PRESENTED TO: LERZAN AKSOY PROFESSOR OF MARKETING & ASSOCIATE DEAN FORDHAM UNIVERSITY, GABELLI SCHOOL OF BUSINESS

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1 Driving Credit Union Success with Innovation PRESENTED TO: LERZAN AKSOY PROFESSOR OF MARKETING & ASSOCIATE DEAN FORDHAM UNIVERSITY, GABELLI SCHOOL OF BUSINESS

2 Innovation Creates Leaders

3 Can a Non-tech Company Be Considered Highly Innovative?

4 About the Aii Vision, Scope, Methodology & Winners

5 About the American Innovation Index (Aii) An ambitious research program that quantifies the innovativeness of nearly 200 companies in 20 industries from the customer point of view The idea originated in Norway researchers at the Norwegian School of Economics (NHH) believed the true indicator of innovativeness in a market is what can be gleaned from the actual experiences of consumers Fordham University s Gabelli School of Business, Rockbridge Associates, and NHH partnered to implement the study in the United States

6 Sectors Covered in the Aii Airlines Auto Insurers Auto Manufacturers Banks Consumer Durables Credit Card Providers Delivery and Shipping Energy Utilities Fuel Companies General Merchandise Retail Health Insurers Investment Services Life and Disability Insurers Lodging Restaurants Specialty Retailers Supermarkets and Drugstores Technology TV/ISPs Wireless/Cellular

7 The Aii Methodology Rockbridge, an independent market research firm, fielded a nationally representative online survey of over 7,000 U.S. adults, comprising over 30,000 customer relationships Customers of companies rated them on key metrics covering general innovation (Aii ), social innovation (Sii ), loyalty, and attractiveness for doing business. For top companies, we also collected emotional experiences (arousal and pleasure) and perceived change in how the company does business. The key metrics are based on scientifically validated scales, and converted to 0 to 100 scores. This includes ü American Innovation Index: Aii perceptions of the company being innovative, creative, changing the market, and being a category pioneer ü Social Innovation Index: Sii perceptions of the company having innovative social offerings, prioritizing the social (and environmental) good, and coming up with innovative solutions to benefit the social good

8 The Top 20 Winners American Innovation Index Social Innovation Index

9 Why Innovation Matters

10 Successful Companies Believe Innovation Matters

11 Amazon Is Revolutionizing How We Shop One-stop shopping for a broad selection of consumer goods, as well as music, television, and streaming services Innovative online shopping experience: First online retailer to offer two-day free shipping for members Originated 1-Click Checkout system Offers quick refunds on Amazon-fulfilled merchandise returns Pioneered online grocery delivery services, and recently acquired Whole Foods Opened cashierless Go convenience store Disrupted the consumer electronics industry with Amazon Fire TV, Echo, and Kindle

12 How Amazon Innovates Starts with an idea to improve a bad customer experience Write press release announcing new product BEFORE development Failure is not just accepted, it s expected

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14 The Results Loyalty Attractiveness Rank #2 #26 #4 #10 Amazon Nationwide Average

15 WHY INNOVATION MATTERS Credit unions have the highest satisfaction levels, but not the highest innovation levels 82 Satisfaction Innovation American Customer Satisfaction Index SunTrust, Capital One, Credit Unions Chase, TD Bank Citibank, US Bank, Regions, BB&T PNC, Citizens Key Bank Bank of America Fifth Third Wells Fargo American Innovation Index USAA Capital One Chase TD Bank Credit Unions Citibank Citizens PNC, BB&T, SunTrust, BofA, Key Bank

16 The cream rises to the top. Satisfaction and net promoter are the price to play. Innovation is the price to stay. Tor Andreassen Professor, Marketing NHH Norwegian School of Economics Bergen, Norway

17 Innovation Influences Loyalty Successful companies are able to ensure their innovation assets R&D, culture, people, technology, IP shift downstream and influence the member experience Science shows that innovation is a strong driver of customer loyalty (and hence, the bottom-line), influencing the customer experience, emotions, brand attractiveness, loyalty and sales Arousal COMPANY INNOVATION Member Experience Innovative -ness Attractive -ness LOYALTY Pleasure Member Experience Value Proposition Value Delivery Member Treatment Interaction Space

18 Innovative Industries have More Loyal Customers Least Innovative Most Innovative TV Subscription / ISPs Wireless Providers Health Insurance Utilities Banks / Credit Unions Fuel Brands Technology Restaurants Life and Disability Supermarkets Investments Credit Cards Consumer Durables Delivery Shipping Hotels Airlines / Amtrak Auto Property and Casualty General Merchandise Retailers Speciality Retailers Automotive Least Loyal Customers Most Loyal Customers

19 In the financial services sector, the most innovative providers have the most loyal customers/members Least Innovative Most Innovative Bank of America Wells Fargo Citi Citizens Fifth Third Chase Bank TD Bank U.S. Bank PNC SunTrust Community Banks BB&T KeyBank Credit Unions Capital One USAA Navy FCU Least Loyal Customers Most Loyal Customers

20 Innovators Don t Have to Be Disruptors Four innovation outcomes are possible Disruptors face the risk of opposition Transformative companies convert their innovation into a positive outcome for the customer and society Aii and Sii are both important KPI s Disruptive Stagnant High Customer Innovation (Aii) Transformative Benevolent High Social Innovation (Sii)

21 In the financial services sector, the social innovators have the most loyal customers/members Least Socially Innovative Most Socially Innovative Bank of America Wells Fargo Citi BB&T U.S. Citizens Bank Fifth Third Bank Chase Bank TD Bank SunTrust PNC Community Banks KeyBank Credit Unions Capital One USAA Navy FCU Least Loyal Customers Most Loyal Customers

22 The Most Successful Sectors Are Seen as Innovative and Socially Innovative Least Innovative Most Innovative DISRUPTIVE STAGNANT Restaurants Airlines / Amtrak Wireless Providers Credit Cards Banks / Credit Unions Fuel Brands Least Socially Innovative General Merchandise Retailers Health Insurance Utilities Technology Investments Speciality Retailers Hotels Auto Property and Casualty Life and Disability Supermarkets Delivery Shipping Consumer Durables Automotive TRANSFORMATIVE BENEVOLENT Most Socially Innovative

23 The most successful companies excel on 2 KPIs they are perceived as generally innovative and socially innovative, a rarity in banking Least Innovative Most Innovative STAGNANT DISRUPTIVE Wells Fargo KeyBank Citizens Credit Unions Community Banks PNC TD Bank U.S. Bank SunTrust Fifth Third Bank Bank of America BB&T Citi Capital One Chase Bank Navy FCU USAA TRANSFORMATIVE BENEVOLENT Least Socially Innovative Most Socially Innovative

24 Credit unions have room to shift their innovation status Least Innovative Most Innovative STAGNANT DISRUPTIVE Wells Fargo KeyBank Citizens Credit Unions Community Banks PNC TD Bank U.S. Bank SunTrust Fifth Third Bank Bank of America BB&T Citi Capital One Chase Bank Navy FCU USAA TRANSFORMATIVE BENEVOLENT Least Socially Innovative Most Socially Innovative

25 What the Aii Can Mean For Your Credit Union

26 Why the American Innovation Index matters to you You need to ensure your hard work and investments reach members downstream Innovation is a powerful strategy to drive growth in a crowded sector where satisfaction is not enough Even if you are innovative, you need to pay attention to social innovation in order to be transformational rather than disruptive If you don t watch innovation as a KPI, you risk disruption

27 Some questions for the Big.Bright.Minds here today

28 Do you believe innovation and social innovation are critical issues for credit unions?

29 Would a valid measure of credit union innovativeness that your institution could use to benchmark its performance be useful?

30 Would you like to be included in Filene s effort to create a national measure of credit union innovativeness?

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