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Innovation's Accidental Enemies

Leaders who demand proof that a new idea will work inadvertently stifle innovation. There's a better way to react to brainstorms

Once upon a time there was a very big bank. Its CEO wanted to better serve its best customers and hired some consultants to tell him what to do.

At the time, the very big bank served its high-net-worth customers at stately private banking offices in downtown branches. The consultants discovered that many of these wealthy customersólawyers, executives, and partners in big professional services firmsówere unattractive customers. They chose plain-vanilla services and were both demanding and price-sensitive.

But the consultants found another high-net-worth segment that was underserved: entrepreneurs and partners from smaller firms. These folks had diverse needs, such as mortgages for their homes and investment properties, and investor agreements for multipartner ventures. But they didn't want to bounce from one banking specialist to another to get a deal done, or drive to a fancy branch filled with high-backed chairs and woodpaneled walls, paid for with their fees. Instead, they wanted integrated, personalized service in their neighborhoods, with no divide between their commercial and personal banking services.

At the final meeting, the consultants presented a strategy built around this new segment. As they wrapped up, the CEO asked: "Have any other big banks done this?" The lead consultant answered brightly, "No, you'd be the first," certain that this would seal the deal.

Not even close. The CEO killed the idea on the spot. And the very big bank's rivals lived happily ever after.

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© 2010 Bloomberg L.P.