In the corporate innovation world, and more so, in Financial Services, it has been well established that the ‘Corporates AND Startups’ mindset (Collaboration) is the way to move ahead with instead of the ‘Corporates OR Startups’ (Competition) mindset. FinTech startups have somewhat become part of the everyday thinking of an incumbent. After so many Hackathons, bank-promoted Innovation Labs, startup Garages, countless ‘Lean’ workshops and colorful Post-Its later, the industry is yet to see meaningful and successful collaboration come through in the mainstream. We, at the recently concluded Startupbootcamp FinTech Breakfast, set out to discuss the reasons ‘why’.
Innovation needs and Drivers
More often than not, Innovation Heads/ Heads of Digital are mandated with bringing in innovation into the organization, usually driven from the top. The innovation needs are primarily one or all of the following:
- Access to innovation
- Engaging with relevant innovation
- Effecting culture change
The needs are established, budgets are allocated, innovation teams are set-up and startup competitions run, but most innovation dollars still see no engagement, no ROI and worst of all, no learnings from failed experiments. Why one asks?
For all the banks / financial institutions that one would think of as being ahead of the game than others, which are the industry defining collaboration engagements that come to mind? How can companies effectively steer and manage a highly complex and cross-functional layer of innovation?
It has been well established that the incumbents and the startups are completely different beasts and matchmaking the two sides are not even half the work. The marriage of the ‘Best of Both Worlds’ – the scale and the customer base of The Big and the agile, lean mindset and execution orientation of The Small, then needs a significant deal of work and continued efforts.
What then, are the drivers of successful innovation? There is no holy grail, no easy answers. However, a few drivers that come to mind are:
1 – A Real Innovation Strategy
If infusing your organization with the right innovation elements is the headache of the ‘Innovation guys’ without the buy-in from the internal customer ‘the businesses’, the strategy is designed for failure. Not surprisingly then, despite all the dollars spent, all the efforts put into your ‘innovation initiatives’ and ‘accelerator engagements’, the handful of PoC/Pilots that were expected to be a part of the process take months and, in some cases, never manage to see the light of the day.
That press release on ‘partnering with a Blockchain technology startup’ might have generated your organization / your brand the attention it seeks in the short term, but it is highly unlikely that it will get you the engagement that is truly necessary.
Does your organization have a well thought through and carefully planned Innovation Strategy that aligns both businesses and functions to achieve the set objectives? Effecting real innovation needs ‘The End Goal in Mind’ and thinking and planning backward to achieve that goal. The end vision means long-term thinking and thus it is important to see innovation walk hand-in-hand with the future direction of the organization itself.
2 – A ‘Customer-first’ Approach
The core tech in banks has traditionally been built with accounting in mind, whereas effective innovation needs the ‘user experience’ to be at the center of the thinking. The complete organizational design and strategy need to revolve around the customer. There are a number of learnings that can be taken from the tech giants that are in the race to become the ‘everything store’ for the customer of the likes of Tencent, Amazon, and Apple.
Also, a strategy that cuts across innovation horizons would ensure that the objectives not only look at avenues of saving cost/ improving efficiencies but also focus on creating newer revenue streams while aiming for the moonshots.
3 – Organisational Culture & Alignment of Incentives
In the world where a combination of FinTech startups and tech companies are starting to encroach banking services and unbundle the traditional financial services system itself, how do you ensure that the chasm between capability and appetite is constantly narrowed?
Organisational leaders must be enabled to have a future vision for themselves in a digitally enabled world, lest they are bound to feel threatened due to a sense of loss of power or worse still, be plagued by the fear of obsolescence.
It is important for organizations to create cross-functional teams that have ‘effecting the innovation agenda’ as part of their KPIs and in accordance with those KPIs, create incentive structures. Marrying the P&L and the innovation agenda is a given and that would, in turn, require expectations to be re-aligned and the internal decision tree to be re-branched. It needs to infuse a ‘startup culture’ that understands the importance of experimentation, an approach that allows ‘must fail but iterate fast’ modes. A larger internal cultural change needs to be put in place where teams/employees are encouraged and empowered to think out-of-the-box and engage in thinking outside of BAU and standard business, operational and technology frameworks.
4 – Aligning Functions for the Win-Win
Talking of the decision tree, it is important to include cross-functional decision makers as part of the decision matrix, that jointly has enough firepower to take calls that help reduce procedural bottlenecks. This needs accountability not just at the level of business, but also at the functional group levels to ensure that ‘quick turnarounds’ are facilitated, and wherever necessary, parallel and shorter decision-making processes are introduced while respecting the right degree of security, legal, compliance, et al. that being a part of a responsible organisation requires.
How to bring about impactful innovation?
Bringing effective and impactful innovation to life needs a long-term vision and commitment towards the ‘innovation journey’ with the right organizational ’buy-in’. The innovation objectives need to be able to answer the immediate questions of the business while keeping a view of opportunistic possibilities and future bets that help the organization leapfrog to the next level. It needs what is called a Portfolio Approach akin to that in Venture Capital investing: place many long-term bets (albeit small) in the portfolio, with a structured engagement framework in mind, that can bring about the aspired ROI over time. This journey of placing regular bets, constantly iterating and self-discovery steers the organization towards taking better-informed bets (across a mix of collaborative and competitive engagements) that maximize the probability of bringing about meaningful innovation strategy that delivers results.
With the experience of working with over 70 large banks/NBFCs and insurers (at Startupbootcamp) and particularly on innovation projects with large corporates and startups across industries at Rainmaking Innovation, we know this approach is needed to effect meaningful returns. But what will drive value and impact for your organization is the execution firepower you give to your innovation agenda, in the quest for tangible returns.
We, at Startupbootcamp, would be interested in knowing more about your innovation agenda and are keen to explore ways of collaboration.