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ING Direct and the Success of Play-2-Win Innovation Strategy

Organisations that can say - with their hands on their hearts - that they'll make innovation the centrepiece of their competitive response to everything have adopted a Play-2-Win innovation Strategy. ING followed this strategy when it released it's Direct product, disrupting the deposits market in the process.

ING Direct worked out that if it offered its customers a very high interest rate, they might not mind losing access to some high cost channels. Customers who decided to take the product would have extremely restricted access to their money - mainly via internet banking.

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".

Direct banking is quite different to the models most banks pursue when they go after savings accounts. Usually, they focus on customer experience in a full range of channels, including expensive branches and call centres. This makes operating a customer account very expensive, and traditional banks usually offer relatively low interest rates to compensate.

The concept of the Direct account was immediately very successful, as customers flocked to the product, drawn by the high interest rates. The exodus proved that customers were being over-served by traditional banks, who had invested a great deal of time and effort in competing on the basis of customer experience. The disruption of the traditional savings account market was rapid.

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 very painful for bankers, who are forced to compete on a price basis of lose deposit share altogether. As you'd expect, these bankers do not respond to the news that ING is entering a new market with unbridled joy.

Article Source: http://articlebarracks.com

For more information about Innovation in your organisation, please visit James A Gardner's free online book which has a chapter on Innovation Strategy.

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