Play-2-Win innovation strategy results when your organisation can say with certainty that it will make innovation the centrepiece of its competitive advantage for the future. ING adopted such a strategy when it decided to launch its Direct product, in the process changing the game for the whole deposits market.

ING Direct determined it would offer its customers something different – a high interest savings account – after it realised that customers might not be bothered by losing full service access if they were given much better rates. Customers adopting the product would have limited choice of channels – mainly internet banking – for access to their money.

The new product was launched first in Canada, largely without the permission of the head office in the Netherlands. The fact of the matter is that this launch would likely have been blocked by HQ had they known much about it, since the new product actually was a direct threat to the main business. Conveniently though, the geographical separation of Canada and Europe meant that the team there had the ability to work “under the radar”.

The model implemented in Direct is very different to that most banks use when they attempt to acquire savings accounts. The ordinary procedure is to create a full customer experience in a range of channels, including the expensive call centre and branch channels. The result is that a traditional account is very expensive, so banks tend to offer a low interest rate to compensate.

ING’s new account was a huge hit as customers proved they liked the high interest rates offered. This showed that customers were generally over-served by traditional banks, who had expended a great deal of effort defining new experiences to attract them. Rapidly, the market was disrupted.

At this point, ING head office began to take notice, and decided to replicate the model in other markets. With each launch, the competitive landscape for savings products is disrupted significantly. The fact is, banks with high cost bases that were structured for experience based competition are now facing a price war, one they can’t easily afford.

This is extremely painful for them, but the alternative is to lose deposit share altogether. As you might imagine, bankers are usually not delighted when they discover ING Direct is planning to enter a new market.

If you need more Innovation in your organisation and want some help, James A Gardner’s free online book has a chapter on Innovation Strategy.

Tags: Entrepreneur, innovation, innovation program, Innovation Strategy, management, Strategy

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