In the years leading up to 2018, I have spent my time bringing innovation to the financial services space. Fintech, as this sector is colloquially referred, focuses for the most part on disrupting the state of affairs induced by the use of technology. As such it is all about innovation.
And now, from a distance, my optimism regarding the sector’s ability to innovate and capture opportunities has not changed. I think the real disruption does not derive from technology, but from the changes technology brings to business models.
Banks and Insurance companies are masters in the quintessential process. Changing a process is slow and requires a lot of detailed planning. No wonder that specialists and managers that have invested years gradually improving a process do not advocate nor gravitate toward abrupt change.
Let’s study a bit about Innovation. Innovation comes in four basic formats
Basic research is the work of Universities and (ever fewer) large corporations. This kind of research does not directly result in marketable solutions. It is however a fundamental prerequisite for an innovative ecosystem.
Sustaining innovation is where larger corporations excel. Years ago, Philips promoted itself using the slogan “Let’s make things better”. Nobody expects a company with that motto to change the industry which defines it.
But how much do we in a western society, need breakthrough innovation with companies which provide employment while making a decent profit? The pace of innovation was much slower in times gone by. Our ancestors adopted the philosophy of Enlightenment, and since then progress, development and change has become integral to our lives. We actually expect to receive the best that is and in fact have exported this notion to other cultures as well.
As a consequence of this expectation, we live with accelerating change and drive the ability to manage and adopt it. As an example, unlike our parent’s generations, we can expect to change our professions multiple times in our lives. We all have become more dependent on our ability to adapt to a changing environment.
Most larger organizations are not good at managing change. Notwithstanding a quest for more flexibility, as demonstrated by frequent use of Agile and Scrum project management methodologies, they are in fact risk averse.
Clever companies know this and adopt change by incorporating successful innovation into their organization. Indeed, it’s the few companies that have taken large, calculated risks that have become the new champions. Management as practiced in larger organization is contrary to this kind of entrepreneurship. It’s about reliable results, good communication and sensibility for the needs found in the corporate environment.
Breakthrough and disruptive innovation requires a different set of skills. A tolerance for failures combined with perseverance and optimism would be a start. In this field failures are more frequent than successes.
Larger organizations will keep struggling to manage this dichotomy. A majority of all the efforts remain focused on minimizing surprises whilst maintaining promise in terms of future value.
The type of management needed for generating innovation appears contrary to the set of skills required to be a successful manager in the corporate world. (Steve Jobs, as an example, was not exactly a prototype of good manager).
A good leader takes the team over a predictable and successful road with the ultimate goal to achieve at least continuity if not moderate improvements. Too often I see companies looking for a hybrid manager being able to deliver both innovation and continuity. This formula simply doesn’t exist in one person.
What could work however, is to make sure the management team is diverse, such that new ventures are included in strategy and visioning. What could also work, is to keep real innovation at arm’s length, to be managed by the innovators with enough incentive in the game to make it successful.
And finally, what could work, is to incorporate successful companies with a different business model that is innovative. This will only work in the long run if together with its product or services, some of the essential innovative culture mindset has a rightful place in the company, hence allow for diversity in management styles.
In the last decade, we have become risk averse to a degree that it is impeding innovation and development. If we are to achieve real progress, it will be vital to both allow and contain risk within business again.
It’s not at the individual level, but the diversity found in a management team that keeps the door open for new ideas and absorbs the resultant benefits into the organization.