For the past two decades, fintechs have helped drive innovation in financial services. New products brought to market by large technology providers and start-up fintechs have placed sophisticated technology into the hands of financial institutions and investors, speeding the adoption and spread of dynamic new solutions like robo-advising, digital payments, mobile banking, blockchain (bitcoin), artificial intelligence-powered analytics and open banking.
The industry has benefited greatly from all this innovation. However, I believe fintechs have more to offer—not just to financial services firms, but to companies and organizations of all types. Fintechs are built to thrive in today’s fast-paced and fast-changing environment. My first fintech company changed course three times in 10 years, ultimately leading to three threads of revenue, and a successful exit. The best and most successful fintechs have innovative mindsets baked into their business models and cultures. They innovate repeatedly and consistently. They work to survive, then reinvent to thrive!
In my professional role, I have the privilege of seeing under the hoods and into the innovation engines at Broadridge, one of the largest global fintechs, and many smaller fintechs who work as our partners to our financial service clients. From this perspective, I’ve gleaned several important lessons that I believe can help any organization get better at innovating.
These lessons seem especially relevant today. Companies understand that in a time of accelerating change, innovation has become an essential core competency. That’s why the financial service firms participating in Broadridge’s fifth annual Digital Transformation & Next-Gen Technology Study expect to allocate nearly 30% of their total IT spend to technology innovation over the next two years, an increase of 7 percentage points from last year’s study.
Understanding Innovation
The most successful fintechs understand that innovation is rarely, if ever, the result of a one-off initiative. Most truly transformative technology breakthroughs come from companies and organizations that have adopted innovation as a core part of their culture and organizational structure. Since established companies won’t be able to rework their entire cultures and structures, senior leadership must develop premeditated and proactive strategies to infuse innovation into their organizations. These strategies can include changes to workflows and adoption of new approaches like agile design, the creation of centers of excellence and other structures that cultivate innovation, and new incentive structures that encourage employees to be creative and take risks.
The best fintechs also understand that there are actually two types of innovation, sustainable and disruptive, and each requires a different mindset and approach.
Sustainable innovation is usually found within the product organization. It starts with existing products, services or workflows and builds on them in a way that enhances results, ensuring the relevance of current offerings or creating new opportunities. Examples include taking a basic set of capabilities and utilizing them to open a new market or rethinking the user experience based on new information from user studies.
Disruptive innovation is a process of starting over or taking a different perspective to solve a problem. While some organizations can perform disruptive innovation within the product or business group, most need a separate group of individuals to think about and bring new perspectives and ways of thinking.
Tesla provides a good example of how these two types of innovation can work together. Tesla has helped launch several disruptive technologies and practices, including autonomous driving, more efficient batteries and a direct-to-consumer sales model. These advances propelled the company to the forefront of the electric vehicle market (despite recent turmoil related to its owner.) On a regular basis, Tesla vehicles receive software updates that enhance and maintain performance. That’s sustainable innovation. Although most instances of sustainable development aren’t as easy to see as a regular software update, companies must build processes to ensure consistent improvement of their products.
As change accelerates, companies will need a combination of sustainable and disruptive innovations to remain competitive and create opportunities for growth.
Implementing Innovation
The fintech example teaches us that generating continuous innovation starts with research, feedback and experimentation. To replicate that process, organizations should allocate a discrete pool of resources to investigate the next set of technologies, identify emerging trends among the customer base and across the industry, and uncover what competitors are working on. This research should be used to pinpoint the most promising areas for experimentation, prioritize investment resource allocations and create initial development plans. Truly innovative companies will use those findings to think big but act small, move quickly to validate concepts, shelve disappointing efforts and move the highest-potential initiatives into proof-of-concepts (POCs) and pilots.
It is important to remember that this process will never end. It will be repeated and replicated in business lines, departments and functional units across the organization in the same way the innovation process plays out across the host of fintechs fighting to carve out a presence in today’s markets. The constant hum of this innovation engine will help companies maintain current levels of market share and profitability—even in the face of disruptive change—while creating the growth opportunities companies need to thrive in an era of constant evolution.
Read the full article here
