Clouds of disruption gathering on the horizon.Having witnessed the disruption of the music business, print advertising and traditional publishing because of the failure of those industries to understand and respond quickly to the challenges of new technologies and trends, the financial sector has had fair warning of just how disruptive new technologies can be in established markets.
Online services are already disrupting the way consumers think about payments and investments. And it’s big business. PayPal, launched just seventeen years ago, is now worth an estimated $40 billion. It deals with around $624 million in payments every day. It’s the payment method for approximately 30% of all online transactions in Germany and 21% here in the UK. And it threatens to swallow ever more market share as it develops its product offering to include mobile payment services for high street retailers and credit services.
Paypal has been so successful because it addressed a real consumer demand at the right time – as consumers began to shop online it offered a simple, convenient and secure way to make payments for the goods they bought.
Similarly, peer-to-peer lending has taken off in a big way since the financial crash, as businesses have looked for more immediate and cost-effective ways to raise capital and investors have looked for better rates of return on their money. Another big success story of the new financial technologies has been Bitcoin – a brave experiment which is far from showing us its true potential, and is therefore too easily written off as having gained traction with only the blackmarketeers seeking untraceable digital payment mechanisms, or market speculators casting their nets wider in the search for bigger returns after 2008.
Whatever you feel about any given technological advance, for me, that is the key: for technology to be truly successful it has to answer a real-world problem, address a real-world need – be that known or unknown prior to launch.
Peeking behind the curtain
As we might expect, the technology sector has been quick to embrace the innovation lab model, perhaps the most renowned yet secretive of which is Google’s X innovation lab – from where Google’s driverless cars and Google Glass emerged. Google X is the company’s sandbox, where it gets to play with ideas and ‘moon shots’. Astro Teller, Director at the X Project, describes it thus: “We are proposing that there is value in a totally new product category and a totally new set of questions.”
This is the attraction of the innovation lab – the idea that through research and development comes the potential for real and valuable advancement. Here in London, and back to financial markets, the Accenture FinTech Lab is in its fourth year. It brings together ambitious tech start-ups, successful tech entrepreneurs and established financial institutions (including Deutsche Bank, Credit Suisse, Barclays and Nationwide) with a goal of developing and supporting a culture of innovation.
FinTech isn’t an innovation lab in its truest sense – it owes a lot to the Silicon Valley incubators that enable tech start-ups, through mentoring and corporate counsel, to bring their ideas to fruition quickly, test them and gain financial backing. The attraction of this partnership is perhaps that large institutions feel more comfortable about investing in disruptive innovation when they see it in start-ups.
Culture not acquisition
However, simply acquiring promising tech start-ups misses the major opportunity an innovation lab offers. By pulling together experienced professionals from across an established business to create flat, multi-disciplinary teams, and giving those teams the freedom to completely re-think the customer experience, the innovation lab strives to achieve more than disruption.
This is a big ask, particularly in financial organisations. It requires serious investment in research and development. It requires senior management to resist the urge to pull their best people back from the innovation lab to help deal with operational priorities. It requires thinking about propositions from the customer’s point of view, rather than delivering new technology because it’s there.
It can be done. Banks were some of the first organisations to deliver genuinely useful applications for Google Glass – even before the product launched.
Maybe Google Glass apps don’t seem like the best example any more. But, in a way, they are exactly what the innovation lab concept is all about. Of course, we don’t all have the nigh-bottomless pit of funding of the Googles or Apples of this world, but the innovation lab model must always come with an expectation of failure. Some ideas aren’t going to work. But the process of investigating them is likely to unearth hitherto unidentified opportunities, and here lies part of the innovation lab’s value. The lab is a sandbox, far removed from every day operations, but never forgetting the operational priorities.
Explore the customer need, understand the technology
The innovation lab offers space to think, research, and study. Between meeting regulatory demands and delivering operational services there isn’t much time or potential to innovate.
And yet we need to be agile, responsive organisations capable of responding to new, rapidly evolving consumer and market expectations and trends.
We need the culture and capacity to imagine and implement new ideas that maintain consistency with our brand but offer something new – better – for our customers. We want to identify the breakthrough solutions that will improve our customers’ everyday lives.
For that, technology isn’t the only answer. These breakthrough solutions aren’t always going to be software-driven. While it’s tempting to focus on technologies, it can be misleading.
Too great a focus on technology leaves us in danger of losing sight of the ultimate goal: improving the customer experience by taking time to understand and explore consumer expectations and trends. Using technologies as an enabler, rather than the focal point, sets us on the path to exceeding those ever-evolving expectations.
About the Author
Daryl Wilkinson is currently Head of Group Innovation at Nationwide Building Society. Daryl is part of this year’s Enterprise Architecture Conference Europe Programme Advisory Panel