For a long while, banks left innovation to other fields of human endeavour. It wasn’t for us. Innovation was for mad scientists, engineers and artists. It wasn’t quite a pejorative term, but it was associated with play, risk and lack of focus. Let them do it. When they work it out, we can finance it.
But in the last decade or so, it has become apparent that what we do when left to our own devices within the banking system isn’t enough. It’s not enough to keep us relevant. The world is changing. Technology is transforming business, knowledge-sharing and human interaction. And with it all, it’s transforming economic models on a large scale. What we used to do to make money, as banks, won’t cut it for much longer.
It took banks a while to fully digest this, and even longer to admit its truth. But having gotten this far, banks tried to do the most natural thing of all: they tried to give these unfamiliar things (their innovation efforts) a familiar shape, albeit with slightly different furniture.
Some built labs: they have the advantage of being self-contained, not to mention pretty. You can run them like standalone programmes, and clients like to visit them. But they don’t plug in to the main machine, and the culture and value shifts remain contained particularly, as, having built the lab, the rest of the bank is still doing whatever it was doing all along.
Others try bottom-up approaches – realising you have to take your entire organisation with you into the future sooner or later. These efforts are inclusive and inspirational, yet require the commitment of a marathon runner, the patience of a sniper, and won’t show traction for years. This approach is cheaper, but the discipline of staying the course even though you have nothing to show for your efforts yet, is priceless and rare, and the urge to cut off a sapling to present to your board as proof that you have sown and planted is occasionally overwhelming.
The most familiar (albeit resource-intensive) approach is a fund. Investment. Money. Something we understand. It’s great PR, has a natural home in the organisation and may even generate revenue eventually, but it doesn’t bring innovation back to the farm, and as a diversification path it’s risky.
So what to do?
A few paragraphs along from the original description of why we’re trying to do this in the first place (the world has changed, we’re losing our relevance) and the remedial action is looming so large, we are less focused on the end game, consumed with thoughts of what may not work that we focus on the what and not the why. A few paragraphs and we’re already overwhelmed with options. Imagine a few years.
Remembering constantly why this whole activity is important is the hardest thing, and the thing most banks do badly. Once innovation has been engaged in, it becomes its own reward; an activity apart, a programme, a PR narrative, a department. With KPIs and bureaucracy of its own, of course. Beavering away at stuff and things, but if you ask, What are you working on that stakes your claim to future relevance?, you don’t get a satisfactory answer. In fact most people will sneer, What does that even mean?. It means you’re not earning your keep, that’s what it means.
It’s not innovation till it’s worked, so while we wait for success, we contain the experiment (because although we support innovation, we still feel we have a job to do and somehow can’t see how we can do our job and innovation at the same time, proving that we both need the experiment and don’t get it). We also govern it: we keep an eye on this strange animal to ensure no boundaries are crossed, no resources wasted, no lines of authority blurred. In short, we ensure we put innovation in a box. We call it a sandbox, because it sounds friendlier.
But really, having decided that in a changing world we need to redefine our relevance, hence need to think hard about the bigger picture, we then put a team of people in a box and wait to see what happens. And what happens is this:
- We appoint a steering committee and an operating committee and a review board.
- We generate forms and templates and time boxes and guidelines.
- We track KPIs and produce MIS. Most of them designed not to communicate with management but to reassure. To comfort. We’re not changing too much too fast. We’re not experimenting with things we shouldn’t be messing with, and we’re not taking unnecessary risks. We will abandon before we fail … see slide 11 for details.
Meanwhile, the committee looks at pre-screened proposals and ROI projections – all heavily qualified, aligned with corporate strategy and with the roadmap IT and Product already committed to. Teams self-censor and leave out the really ambitious; the really exploratory. They leave out the really aspirational. They talk about disruption the way they talk about large-scale political events. It’s happening, there are conferences, it’s not here yet, I have a job to do. And part of my job is innovation. I have to calculate my ROI and do a draft roadmap and determine my MVP success criteria, before I design my POC, before I talk to the client. I have to do all that in between all the other stuff I have to do. And I have to make it look more robust than it really is, because I can’t know what I haven’t yet tested, but I must try. And I have to make it less risky than it should be if we want to really try it out. And I have to be ready for the next committee meeting or wait a quarter.
And in all this, I haven’t once paused to ask what is my right to relevance in this new world? Having engaged in innovation because the world is changing, we almost immediately lose the urgency, stop fearing the future may not include us. We now feel we have choice, we believe we have time to do this on our terms.
Yet, if I truly believe the world is changing. If I truly believe disruption is profound and lasting, and I doth constantly ask what service is relevant in that new market, I am missing a trick. If I don’t wonder what about me, my organisation, or my plans, gives me a right to be relevant in that new market?
Pause. Reflect. But no. Rush instead and stress and revise PowerPoint and limit my scope to lock down my projection and focus on what I know to be true rather than what I know to be resolutely changing, the things I know won’t be true for long.
Now don’t get me wrong. I do all this and I end up with a nifty little project, a cool solution, some nice PR coverage and plenty of battle scars. But at no point in all this exercise did we talk about the unravelling value chain; the deep belief that the way banks make money is coming to an end; that technology is rewiring society. It’s changing the way we buy, learn, relate. The fact that it changes how we bank is almost an afterthought.
This should be keeping bankers up at night. Innovation should be about going all the way to the end of that thought: the world is changing, and work our way back to our changed place in a changing world. Not What do we need from this world?, but What may this new world need that I can provide?.
This is the only question that matters: If the world is changing and value is shifting, what about me remains relevant in this new world and what about me gives me a right to success, a right to that relevance?
The most successful innovation programmes in the market shy away from this question. They have shareholders and boards to report to. The more vanilla programmes are not even empowered enough to wonder. Besides, they have projects to run and deadlines to meet.
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