Committees Can Foster Innovation: Here’s How

Boston-based Eastern Bank Corp. has quickly ramped up its ability to invest in and deliver innovative products and services. The $9.7 billion asset mutual holding company started changing its culture in 2014, through the creation of its innovation lab. In June, the bank began using voice biometrics in its call center, so customers now can access accounts using just the sound of their voice.

This year, Eastern dedicated $4 million to research & development—1 percent of its annual revenue, says Bob Rivers, Eastern’s president. The additional investment meant that Eastern’s board needed to increase its involvement and oversight, so Eastern created an innovation advisory committee to guide and support the bank’s innovation investment. The committee is staffed by four board members and four members of Eastern’s management team, and meets quarterly to discuss innovation within the company. “It’s really to give the board visibility and oversight with respect to that investment and focus,” says Rivers.

Financial institutions today are increasingly reliant on technology and the delivery of innovative products and services to drive organic growth. Boards must be ready and willing to engage in discussions on innovation and technology. An advisory board can be a great way to drive innovative thinking, but the board may instead focus on innovation within a board-level committee.

Innovation comes from diverse perspectives, ages, experiences and cultures—not just from individuals with a technology background, says Edward Stautberg, managing director at PartnerCom, a New York-based board advisory firm that helps corporations create advisory boards. Advisory boards have their benefits. They can be comprised of businessmen who may not be a good fit for the board but may have the right expertise to advise the bank, and directors and executives can take their input with a grain of salt. Food and beverage conglomerate PepsiCo Inc.’s ethnic advisory boards are tasked to create products for the company’s diverse worldwide customer base. According to Stautberg, one of these boards came up with the idea to add chili and lime flavors to some product lines, such as Lay’s potato chips and Doritos tortilla chips. “That was a direct result of a diversity in thinking,” he says. Digital advisory boards are a growing trend for Fortune 500 companies such as Target Corp. and General Electric Co., reports The Wall Street Journal.

But banks can choose to focus on innovation in a board-level committee, which sends a message throughout the organization that the board is truly dedicated to the issue. “It shows that you’re actively discussing innovation at the board level and that it is something that the board is engaged on,” says Stautberg.

Huntington Bancshares Inc., the $68 billion asset bank holding company headquartered in Columbus, Ohio, founded its board-level technology committee in 2014. Among the many technology-related duties listed in its charter, the committee oversees whether the bank has the technology in place to push innovation, and monitors innovation trends that impact Huntington’s strategic plan. Peter Kight chairs the committee, which he says was created to address two of the board’s biggest concerns: Cybersecurity and digital delivery. “A financial services [company] is an information based business, and information is digital today, which means our business is a digital services business,” he says. “Are we going to be able to innovate fast enough to be able to be one of the survivors, and in fact one of the winners?”

At its most recent board meeting, Huntington’s technology committee brought in a venture capitalist who focuses on financial technology. The discussion provided the board with direction about which startup companies they might want to work with, and helped identify threats in the financial technology marketplace. Trends in digital lending were also discussed.

The technology committee isn’t staffed with technology experts. While Kight has a background in financial technology—he was the founder and chief executive officer of CheckFree, and after its 2007 acquisition by technology services provider FiServ, he served on FiServ’s board for five years—he doesn’t believe a technology background is necessary. “Who’s really driven to want to learn in this space?” says Kight. “What we need are people who understand the need to look for this innovation and drive it within our culture and to drive it within our strategy, both in management and at the board.”

Huntington doesn’t lack for board members committed to innovation. Finding four board members to staff the bank’s technology committee wasn’t a challenge, because every board member wanted to join. Not only did the focus sound “cool,” Kight says, but the board believes innovation is critical to the success of the company. 

“If we keep thinking like bankers, in five years, we won’t be bankers, because banking isn’t going to be done in the same way,” says Kight. “We absolutely cannot continue to run the bank the way we have run it in the past, which means we have to, at a strategic level, drive for innovation.”