The Innovator’s Dilemma: Risk on the Edge

Abstract: The 2024 Canadian Lenders Summit Panel “Innovator’s Dilemma: Risk on the Edge” panel, leaders from top Canadian financial firms gathered to discuss practical approaches to balancing these competing demands. They shared insights on effective strategies for innovation, prioritizing low-risk “no-regret” initiatives, and fostering an adaptive, resilient approach to change. 👉 Check out the full video here.   👀  

Let’s start with what I call ‘no-regret’ innovations—initiatives that deliver value without major risks or complications. Amir, how does this concept apply at BMO?

Amir: At BMO, we saw value in streamlining the mortgage renewal process. Canadian clients often feel they get better rates through direct negotiation, so we used technology to create a personalized, online renewal experience. This allowed clients to receive customized advice, making the process simpler and lowering our operational costs. It’s a win-win: clients benefit from a streamlined renewal, and we gain efficiency.

Martin: In risk management, particularly with anti-money laundering (AML), “no-regret” innovation is crucial. Regulatory requirements have increased, so we’re exploring robotic process automation for tasks like adverse media checks and transaction monitoring. This helps us handle higher workloads without expanding the team, ensuring compliance while controlling costs.

Jason: One of our successful “no-regret” innovations is using consumer banking data in underwriting, a pioneering move we started in 2017. This helped us make better risk assessments and streamline our processes by incorporating real-time data. Over time, it’s proven a strong investment, allowing more precise, data-driven decisions.

What about when it comes to larger, transformative changes? How do you manage the tension between incremental improvements and major overhauls?

Jason: For established organizations, innovation often means incremental improvements. At GoEasy, we find that smaller changes can drive substantial value without disrupting the business. However, as the organization grows, it’s essential to prioritize strategic planning. By revisiting ideas regularly, we ensure they’re viable and aligned with long-term goals.

Martin: Understanding an organization’s capacity for change is key. At MCAP, we use proof of concept (POCs) to test new ideas on a small scale, gathering data on risks and benefits before scaling. This approach mitigates risk and builds a culture where innovation is part of daily operations.

Innovation often requires a cultural shift. How do you cultivate an environment where innovation can thrive?

Martin: Creating a culture of innovation means empowering teams at all levels to experiment with new ideas. We encourage grassroots change through small POCs, which involves junior staff and demonstrates potential value to the larger organization. This bottom-up approach integrates innovation into the daily workflow.

Amir: Agility is essential. Innovation isn’t just about breakthrough technology; it’s about challenging outdated processes and product strategies. Our teams are encouraged to pivot quickly, discard projects that aren’t working, and refine those that are. This keeps innovation flexible and adaptable.

Is there ever a risk in not innovating? What are the consequences if a company becomes stagnant?

Jason: Absolutely. The opposite of innovation is apathy, not opposition. When employees stop caring about new ideas, it can lead to organizational lethargy. To prevent this, we stimulate innovation with small POCs, which keeps teams engaged and forward-looking.

Martin: Not innovating is not an option, especially in financial services. Customer expectations and regulatory demands are constantly evolving. We have to innovate to stay competitive. Building “optionality”—developing capabilities that can be implemented when needed—keeps us prepared to act quickly if market demands change.

Can each of you share a key takeaway for navigating innovation and risk in your organization?

Martin: Small-scale experimentation is powerful. A POC culture can de-risk major initiatives, reveal valuable insights, and keep innovation alive.

Amir: Agility and adaptability are critical. Innovation encompasses everything from process improvements to customer experience upgrades, and it’s an ongoing journey.

Jason: Understand your organization’s tolerance for innovation. Every company’s approach is unique, so either adapt to it or help redefine it.

Hamid: Thank you all for sharing your insights. This has been a valuable discussion. I appreciate your time and thank you Canadian Lenders Association!  👉 Check out the full video here.   👀  

Sign up for our Finance Summit Series