There does not seem to be a conference, town hall or announcement these days without executives speaking about the importance of innovation. Companies like Uber or Spotify have shown that digitization and technology can bring disruption into established industries. This, and the growing FinTech scene, are alerting executives in banks and asset managers. They are setting up different initiatives to understand how technology will impact existing business models. Hackathons, labs, think tanks, accelerators, incubators, outposts, dedicated functions and teams are all frequently seen examples of attempts to support innovation in the financial world.

Big banks and asset managers nevertheless often fail to create an environment which fosters innovation, even though they have talented staff and good ideas. I have seen a few successful projects and many failures, and detected something which Edison apparently already saw more than a hundred years ago: “Innovation is 1% inspiration and 99% perspiration.”

I am convinced that the institutions are not missing the creativity, but the execution power to develop new things. The good news is that, from my experience, the failure of execution power is not about missing opportunities, or the funding, but boils down to a rigid corporate culture lacking the pragmatism to execute ideas.

The purpose of this chapter, therefore, is to provide readers, particularly bankers and asset managers, with some pointers to help them test and try newer models and concepts in the workplace, in the hope that many more ideas will be successfully executed, and to empower the internal entrepreneurs and visionaries – called “intrapreneurs” – in these organizations.

Always Strive to Generate Buzz When Promoting Your Idea Internally

Some of the advantages that bank staff and asset managers have over newcomers are distribution, funding, knowledge and regulations. As banks consist of educated and competent personnel who can generate equally good ideas as their competing newcomers, what bank staff need to bring these ideas to life is, well, buzz.

How do you generate buzz around your idea? Begin by researching what is trending in the finance and banking industry. Big data, robo-advisory, bots, artificial intelligence (AI) or blockchain are examples of currently often quoted innovations, which are, however, seldom completely understood by banks and asset managers. The end justifies the means, so use these trends to create attention and visibility. By augmenting your idea with these trends, you will most likely find more support to develop your idea. AI or big data are some good examples of trends which can easily be built into many ideas due to their broad definition. Almost any database can be big data, and I have seen a decision tree being sold as AI supporting a project. Important here is not to overdo it; focus on one trend, and be clear about how you will implement and leverage that trend. Take your idea, augment it with one of these trends and bring it to the newly created innovation functions within your bank or asset manager. They are waiting for ideas and people like you, and you have a fair chance of getting support.

The point here is to use these current trends to push and develop your idea, ultimately garnering the internal support you need. But securing the idea is just the start, as the most challenging part for financial institutions is successfully producing innovative products. Let us focus on patterns of successful innovation projects at big financial institutions first.

Execution is the Real Game

Many people might think that once you have secured support for the project the big work is done, but in fact it has not even really started. The support to execute is often the start of the struggle for banks or asset managers. In fact, hierarchies, legacy, regulation, guidelines, delegation, incentives or culture are all examples of disadvantages of established players versus new entrants when it comes to execution.

Here are some observations I have made after dealing with different innovative projects in wealth and asset management. These insights are presented to overcome the mentioned burdens and to help you successfully implement your idea:

• MVP + (minimal viable product plus) approach. The focus of all doing needs to be on building a real product, and leveraging part of the existing infrastructure. The faster something real can be shown, the higher the success probability. Important here is to apply Eric Ries’ lean start-up methodology to the established corporate world. Avoid trying to build a perfect product from scratch; you will most likely fail. Innovation always involves uncertainty, so focus on getting something out and testing it. It may not be perfect, but unlike start-ups, you have existing products, know-how or infrastructure at your disposal. Get your idea up and running fast.
• Less is more communication. Visibility will lead to alignments, doubts and coordination efforts. Stay in stealth mode as long as you can. I have seen many innovation projects lose their lustre and ultimately fail because the project managers spent half of their time with internal bureaucracy, having no time to deliver. You can be sure that you will find many colleagues who want to contribute for different reasons, but remember that it is not about talking, it is about execution. I sometimes avoid telling colleagues too much in the beginning, and if people approach me, I try to decrease their interest by making the project sound irrelevant.
• Apply a do-it-yourself approach to tech. Hiring an agency to support you can be useful, but hiring an agency to lead the development will be deadly. Technology is the core of any digital project, and outsourcing IT will ultimately not be successful. The most successful projects I have seen were those where at least part of the project management team was actually building the product. I am not saying that everything has to be done in-house, but what I have learned is that you need to be on top of technology for it to really work in the end.
• Be bold. Executives have already built labs, created teams and promised a lot. The likelihood that you will be their only justification for all this time and effort is quite high. Approach them directly, avoid the middle management (which is rarely supportive) and make them feel like they are part of the idea. Executives in banking or asset management spend most of their time building a legacy; they will surely support any exciting innovation.
• Tackle, do not question. Innovation is about improvement not perfection. Be disciplined but take failure as part of the process. Keep iterating, and the faster you do this, the quicker you will improve and, hopefully, be successful.
• Do not forget your value chain. There is a big difference in using technology to improve existing services, and in developing new technology. Banks are not basic research centres, and academia and entrepreneurship will most likely beat any corporate efforts in this field. Giving use cases to these fundamental researchers, on the other hand, can be highly productive. Just look at what is already in the market and think of new ways to use it in your industry or office.
• Consider failure. Nobody wants failure, but the success probability of innovation projects is significantly lower than the usual corporate projects. You are doing something which involves a lot of uncertainty and your stakeholders are aware of this. Do not get scared but try it – the attempt will always be a great experience and an enrichment for you. You might come to a point where you realize that your idea does not work as planned. Accept this quickly, pivot and go try the next idea you most certainly got while working on the initial project.

Summary

We only need to look to Kodak or Nokia, once major players in their industry, for lessons in failing to innovate. Banks and traditional financial institutions are not exempt from this and the signs are everywhere. New entrants from the FinTech world, changing regulations like the Payment Services Directive 2 (PSD2) and technological progress have all increased management’s attention on changing business models, and intrapreneurs can use this momentum to drive change. Just remember, you first need to augment your idea with some of the trending disruptive movements in the market. Once you have successfully received the mandate, iterate as quickly as possible, test and prove your product. Failure is expected, but that should only spur you to refine the idea. After all, failure is better than not trying at all – so Just Do It!