Innovation Summit – sharing champions’ secrets 24 June 2015

Efma’s Innovation Summit will take place from Monday 26 to Tuesday 27 October in Amsterdam. We spoke to some of the speakers at the event to find out what to expect and to hear their thoughts on what makes an effective innovation strategy.
What will be the key focus of your presentation? Paul Steenkamp, head of innovation capability, personal and business banking, Standard Bank (South Africa): At Standard Bank, we’re really honoured to be invited. The key focus will be lessons learned in becoming as adaptable and fast as the challenges we face. Deepak Sharma, executive vice president and head of digital initiatives at Kotak (India): A lot has been written around disruption in financial services, the growing influence of fintech and how it impacts the bank. In this context, I thought it will be interesting to have a discussion around this. I chose the topic- “Banks and startups: a real opportunity, inflated hype or both? Born to partner together or forever enemies?” Andres Wolberg-Stok, global head, emerging platforms and services, Citi Bank (USA): I’m going to be sharing Citi’s 120-day journey to imagine, build and launch the first Apple Watch banking app featured in Apple’s own marketing, and the deep transformation it symbolised for us. Marcelo Frontini, director of innovation and technology, Banco Bradesco (Brazil): The key focus of my presentation will be open innovation. I will make a short report about the Bradesco organisation, highlighting initiatives which were part of our history as a pioneer and a robust financial institution with great prominence in the market. Numbers and information on Bradesco's innovation process will be presented, highlighting the initiative launched in 2014 to support innovative projects with solutions applicable to the financial sector. Maria José Jordà, head of customer experience strategy and transformation, BBVA, Spain: My presentation will focus on breakthrough customer experiences in retail banking. What are the biggest challenges facing retail financial services organisations when it comes to innovating? Jordà: Innovation is a value-creation process that places the customer at the centre of everything. Reaching the client today is about listening to their needs and understanding their vital moments in life to offer compelling experiences. To do this, you need companies to work as one and offer all the functional knowledge built over the years. Financial companies are usually large and have the inheritance of the 80s mentality, where growing through marketing, sales, etc. was the main strategy of many companies. These departments grew up in a short time, focused on their unique view and goal and creating what we know as silos inside companies. Silos make very difficult innovation to happen, as departments are not used to working together and collaboration is key to create new value propositions. Wolberg-Stok: An endocentric perspective is a pretty common challenge for any large organisation. Any big company is prone to this, whatever the industry. But it can become more noticeable, and more dangerous to your long-term prospects, when most of your staff are – rightly – focused on compliance in a naturally risk-averse, regulated environment. Frontini: We have innovated by establishing a democratic rule on financial services and, in the course of time, with the massive use of technology. Our goal is to maintain and expedite this journey by offering new internal and customer experiences, increasing the sustainable revenue and ensuring a competitive advantage. This is an inspiration for actions in the present and reflects the challenge to innovate the organisation's culture. Innovation is a strategic theme and, at the same time, it is included in the experimental, testing, trial and error side, among other items which require a cultural change within an organisation like ours. Steenkamp: Discovering the truth of what matters to our customers, and delivering it. Fast. Sharma: Size and scale can be an advantage as well as a challenge for banks to innovate. Banks have always looked at revenue and profitability as the starting point for new product development, service or innovation while fintechs have looked at new ideas and disruption to create new markets, rather than looking at profitability initially. These two approaches are in different quadrants of our business approach. This, as well as agility, speed to market and risk averseness are some of the inhibiting factors for banks to innovate fast enough. Banks also face the dilemma of where to put more energy – into transforming the existing business or building a pure play digital model? What needs to be done to meet these challenges? Frontini: Innovation is only feasible from a reliable technological structure. In the last few years, investments in IT, systems and processes, besides new services and digital channels, have brought efficiency gains and more convenience and security for our customers. Investments in innovation and technology were one of the factors which contributed to an enhancement in our operating efficiency ratio, which reached 39.2% by the end of 2014. This effort is the result of a system architecture which has created, among other benefits, enhanced productivity, savings on development and maintenance of components and reduction of operating activities. The evolution of this new architecture, in its final implementation stage, still brings great possibilities of productivity gain and directly impacts the experience with the customer, extending their interaction with the organisation. Jordà: Companies need to go to the next level, where knowledge is shared, talent is relevant, and the need to offer true and differentiated omnichannel experiences becomes the focus of the whole company. Top management has to drive this change and initiate the triggers for everyone to work differently. This can be done through new ways of communicating to employees and sending the right messages through action, like objectives on innovation or creating a safe and engaging environment to promote new ideas. Steenkamp: Remaining insanely optimistic. Unleashing the creativity of employees. Creating an advanced learning company. Living up to our bank’s proud 152 year innovation legacy. Sharma: It is important for banks to assess their starting position and end objective. This brings clarity in terms of approach and end goal. Digital transformation requires as much of innovation in approach, enterprise architecture, process and technology platform as it would take to build a pure play digital model. It can be a blend of two approaches if existing business is weak on certain products, customer segments or experience. Such gaps can be a good starting point. Once results of these initiatives are visible, it becomes easier to align more resources towards it. I see this as a gradual process, which needs to get ingrained in the DNA of mainstream banks. While banks have an advantage of a large affluent and mass affluent customer base, building a collaborative ecosystem can help banks accomplish these objectives faster. Wolberg-Stok: Cultural transformation is the key. There are different approaches you can take – everything from tasking “cells” to innovate, to funding external startups, to holding mass events with third-party developers, to purposefully erecting lighthouse projects whose success can radiate the right message throughout the organisation. At Citi, we’re actually doing all of the above. How do you effectively engage both employees and customers in the innovation process? Sharma: To drive innovation, it is critical to drive three key stakeholders: bank/management; employees; and customers. It is important to identify the benefits for each one of them and communicate effectively. At Kotak, we often ask this question: “What is in it for me?” from all three perspectives. For example, if an employee feels that his/her job can never impact the innovation process, they will never become a committed partner. At the same time, if initiatives leads to empowerment, productivity or efficiency for them, they will be drivers. Similarly, listening to customers through all touch points, data insights and feedback through our innovation portal helps us to build a participative culture. Making an innovation approach inclusive and participative is key to success. Jordà: You cannot engage any of them in disruptive innovation right from the start. For both, you need an incremental approach before you can take them to a more disruptive level. They need to see first at a little scale and, in the short term, what the value of applying innovation is. Engaging employees can be done by focusing the innovation process on existing challenges the business unit has. When people experience the innovation benefits on something they know and control, the change is very powerful. Innovation changes people by experiencing the value of seeing challenges being approached differently. Customers today have an increased power to decide where, how and to whom they are going to buy. I believe that customers will define the strategy of companies in a very near future. Engaging them in your creation process is key in having them believe in your value proposition. Frontini: We have been searching for a new model over the last two years: one that is agile, flexible and modern; while being oriented to business and to customers' wishes. With this new model, we have aimed for disruptive innovation and we started to handle this topic corporately. We have created the executive committee for innovation to direct the initiatives and deliberate actions, investments, and priorities. We promote the innovative culture within our departments, encouraging the creation/analysis of opportunities involved in the customer experience, business, and technology. Launching the inovaBRA Program was a paradigm breaker, which made clear to the market a requirement which was so far handled only inside the organisation. It is a programme directed to support innovative projects with applicable solutions which are adjustable to the finance sector. Besides boosting our commitment to the Brazilian entrepreneurship by providing technological and business support. Wolberg-Stok: As far as employees are concerned, you need to make it clear that for those who are in relevant roles that it’s OK to fail, and even to fail ‘early and often,’ as the Silicon Valley mantra goes. Encouraging innovation isn’t enough – it needs to be big and visible. We want to hear that ‘sonic boom’ like when a jet fighter flies faster than the sound wave can propagate ahead of it – that’s the sound of constructive friction in an organisation. And as for customers, well, you can’t not make them a part of the journey. You can bring them in and ask them to co-create with you, but at a minimum you have to run your work by them and make sure the usability is at the right level. What you should never do, though, is to ask the customers to tell you about the needs they haven’t yet discovered that they have. You cannot innovate by focus group. You have to be accountable for your own ideation. Steenkamp: Driving strong business ownership for innovations. Adopting and infusing Design Thinking, Lean Start Up and Agile approaches. How important is it to establish partnerships with players from outside of the industry in order to innovate effectively? Steenkamp: We believe in the magic of what is unattainable alone. That’s why we’ve adopted an Open Innovation strategy. Wolberg-Stok: It’s essential to open yourself up to ideas from outside the organization and further out, outside the industry. Not to do that would be supreme arrogance – it would imply that you believe all the best ideas will come from within your own company, or from within the industry itself. In the real world, that’s actually very rare. Sharma: Customers don’t think of bank most of the time. It is invisible yet most important part of everyone’s life. In order to innovate it is important for banks to understand and be part of the customer journey. This insight helps banks to build product or transaction capabilites around the customer journey. For example buying a house, well-being, children’s education, retirement, travel or shopping are some of the notable activities in a customer’s life. In each of these journeys, banks have a meaningful role to play. Banks who can understand and participate in this ecosystem to drive innovation will be closer to customers. Jordà: The innovation you bring to clients must come from outside your company in a high percentage because half of the talent of this world is not in your company. The companies of the XXI century must include other players in their strategy, in the way they innovate and want to evolve. Partnerships help companies to mix with a different profile of employee. It promotes cultural change, best practice sharing and spreads understanding on how to create new value propositions. Including other companies in your strategy is a must in today´s model for innovation in companies. Frontini: The results expected by Bradesco are: Identify new opportunities, map the market, be agile to innovate, create an ecosystem of entrepreneurs, place itself in the market and attract promising companies. Which innovations are having the most impact on the industry today? Sharma: Innovation across markets are not consistent as it is reflection of market dynamics, banks priority and regulatory environment. However, analytics, mobility, the cloud, security and social are at the backbone of innovation. This has led to backend and customer facing innovation in risk and credit management, lending and deposit products, payments, customer acquisition, transaction and management. Frontini: The world is becoming more digital than ever and this is one of the main impacts and challenges in the sector nowadays. This is related to technology, mobility and the way people connect and want to get services. The new generations are born digital and this is the future. Some examples of outstanding companies: The biggest taxi company in the world does not own any taxis; the largest hotel business does not own any hotel room, among other examples that the digital model prevails. We believe that with financial services it will not be different. Thus, we are moving from a multichannel structure to omnichannel in order to provide the same experience to our customer, regardless the channel chosen. Open innovation promotes this challenge since it brings new visions of the market, enabling partnerships with other segments and changes in our business model. Steenkamp: Ones that truly enable our customers’ lives and/or businesses. Wolberg-Stok: The most impactful developments out there are those that don’t simply reinvent a sliver of the client experience, but instead call into question really broad established paradigms – the ones that leave you wondering why things had always been done a certain way up to that point. Recently, it’s so common to hear that a certain startup could become “the uber of this” or “the uber of that” – that’s a testament to the transformational achievements of a new brand, right? Jordà: I believe that everything that has to do with connectivity and the concept of everywhere, anytime. Mobiles are a window to everything I need to do or solve now. If your business is not there, available, I am not interested in you. Mobiles today and very soon wearables have a great impact in the way banking works. Banking is about getting stuff done and reaching financial wellbeing. In a connected world it is not anymore about the closest branch to my house but about convenience and flexibility. Social networks are also having a great impact in retail. The incredible power of exchanging opinions and experiences have changed forever the way companies approach clients. Secure your place at the Innovation Summit



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