Next-Level Growth: Innovation as a Growth Driver for Credit Unions

In this episode of our Next-Level Growth series with Cornerstone Advisors, CEO of TeamOnUp, Mike Kelly, discusses how to move past organizational “innovation theater” to solve real business blockers. He explores the evolving role of the Digital CTO, the importance of “roles and rhythms” in execution, and how to build a culture that prioritizes mission-centric growth over vanity metrics.

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Transcript

Ron Shevlin, Cornerstone Advisors (0:05):

Hey everybody Ron Shevlin here, Chief Research Officer at Cornerstone Advisors and I am here today with Mike Kelly, the Founder and CEO of TeamOnUp. Mike is a legendary figure in the credit union and technology space. Prior to TeamOnUp he had a consortium of advisors, before that of course CEO of PSCU, before that a number of positions at Fiserv and the tech space. Mike, thank you very much for joining us today.

Mike Kelly, TeamOnUp (0:33):

Ron, thank you very much. Thanks for having me. Legendary is a big word. I might have assigned it to you, so I’m glad to be here.

Ron Shevlin, Cornerstone Advisors (0:40):

No, no way. Hey, listen, quickly, briefly for those folks who are listening in who don’t know what TeamOnUp does, tell us a little bit about that.

Mike Kelly, TeamOnUp (0:49):

We are a mission management system, so we put together this idea that money and mission need to work together, not at odds. And so we teach a system that just claims roles have goals, know yours, do those roles in rhythm, and it works better. So we built scorecards and software to support everyone’s success.

And so we do a bunch of strategy work, we’re trying to support execution in that way, and heading on down the road to AI world and automating ALM in it. So it’s very exciting.

Ron Shevlin, Cornerstone Advisors (1:22):

Thanks for that. Mike, there are a few people out there who have their finger on the pulse of what’s happening from a technology perspective in the credit union world. What innovations are capturing your attention right now from an innovation perspective in credit unions?

Mike Kelly, TeamOnUp (1:38):

You know, getting prepped for this, Ron, I hear the word innovation all the time. I wondered if we could chat about what exactly are we talking about, so I can try to be useful to your group that listens in. What’s your definition? What are you working from?

Ron Shevlin, Cornerstone Advisors (1:54):

So I didn’t get into that because I didn’t want to limit us to big honking things that disrupt the world. I don’t care. To me, innovation is simply about change. Doing something different, whether it’s technology-driven or not, it could be organizational, it could be process.

These days, I don’t think there’s a lot that doesn’t have a technology component to it. But I think it’s really about change and improvement, in that direction.

Mike Kelly, TeamOnUp (2:28):

I agree. Yeah, okay, so innovation or otherwise, incremental change, what has my attention is the blockers that are in the way and then what’s working. So the blockers in the way, innovation, change, challenges the orthodoxy. And as I live in this industry and support it from all different perspectives now, that orthodoxy is strong. We’re not great at critique. This is why you’re so fun in your writing on LinkedIn and elsewhere, that you’re poking the bear.

And one of my clients has the NCUA coming in for a two-week exam. They’re a $100 million credit union and they were buried in Excel spreadsheets and Word Docs to prepare for that three weeks in advance. They’ll be there onsite for two weeks. It’s like the most, the least innovative thing you’ll ever imagine. And that’s the group this industry cares about the most. Most decisions, in one way or the other, land at, oh, what’s the regulator going to say? What’s my insurance fund thing going to look like? And so there’s a huge blocker to what we want to do, and I don’t know how to get around it. So you just keep going on, maybe that’s what you’re saying on I don’t want to get stuck on the exogenous for otherwise.

The credit unions that I see having success are trying to think harder about their economic model. This is our offer to the group of we’ve made it way too complicated. You have one product: it is money. That’s it. You call it lots of different things, but the product is money. You have one problem, that you don’t know where you buy it and you do not know where you sell it, and there’s one solution: getting a system in support of that, so you can understand where you buy and sell money because it’s a very simple, beautifully regulated model.

And so if you’re only focused on chatbots, and Ron, I think most of the chatbots stink. I’ve been on a lot of chatbots and they’re just— I was on one yesterday, what’s the mailing address of Credit Union? It can’t even answer that. It’s like, oh my gosh. So, there’s lots of blockers that are helping to lose the plot on what the actual business model is.

And so the interesting innovations are, in the world I’m living in, what sector are we serving? I think the smaller credit unions, $250 million and below are super interesting because there’s a macro problem to solve there that’s not easily attained. ALM and these things are very expensive. Talent acquisition is hard there. Hybrid, in-office work models, all these things compound there. And can you get clear on what’s happening?

And so the credit unions I’m working with are trying to get better at hospitality. How about that for an innovation? How about we be nicer to people when they’re in the branch, actually have people in there who like human beings and are trained and ready for the moment with a reward system that hands out the cash and prizes for a job well done in that.

And they’re working harder to get automated in the back office because that’s where process and AI can really go to work now, until Gen AI gets figured out, whenever that might be, if it ever does. So the group that I’m interested in is hospitality. So Tansley Stern’s group, they seem to be really working hard, digital and in-person, to think about that in a different way. A group I serve out in Monterey, Monterey Credit Union, doing the same thing, trying to bring a Monterey mood to things. I think it’s fascinating. And different than what the big boys can bring. So.

Ron Shevlin, Cornerstone Advisors (6:22):

So you, lots to unpack there. A couple of things I want to clarify and dig in with you here. You referred to both the economic model and the business model. Are those two different things from your perspective?

Mike Kelly, TeamOnUp (6:35):

Good question. Economic model, I mean, how do you make money? You buy and sell money, gather into deposits, borrowing, all the ways you do that, and then when you lend it out, you’re selling that money. That’s what I mean about economic model.

Business model, I’m glad you put a fine point on this. I’ll tighten up my language. Business model is high-touch, high-tech, are we process-oriented, are we early first-mover, that’s more, and I don’t see a lot of business model shifts in our space, for all the reasons that I said. It’s just, there’s no reward system in place for move fast, break a lot of things. It just, you’re prevented from doing that. So let’s handle business.

Ron Shevlin, Cornerstone Advisors (7:17):

Mike, I think where a lot of credit unions wrestle is, I think they believe that they’re very good at the high-touch aspect of it, that they’ve got good in-service human-to-human service and interactions.

But as they see diminishing numbers of in-branch visits or even human-to-human phone calls, you know, as you mentioned, the chatbots might suck today, but this is broader than just chatbots. There’s a lot of opportunity to use AI, use new technologies to improve the human-intermediated interactions. Do you see things going on there and what are your expectations going forward for that?

Mike Kelly, TeamOnUp (8:01):

It’s a good question. By the way, I did not say they suck. That’s your word, Ron Shevlin. Yeah, they’re not good. I think the myth of, hey, we treat everyone great when they’re in-person. I mean, 10 years ago when I was at PSCU, we kind of broke that one apart of, are you sure about that, and how might we know? This is a big one.

If you want to innovate, if you want to run a good business, you need feedback loops, and still those feedback loops are lacking. One of my clients, good buddy of mine, is running now a multibillion-dollar credit union. They have a big branch footprint and no analytics in the branch footprint. Like zero.

So, it’s a first-thing-first kind of question. So, kiosks, like the video kiosks were an early innovation, now getting some age on them. Did we change the paradigm on them? I don’t know. I’m kind of down on those. Like, they’re still in a branch, they’re still open from a certain set of hours. So, where is it going? I’m not hopeful in the near term on AI in that way, human engagement. I just don’t see percolation, although Ron, I’m obsessed with that smaller end. So, I’m relying on you and some of the other really good thinkers to be at the top of the heap on what’s going on in the macro. But this small space, it’s not possible.

Ron Shevlin, Cornerstone Advisors (9:40):

You know, there’s a lot of talk about getting to a certain size scale and you are talking a lot about some of the smaller $250 million, maybe $100 million organizations.

Are they at a disadvantage from an innovation perspective, or do they actually have an advantage for being smaller and more agile, and what are they doing from an innovation perspective that would be different organizationally and technologically from a larger credit union?

Mike Kelly, TeamOnUp (10:08):

Great question. So what I tell them is, look, you can’t be small and slow. Those are not good combinations, you know? So I’m a bald man, I think I’m better off if I’m fit. I can’t be bald and fat, I got to be bald and fit, you know? So I got to keep these two things in lock.

And so here, credit unions have plenty of capital. I have known this for 15 or 20 years. I don’t think money is the problem. It is, what do I spend the money on? And now I’m mature enough to realize, oh boy, their investment portfolio looks great. They don’t know what else to do with the money. They can’t lend it out, it’s not putting to good use.

And now some credit unions seem to be more interested in being a Fintech than actually being a credit union, which I think is a fascinating dynamic in this space. We don’t have time for it today, I’m sure, but what’s going on there that’s interesting is that overhaul, if you haven’t updated your core in 30 years, which you guys call zombie credit unions, it’s going to take a lot of your time.

And then you’ll figure out, oh, our mobile banking thing stinks, too, we got to update that, and turns out our data was trapped and all these silos we don’t do that. So in that space, it’s still the dig-out, but I think because there’s plenty of money, you don’t need millions and millions and millions of dollars to get your supply chain organized, and there’s 40, 50, 120 of you, the span of control, hey CEO, how about you go hold a town hall every month and just get everybody on the same page? You’re a small business, and in that way, it’s beautiful. Be fast, be friendly, and be on with it. There’s still a community, old, middle-aged, and young, that want in-person. You can still win online, and I think that’s this space.

Ron Shevlin, Cornerstone Advisors (12:00):

Mike, as you look across the credit unions that you’ve been working with and looking at it from an innovation perspective, from an organizational take, do they need a Chief Innovation Officer to make the transitions they want to make?

Mike Kelly, TeamOnUp (12:15):

This is a provocative question. The problem with this podcast, Ron, is I want to ask what you think. Do they need a Chief Innovation Officer? I’m going to go big and small, my answer is no, because it offloads the responsibility for each executive to get on board with what’s happening in 2025 and beyond.

So, in the same way that talent was somebody else’s problem, and yet we still have HR trying to run payroll, benefits, and compliance, and think through talent, workforce, workplace, those are two different humans. We split CIO, gave her CTO, now there’s all kinds of CISOs under there. So we realized it was too complex. CEO got COO. CFO got controller.

So do we need a Chief Innovation Officer? I don’t know. I’m not for it. We tried an innovation department at PSCU, and it was great, and we put a lot of money into it, and we did a hackathon and all this stuff. Definitely changed the climate. Did it change our culture? I don’t know. Culture takes forever to change. But it was great energy, great marketing. We learned a lot, we made a ton of mistakes. It was really good. But do you need a Chief Innovation Officer? I say no, but you still, the innovation is a mandate, but it’s your responsibility to bring it into the talent function, the executive function, etc.

Ron Shevlin, Cornerstone Advisors (13:58):

Yeah, so, I’ll weigh in on this too, Mike, because I think I fundamentally agree with you except I do recognize that there are instances and times where an organization, an institution, and this could be a large credit union, mid-size, or small, medium, large, whatever it might be, needs an instigator.

And I think, and this is the tough part for a lot of CEOs to have to recognize and deal with, is that often the need for a Chief Innovation Officer is actually a signal that there’s a problem with the management, the senior executive team. That they’re not focused, that they’re too day-to-day.

I’ve seen this in one credit union I worked with a couple of years ago, with a wealth management department, the guy who ran this was, I mean, he knew this stuff inside out. He just wasn’t a strategic thinker. He was a firefighter day-to-day guy, and that’s what he did well, and you can’t knock that.

But if the management team isn’t working together, isn’t thinking, isn’t doing that stuff, then you need an instigator. But the challenge I think that a lot of credit unions have had to deal with from a Chief Innovation Officer perspective is that even if it’s needed, then you’re introducing organizational conflict, and then you’re begging the question of, well, how much budget do we give this person? And where is that budget coming from?

So, you know, this is you’re spot on, but I do think that there’s, tell you what, if I were advising a credit union CEO on this who said, look, I think I need a CIO, a Chief Innovation Officer, then I’d probably walk that person through a series of questions to get them to understand, is this an organizational problem?

But I would tell them, you give that person a three-year max window. They’re either in some other role by three years or it’s a failure. They’ve got to work themselves out of a job. Now, I got another line of questions I want to give you here because we do have a few more minutes and I want to deal with this. Mike, I bet you that if you talk to 100 credit union CEOs, 90% of them will tell you that their core is their biggest barrier to innovation. And I’m not buying it, and I’d like to get your take on that.

Mike Kelly, TeamOnUp (16:28):

I love you, Ron. That prior topic is juicy. Is core the barrier? Is technology the barrier? I also call bunk on that, and the model we have now, we’ve just overcome it. We do not have, so we have a mission management system. We’re trying to automate scorecards at company level, department level, and personal level and make them stack.

That’s the basic idea. We mapped it all out, 15 lead and lag measures that show your business. You guys know how to do that for 100 years. We’re trying to like automate it so you can see your business daily, right? But the Correlation group seems more forward-looking, you know? I know you spoke there a couple years ago. I love that group. Now, it’s hard to make big generalizations, but they, when I show up in there, they’re like, oh, great. Here comes a new idea. This is going to be good, whether I agree or not. But they’re welcoming of new ideas.

Some of these cores, I think you guys call them zombie cores, like, what are you talking about AI and chatbots and all this stuff? You’re from Mars. So we’ve just overcome it, and we said, fine. Send all your stuff to a place we can grab a hold of it, and we’ll handle all the complexity, do all the machinations on the back end, and present you your data. Correlation’s good, Portico’s good. You can overcome it. There’s a lot of phoney baloney excuse-making in this place called Credit Union Land, and that’s one of the tropes you’ll hear, which is, oh, our core. Well, then change it. And get on with it because you’ve got to make it go. So.

Ron Shevlin, Cornerstone Advisors (18:11):

Do you have to change the core? I don’t think you have to. We’re seeing a lot of middleware platforms, integration platforms. They don’t have to change the core in order to be innovative, do they?

Mike Kelly, TeamOnUp (18:23):

Some of those cores are pretty brutal, you know? I mean, so, do you have to, some of the middleware stuff is very, very cool. Can you be innovative? You can’t wait. Either you are, I think Steve Jobs said that, you either are innovative or you are not innovative.

I’m for, how about we be who you are? Just be who you are in your business model, know your member base, know what makes you special, put some structure around it so you can execute against it, and in that way you’re going to uncover all kinds of trouble.

And problem-solving is how I think about it. When I was at Fiserv, we had a really couple of good innovations when I was an individual contributor there, because there was no oversight there. You could just do whatever you wanted. It was great. It’s easy.

As soon as you become a leader, it gets harder to do it through, alongside people. And so credit unions and any business cannot wait because it’s here, it’s now. And if you’re not getting in touch, I liked your grid of putting yourself on a scorecard of your AI aptitude. But in that exercise, too, there’ll be tons of lying, you know? It’s very hard to be sure about this stuff, all of us.

Ron Shevlin, Cornerstone Advisors (19:44):

I have a statement I’m going to make and would love for you to like tear it apart because so far I haven’t had anybody do that, but you’d be the right guy to do it. I was at a conference a couple years ago doing—I was sitting on stage being interviewed, and the interviewer said, “How can credit unions be more innovative like fintech companies?”

And I said, “Well, they could close all their members accounts because that’s why fintechs are so innovative, that when you don’t have to worry about taking care of any customers, it’s really easy to be innovative.” So that was a little bit of a snarky answer on my part, but, you know, what I’m hearing you say is that and this is maybe counterintuitive to our whole line of thought process here, is that maybe there’s an—I’m getting the sense that there’s an over-emphasis on being innovative versus just doing what you do well.

Mike Kelly, TeamOnUp (20:40):

I am for, I got up at the Correlation conference and said my keynote was, “You have one product, you have one problem, and there’s one solution.” “We’ve lost the plot. It’s about your economic model.” And I got hired at PSCU because I had a picture of what the future could be.

And at that point, 2011, it was about mobile adoption. And I told that hiring board a story of, I was like, “There’s a 35-year-old lady out there who runs household finance for her family. She doesn’t want to come into your branch. She’s got two kids and is very busy.” “So, credit adjudication is great business. Always has been, back when we were trading cattle with one another, and it will be into the future.” “I might want an option to be on a mobile phone if I was making that credit adjudication.”

And you guys are in person on plastic cards. 52% of revenue was credit card, because I was innovative, innovative, innovative. You know what I learned, Ron? The orthodoxy mostly hates that. And so now I’m more, I have more of a posture of, and genuinely my mindset now is, “What problems do we need to solve?” And what can we not be distracted by in favor of that? Because it is easy to hallucinate. It is easy to lose the plot.

That CEO gets less used to hearing feedback as they rise up higher in the ranks. And so your job as CEO is to see reality and deal with it no matter what’s happening. One of my credit unions is down hundreds of thousands of dollars. They had to swap out CEOs, and you just got to chew that glass, as Elon Musk says. Like, what are you doing?

So, I am for good feedback loops that tell you how you’re doing. I am for doing that four times a month, looking at your business with that amount of rigor so that you’re not surprised when you close the books two weeks after the month closes. Less guessing and more knowing is my whole belief system now and the tool set we’ve made.

And in that way too, that’s why we want to automate ALM. It’s like that is the core of what you do. And that side of the industry is still really smart people with really big spreadsheets who fly in once a quarter and tell you stuff that you probably don’t understand as deeply as you needed to, and then the market has passed anyway. You know, like that kind of stuff I’m after of, the nitty and the gritty in the execution model.

And that is a 10-year change for me. I was, you know, shiny penny, Mr. Innovation. And now the root driver is what problems do we need to solve? How do we get new members? How do we welcome them in? And I don’t even, you know, credit unions that we work with, just the member count’s not good enough. Are they direct or indirect? Who’s new? Who’s lingering? Who’s active? Who’s lost?

You know, I don’t even use the word escheatment. First of all, I can’t spell it, and two, it’s too fancy a word. Who’s lost? You know, and just deal with that. What are we doing about it? The sales motion in the branch. How do we welcome people in? Is that siloed? All of those things, credit unions of big and small, still need those basics. Your basics done at a high level lead to an elite business. I think, that’s been my experience.

Ron Shevlin, Cornerstone Advisors (24:04):

You touched on something, Mike, there that really resonated with me. And it did because I think we tend to think about innovation as being just a technology aspect, where I think what you’re pointing to is that there’s a lot of innovation opportunity from just an organizational perspective. It isn’t all about technology.

And what you just touched on for me was something I literally just came a couple of days ago from a credit union board meeting where they asked me to talk about member engagement and what it meant. They had already started a process of measuring member engagement as the percentage of members who are active utilizing the mobile banking platform. And my point was, “Well, that’s a nice start, but you got a long way to go.”

And that the ability to really define what member engagement means from a behavioral attitude and behaviors that infer attitude, like you’re driving for emotional connection and looking at the types of interactions. And then what you’re really making me think is that there’s opportunities to innovate on the measurement and metrics that credit unions use to measure their success and progress and all of that, and not just simply throw more new technology at things.

To wrap this up though, Mike, I do want you to look to the future, and I want you to share your thought on what does the credit union IT department of the future look like? What capabilities does it have that it doesn’t have today? Or does it go away because of a lot of things in AI and all these things that happen? Where, five years from now, what does the credit IT department look like?

Mike Kelly, TeamOnUp (25:59):

Okay, I’m going to answer the last two questions together because what you just said is the air I breathe every day, Ron. I’m in, I spend a lot of time with senior teams looking at their business every week on those metrics. It’s now automated. It’s killer. But I look at it so much where I’m falling in love with it, and I have to have the discipline of, “Is this just what I want to think is real? Or can you have enough intellectual honesty and all the other ways we know things? Is this helping you to run a business?”

And so, $200 million credit union, when the CFO says to the chief member experience officer in one of those meetings, “Hey, I’ve noticed we’ve had $4 million of outflow from our member savings over to our CDs.” “I wonder, do we have new branch staff? Do we have a training issue? Did something change in incentives?”

Ron, not one time did she say, and this is a great CFO, not one time did she say, “Because I’m worried about cost of funds.” Now, that’s also an issue and a good one, but it almost brought a tear to my eye and I thought, “Oh my gosh, this is going to work,” because that level of conversation from the finance function to the field team about a field team’s concern. I was like, “Oh, baby, this is going to go.” And they’re turning it around.

So, this is very exciting. So, CTO, CIO, chief innovation officer. No. The technology leader and the marketing leader have to be BFF. These two humans need to get together and execute. And that’s what we’re trying to push together. That CFO and HR, you’re both allocators, one of money, one of talent.

So, what we’re trying to do is consolidate in on the strategy and say, “Here’s the opportunity. Let’s meet it when the time matters.” And CTO and chief marketer, marketing, you’re supposed to be educating our future member. Get out there. It is not sales. Get out there, tell the story, and then when we see a push come in the branch, let’s be ready in our sales motion to meet that moment.

And then when we convert them and take them in the business, how do we take care of them and grow them? Those are three separate things. Brand starts, “How do we want members to feel?” Marketing is what we’d like them to do. Sales is what you’d like them to do. Marketing is getting them educated.

And so that CTO and marketer, that CTO cannot just worry about servers and Fiserv integrations. That needs to be an executive leader who understands the market, can bring context and ranges of options to the opportunity in front of us. And you guys better understand one another. And if you don’t, take it offline and figure it out because we’re not getting anywhere unless you get together.

Ron Shevlin, Cornerstone Advisors (28:51):

Mike, I could go on for hours with you. I’m learning a lot. Love the perspective, but we are kind of out of time. Mike Kelly, CEO, TeamOnUp.

Mike Kelly, TeamOnUp (29:01):

Can I say one more thing, Ron Chevlin?

Ron Shevlin, Cornerstone Advisors (29:02):

You bet.

Mike Kelly, TeamOnUp (29:03):

You’re an important voice in this industry, and I appreciate the work you do, and I’m for you and the work that Cornerstone does. You guys are great. Keep going. Thank you for having me on.

Ron Shevlin, Cornerstone Advisors (29:16):

Thanks, Mike. Thank you everybody for listening in. Hope you join us on another episode. Mike, thanks a lot.

Mike Kelly, TeamOnUp (29:24):

Thanks.