Innovating during a disruption
However, many innovators have been handed the reverse. After almost 80 years of banking stability, the banking and financial services sector has been completely disrupted. Yes, the subprime crisis has shaken the very foundation of our national and global financial systems, but cracks were already beginning to show. A number of non-financial actors, like Google and Paypal, and a number of adjacent firms, like ING, Orange, Prosper and Schwab, had already begun to peel away valuable customers from mainstream banks. Christensen notes that innovation often happens when a firm provides less functionality than is currently expected and the established players are willing to cede that business to someone else, so online banks have been growing in deposits while many banks have been happy to let that business go. Rather, they doubled down on leverage and would love to have those depositors now.
Some banks and financial institutions have been handed a golden opportunity. Rather than have to disrupt the financial industry, they can innovate in this current disruption to dictate what the eventual landscape of the financial markets will look like in the near future. Some firms, like credit unions and small community banks, will bet that consumers want safety and security for their money. Other firms, like Prosper and peer to peer lending firms may find their services in higher demand as traditional banks shy away from loaning money even to stable businesses. Who knows - perhaps the long down trodden angel firms and first round VC funds will find it profitable to make loans rather than investments.
The point is - whether you create the disruption or have it thrust upon you - now is the time to innovate. The banks that are impacted by their bad loans will be completely focused on cleaning up their messes and will not be anxious to create new products and services other than ones that provide complete safety. If there is any innovation possible, it must come from the remaining strong banks, regional banks, credit unions and adjacent financial services firms that have weathered the crisis, or it will come from non financial services firms who understand a once in a century opportunity.