Why Successful Innovation Is About Successful Transformation
From David's Desk: Innovation => Transformation
Innovation - “bringing ideas to the discipline of the market” - is most often linked with entrepreneurship, where new companies leverage new technologies to take on established players in an industry. People associate it with the “creative destruction” concept first introduced by the economist Joseph Schumpeter.
But inside the established players mentioned above, there are also many innovative people looking to respond creatively to new challenges and technologies, and to adapt and evolve their organizations in new directions.
We have often written about the challenges of innovation inside large organizations, especially in Financial Services (FS) (banks, insurers, broker-dealers, asset managers), based on our experience leading innovation inside banks, and then working with them as clients over many years.
We have observed a multitude of different innovation departments, new product development teams, and even process optimization units, all working hard to generate new ideas and try to create something new inside their large FS organizations.
We have witnessed many of these efforts fail, as a result of:
Failure to get traction inside the organization from key stakeholders; and or
Failure to deliver the business benefits promised at the start; and or
Failure to convince target customers to buy or use the new product or service.
It is absolutely true that in large organizations like banks, “success has a thousand fathers, while failure is a lonely orphan”.
But why does this happen? Large FS players like banks have access to enormous resources, smart people, and an abundance of data - they should be able to innovate successfully, in the same way that they are (generally) able to lend money successfully, store money successfully, and move money successfully.
From our experience working with banking leaders and others in FS, we know that managing innovation is about much more than managing processes. It is about creating the right conditions and support for people inside the organization to come up with new ideas and test, learn, and adapt their thinking in collaboration with others.
As a case in point, when I was part of the team leading the development of an ideation platform to collect ideas from over 40,000 staff members, we learned that despite having thousands of ideas logged each year, many simply faded away, and the ones that were pursued required took considerable enormous amounts of time and energy from many people to keep them going. As we learned and improved the system over multiple years, it was clear that much of the most important work was taking place outside of the ideations system - and that this work was crucial, but very poorly understood or managed.
Ideas and innovation processes on their own are not enough
Ten years later, and working with other banks, I have come to understand that to do this kind of deep learning and teamwork, innovative organizations need much more than ‘idea collection’ solutions - they need a transformation platform. Ultimately, successful innovations end up changing the way an organization works at a fundamental level if they work - they create new ways of thinking, new ways of working, and new value being delivered.
Delivering transformative innovation requires large organizations to do more than just call on staff to share ideas, work with a few accelerators, or visit VC firms. Innovative large organizations have a well thought-out “Innovation Playbook”, drawing on best practices from successful innovators, supported by a transformation platform. Key elements of such a platform include:
A clear understanding of strategic goals across the organization and within operating business areas;
Systems to communicate with staff and other stakeholders, with easy ways to share ideas and collaborate with others to make them stronger;
Advanced tools to analyze and sift through many ideas, and to cluster them into coherent concepts;
Shared understanding of the best ways to test and validate concepts for commercial readiness - with easy access to how-to guides and other relevant resources;
Well-defined approaches to iterating and improving on viable concepts, using best practices around prototyping, testing, and incubating them - in collaboration with with other parts of the organization;
Agreed pathways to take proven & fully incubated innovations into production - to ‘institutionalize’ and scale them, thus completing the transformation journey from idea to a ‘new way of working’
While the above points may seem theoretical, we have seen all of them as real pain points within large organizations when they try to innovate.
In my own experience working with innovation units and labs in banking, while they often have invested in solutions to help with point 2 above (collecting ideas), they are not getting much business benefit - because of weaknesses in point 3 (analyzing and clustering) and especially in point 4 (shared understanding of the best ways to test and validate concepts). There is also often confusion and lack of agreement on how to incubate innovations (point 5); and how and under what conditions a proven and tested innovation becomes part of a new ‘Business As Usual’ operating model.
Build on proven IP - then adapt & customize using the latest technologies
The way to solve these challenges is to look for proven approaches and tested methodologies to innovation management - and then to build upon and customize these for your own organization. In our work with large and mid-size banks, we draw upon intellectual property created by our strategic partner, Innovation360 Group, whose approach is based on rigorous academic research into innovation over the past century. We leverage our deep expertise and experience in financial institutions to ensure that it is delivered within the parameters of the institution's risk management and regulatory frameworks.
The kind of collaboration needed for successful innovation in a bank requires a transformation platform, with specialized tools including:
AI-supported clustering of ideas, including the use of Large-Language Models (LLMs) to synthesize and summarize ideas, so that the strongest concepts can advance o further testing;
Content sharing tools, to ensure that the most relevant content is available to team members working on testing selected concepts in the most rigorous way (making the best knowledge available at the right time);
Customizable dashboards, to enable innovation management leaders to understand communication flows around ideas, and to identify high-leverage actions to increase collaboration between all the areas of the organization that ultimately determine its success or failure; and
Data-linking and sharing capabilities - both to access existing corporate information and databases during the innovation development journey and to enable easy handover of data about successfully tested innovations into other corporate IT systems (e.g. production, finance, HR, etc.)
Today, many banks and FS players have assembled a variety of systems to meet some of the above requirements, with mixed results hence our intrigue by the emergence and promise of new solutions that could deliver an integrated transformation experience we believe is needed to take innovation in banks to the next level.
We believe the capabilities developed in the Transformation360 platform address these challenges and close a long-standing gap in the market. This will be launched formally in September this year and will provide the functionality to speed up ideation, clustering, testing, and commercialization of innovations. But arguably more importantly, it will also include a large content library with best practice approaches and guides that help cross-functional teams in banks collaborate and bring ideas to market successfully.
We are excited about the launch of this solution, the impact it can deliver, and the initiation of beta-testing with selected banking clients and others.
While innovation in Financial Services remains a challenge, requiring both a clear-eyed appreciation of internal stakeholders and insight into external trends shaping the industry, the advent of integrated platforms like Transformation360 will make it much easier for banks to “bring ideas to the discipline of the market”—helping make innovation real.
Best regards,
David Milligan