Innovation in Corporate Financial Services
Lessons for Leaders, Innovation Managers, and Innovation Teams
Societal and technological trends are developing at an exponential pace. We see it, sense it, and read about it every day. While corporate innovation is often labelled as a viable strategy for improving the company’s performance, a successful implementation of corporate innovation remains challenging for most companies. Here, we share the most important innovation lessons we have learned over the last three years in a financial services context to help organizations, hopefully yours, avoid common pitfalls. This article is divided in three parts: lessons for leaders, for managers and for innovation teams.
1. Lessons for leaders
Capture the value of the right ideas at the right time. It’s important they’re congruent with your organization’s vision and strategy for innovation. For this purpose, all senior leaders need to have a deep understanding of what the innovation vision and strategy is. It’s important that the board communicates this clearly and repeatedly. Relevant innovation is about creating and capturing the value for your customers and your organization. However, as a leader it is essential to ask for value cases first and business cases later. Novel business model success cannot be predicted from the start. Asking the right questions is key to encouraging innovation as a leader. This helps the innovators to learn to solve the right problem or uncover new territories.
Senior leader sponsorship is key if you actually want to see prototypes transform into minimal viable products. Innovation teams can get stuck in the legacy immune system of a big corporate structure. Think about how your IT infrastructure, compliance, and legal could trip up your innovation teams unintentionally. While of course you cannot allow your innovation teams free reign and it is important that they are aware of key constraints but, again, not too soon in the innovation process. It might kill creativity and unnecessarily slow things down. In the moments where innovation teams are threatened by the corporate immune system, commitment and support of the board is required. An effective way to incorporate that is to assign members of the senior leadership as sponsors for the different experimentation teams.
Prepare for resource rigidity. The fact that the board wants to innovate does not mean your management is prepared for it. You need to face the fact that up until now you have been rewarding your management for hitting today’s business KPIs. Why would they outsource their best resources to innovation initiatives? For radical innovation we recommend that you can organize for structural separation of innovation and current business model activities. Your management will be given the opportunity to outsource resources to the innovation unit and will be compensated for it. If you want to go one step further and actually make innovation everyone’s job, consider concurrent metric systems for your management where they are evaluated on their contribution to both your current KPI’s and your organization’s innovation objectives. This will motivate them to innovate more proactively. It is naïve to rely only on intrinsic motivation in corporate contexts. Make a discipline out of innovation resource management and you will be able to flexibly reconfigure resources in your innovation teams.
2. Lessons for innovation managers
Focus on the right team composition. Innovation contributes to strategic renewal. Therefore, you want the best people to work on your innovation efforts. Team members need to be entrepreneurial and analytical. These type of people will always be rare and if you find them they will most likely be unavailable. Make sure you involve your Business Unit executives and Finance & HR functions in the process. If you build up a good relationship with them they will help you to allocate the right people to the right innovation efforts. Using your informal network for team resourcing helps, and is something you should actively use when just initiating corporate innovation process, but is not sustainable in the long term and might lead to the perception innovation is only for the happy few.
People around you will be cynical about innovation. Accept this. In their eyes, they are doing the hard work and you are playing in an innovation lab with undoubtedly no revenues to show yet. Make sure that innovation does not become the happy brainstorm place, but the place where new business is developed in a disciplined manner. You have to deliver quickly to gain respect from your skeptics, and inspire more colleagues to join innovation projects. Counterintuitively, make sure not to communicate too much on your innovation progress! As already mentioned, resources are scarce in innovation. Use them wisely and let them focus on innovation execution, not on corporate innovation marketing.
Most of the people you need for organizational transformation do not work for your organization. Develop a corporate venturing capability to allow for outside-in innovation and, hence, decrease your time-to-market. Doing a start-up acquisition is one way of doing this, but there sometimes more effective, venturing mechanisms. You could, for example, start partnerships, license new technologies, or temporarily hire flexible resources using gig economy platforms. You should start corporate venturing activities as soon as you discover your organization lacks certain capabilities, such as cognitive agent technology, Internet of Things, and predictive analytics. Do not start venturing for the sake of venturing in and of itself.
3. Lessons for innovation teams
In our experience, teams should be multidisciplinary and preferably a mix of internal and external resources. It is the role of team leads to drive the right team composition as quickly as possible. You should use the innovation department as a facilitator in creating that team. Also make sure team members are available full-time when you actually start releasing innovations in the marketplace. The innovation failure rate dramatically increases when executing with part-time resources. Think about it, you can’t compete with highly motivated startups with a part-time team.
Track your learnings in order to stimulate cross team learning. This may sound very logical and easy. However, we have seen this going wrong almost for all innovation teams. Why? Because teams experience this as an administrative hassle and they don’t like it. Develop a routine where it’s easy and fun for your team to report learnings. Many companies want teams to fail fast and cheap. But is it not better if teams do not fail over the same pitfalls over and over again? In that way the performance of you team is not only beneficial for this project but to all projects.
There is no such thing as one perfect model. It also depends on what life cycle stage your product or service currently is. In the beginning, you can use tools from Design Thinking (for example from IDEO). After the idea generation Lean Startup Management tooling (Steve Blank & Eric Ries), and Business Model Canvas (Alexander Osterwalder) can help a lot. After you validated your business model go for agile development and use growth hacking techniques to find your distribution strategy. But keep in mind to use models as a guideline and not as a goal in itself. It is pretty easy to change your PowerPoint slide deck. It’s all about finding real valuable learnings and results. Start every week with the question: what do we want to learn or achieve? Then decide which model and tools are most suitable.
So to review, innovation within an existing corporate structure is more challenging than most board members, innovation managers and innovation teams initially think. Just like other core competences in your organization, innovation is something you should organize for in a disciplined manner on every level.
These learnings are a quick and easy way to help you better diagnose your corporate innovation strengths and weaknesses, and can direct the ways in which you intervene to produce a better functioning innovation engine.
If you have any further questions, feel free to reach out to us. We would like to explore the lessons learned further with you in the comments below.
Copyright: Martijn van Hal and Tom Romanowski
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Tom is a business innovation coach and now venture lead of Kandoor.nl. A new initiative where a digital community of independent volunteers supported by artificial intelligence is helping Dutch people to make better financial decisions.
Martijn van Hal is innovation coach and innovation capability developer at Monitor Deloitte. He has a passion for co-venturing innovation teams and develops innovation capabilities for the purpose of speeding up corporate innovation.