thanks again,
Ben

Thanks for the comments. So impressed with Filene for publishing our post, thanks for that!

Thanks too for the link, Martin!

Interestingly, in the past week, we’ve fielded calls from 3 separate credit unions wanting advice on how to shift from a consumer finance organization to a cooperative finance one. Thanks for the note fellows.

You most certainly did not fail according to the Filene Method. The rapid prototyping phase of the process was put into place so ideas would be put into action. Too often, people have ideas provide no value to the world. It’s not because the ideas are good, bad, or in-between…it’s simply that without implementation it is impossible to assess an idea’s merit. Worse, without being brought to life ideas have little hope of helping us learn, grow, or improve as a result.

Timelines are largely arbitrary, but in most cases the quicker you can test an idea the more effectively you’ll be able to iterate, improve, and polish it. Further, the quicker you’ll be able to rationally decide the idea’s future.

The space shuttle wasn’t built in six months. Rather, it was the result of countless trials, errors, time, and effort. He with the most experiments doesn’t always win, but he is much more likely to make meaningful contributions to future endeavors.

You two didn’t fail, you did exactly what you were supposed to do. You brought an amazing idea to life. Now, we all can enjoy learning from this and all future iterations.

William & David,

Interestingly I found this article in one of my blogs I follow. Apparently there is another term for a passionate pissed-off change agent - of course their term is much more PC. And its actually that something that has value for cooperatives.. who knew?

The Most Undervalued Employee in Your Business
http://www.inc.com/laura-montini/the-most-undervalued-employee-at-any-organization.html

If this group ever does form, I would love to be a member.

Great article. Keep on sharing and being a voice of change. My ears are listening and my hands are ready.

 

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