This interview is part of our Expert Interview Series
We have conducted a series of interviews to gather learnings and points of view from top management’s perspective on the state of innovation in banking. Those findings, among other analysis, predictions and upcoming business opportunities, are part of our “Financial Services 2021 Innovation Report” which will be released this summer.
Subscribe to get notified once it’s out.
This interview is part of our Expert Interview Series
What does innovation mean to you? How would you sum up your understanding of innovation in the financial industry?
Innovation is a necessity for a long-term sustainable business and as such should be incorporated into company culture and its operations. Our industry is impacted by technologies that are completely changing business models. Right now we are in a situation where we have a lot of traditional financial institutions operating on more traditional technologies and in traditional ways for developing financial products. On the other hand, we have a lot of fintechs and start-ups using new technologies to disrupt the financial sector. Innovation is something we have to take very seriously and pay attention to it in order to stay in the game.
If traditional financial institutions are in a race against neo banks and fintechs, what is your prediction for the future? How will this race develop?
Looking at the market, you can see large financial institutions that are investing in innovation, experimenting with new products e.g. stepping into cryptocurrencies or tokenized assets. Some names you don’t see there yet. It’s not that they don’t innovate. Impact of some innovations are so pervasive across the board that they adopt different strategies how to innovate. Either they try to innovate with internal teams, spin off new ventures based on innovation or acquire smaller players to expand their portfolio.
Some companies prefer to launch innovation spin-offs, ‘borrowing’ the resources of their core systems for launching new products or using the technology. This is because it’s difficult to fully innovate internally as part of daily operations.
Financial markets are changing. Initially the impact looks flat, but eventually speed up significantly. We are somewhere at the beginning of this line and the changes will come, business models will change. I can’t estimate how long that will take. My guess would be ten years for us to see clearly visible changes.
Is there an innovation project that you have been involved in recently where you used interesting methodologies?
My job is about enabling companies to innovate and incorporate innovation into their culture and processes. I focus on agile transformation which means bringing business and IT people together to create an understanding of what technology can do to drive business in the context of what the market is demanding. My focus is more on smaller innovations, such as how to better understand customer data so that we can customise and personalise services.
Based on your experience and view of the market and financial innovations, what should be the focus for the financial sector for the next year?
There are a couple of major technologies influencing financial sectors, such as machine learning (AI), advanced analytics and blockchain. We already see some good applications of these technologies by financial institutions like smart assistants or using advanced analytics to better understand customer behavior. The focus in the upcoming year should definitely be to invest in applying these technologies, e.g. by running smaller scale projects to better understand them, to increase awareness and grow experts in your company to get ready for large scale use cases.
But overall, I prefer to focus on long-term thinking. How will the financial world shape in the future? What will be the impact of blockchain and cryptocurrencies on the financial market itself? What will happen with cash? The focus should be on continuous learning to form strategies of where we want to play and where not. It is not probable that one company can play in all the arenas.
What are the most important customer pain points to be solved now?
I would recommend to start with changing the mindset of how we look at customers. Customers have different financial needs over the time depending on their evolving personal situations. Sometimes, the classical banking customer segmentation might not fit. From the segmentation perspective, they might still fall into some category, while it says nothing about their actual needs.
If financial institutions could really plug themselves into customers’ lives, be where customers need them, even predict customer needs and give them relevant offers, this would be a huge progress in innovation. The technology of applying big data and advanced analytics is there already. We just need to be aware of what actual problems we are trying to solve with these capabilities.
What steps can be taken to identify emerging opportunities and needs of customers?
I’ll give you an example. We are currently launching a new development program called “agile leadership.” This means that we are looking for leaders who are not only able to develop their own agile mindset but also inspire colleagues and peers.
This is so important. Part of this model is personal development in order to make better decisions based on data and inputs. However, a leader must also develop a culture where these abilities are passed on to teams. If a leader can achieve that, she or he will gain a lot of power, scale, brains, and people who learn to look outwards, observe and make meaningful conclusions. Much of inspiring innovation is happening cross-industry so we need to develop habits to keep our eyes constantly open.
Any organisation needs to choose a handful of technologies that it believes have real benefits, bring them in, build internal communities and equip these communities with knowledge as well as the ability to connect the dots between technology and needs. That requires adjustment in the leadership style as well to enable that.
What are the most important ingredients for successful innovation for any organisation?
I would start by defining what is meant by an innovation. Many people are not confident enough to innovate or are unsure they are the person with the brightest ideas.
Organisations need to demystify what innovation is and make it part of a company life so that new ideas do not even feel like innovation per se. Making innovation a natural part of individual work is one of the key ingredients.
Leadership teams need to invest in processes and systems to make the ‘machine’ flexible. They also need to invest in the capital to explore new technologies, accept risk and be open to experimentation.
Are there any innovation methodologies that you think are valuable or that you use?
Generally, “customer-centric methods.”, e.g. Design Thinking. Then I personally like a method called “synectics”, it is based on research on how the brain works and how it might start thinking outside the box. I also use a method from Marc Gruber described in a book called “Where to Play,” which focuses on corporate innovation. I was part of some courses with Marc Gruber and I was really surprised by the positive outcomes of these sessions.
Are there any success stories that you would like to share?
It’s an IT example from one of the projects I was part of. We were facing a business problem on which we spent millions of dollars without any tangible solutions. During that process, I read an article completely unrelated to our situation but it described a principle for integrating two systems. Though very untraditional, we applied similar principles and delivered a solution costing only fraction of the original budget. Very different industries share many of the same problems so we need to seek inspiration outside of our own company and industry.
What is the ‘best’ way for an organisation to fail at innovation?
For me, it’s not seeing innovation as a necessity that should be part of daily work life, but something extra. We need to see that conditions, technology, customers, and competition around us are changing. Innovation is not a ‘nice to have’. We need to take risks to do something differently, to step out of our comfort zones, to allocate money and investment in the company differently. The biggest hurdle is actually us, our mindset and a fear of failure.
Is there any book, article, video or podcast that you would recommend to innovation leaders?
‘ALIEN Thinking’ by Michael Wade, Cyril Bouquet, and Jean-Louis Barsoux. It’s a method on how to use your brain to innovate. It’s really a good one.
Special thanks to Lenka Pincot for her insights on this Interview
This interview is part of our Expert Interview Series
We have conducted a series of interviews to gather learnings and points of view from top management’s perspective on the state of innovation in banking. Those findings, among other analysis, predictions and upcoming business opportunities, are part of our “Financial Services 2021 Innovation Report” which will be released this summer.
Subscribe to get notified once it’s out.