Are large corporations still unaware of the importance of innovation, and hampered by scale, structure and established modes of behaviour to really innovate? Absolutely not!
In fact, many of the world’s largest firms now have targeted approaches to innovation, particularly in financial services. Research from data analytics firm Indicative suggests that 65% of financial services companies have a dedicated innovation lab, division, or new product innovation group.
It’s often assumed that the successful enterprises of the future will be the dynamic small-scale innovators of today. The video rental chain Blockbuster disappeared because it clung too tightly to an old business model and was usurped by the startup Netflix it once turned down the opportunity to buy.
Other industries – including banking – are equally ripe for disruption. Local government support to boost startup ecosystems also helps deepen the opportunity for disruption. Take Hong Kong, for example. According to InvestHK’s survey, the city’s startup ecosystem has skyrocketed in the last few years. As at November 2018, the number of startups grew by 18% year on year, and jobs created surged by 51%.
According to Accenture, data from CB Insights suggests that global investment in fintech ventures more than doubled in 2018, to US$55.3 billion, led by a surge in funding in China, and strong gains in other markets including Australia and Japan.
The business model for launching a start-up is based on an appetite for risk and uncertainty, while for established businesses the incentive is to keep revenues consistent and minimize risks.
But if big corporates are already innovating, the challenge is more on knowing how to manage innovation properly, without the do-or-die attitude that comes from limited resources and focussed objectives at a startup.
In light of this, here are six key ways for achieving true “innovation” at a big corporate:
- Don’t confuse digitization with innovation. digital transformation does not mean innovation. In all industries, firms need to digitize customer journeys. Getting this right is critically important, but innovation is about looking beyond what customers experience now, and towards defining what that experience might be in future – this could be a new business model created via partnerships or new consumer data. Too many companies are just trying to stay a few days ahead of competitors.
- Be clear on the kind of innovation you’re looking to achieve. Innovation approaches vary significantly depending on the intended horizon of opportunity, both in terms of time to market as well as proximity to existing competitive strengths and assets. Corporate innovation teams often act as a catch-all for any kind of “thing we’re not yet doing”, failing to distinguish between incremental improvements to existing businesses, new products or features, and much more radical changes that require shifts in organizational structure.
- Be clear on the level of commitment you’re willing to make to your innovation team. True innovation is not just about having the ability to ideate, but also about the ability to execute.
- Support for innovation needs to come from the top. To truly innovate, corporates need to commit and invest, but this is not just financial. One of the biggest roadblocks to innovating can be ingrained processes. To overcome this, innovation teams need senior buy-in, supporting experimentation with new ways of working – the right culture in the right work environment.
- Do set expectations early on. The biggest challenge for corporate innovation can be balancing the tension between near-term delivery and longer-term sustainability – or the trade-off between long- and short-term investment and effort.
- Finally, leverage the threat of disruptors to push your team and your business to do better. Use challenge as an opportunity. As the saying goes, “don’t let a good crisis go to waste”.
If done right, bigger corporates may actually have some advantages in innovation and can be dynamic. Take financial services as an example, this includes our ability to navigate highly complicated, constantly evolving regulatory environments and better manage risks. Greater scale also often means more resources to rapidly develop a new product or platform and see it immediately active with an established customer base. HSBC was able to leverage strengths like these when rapidly developing its highly successful PayMe app, which went from post-it note idea to launch in only about a year.
While the current narrative is of a simple win-lose situation between the disruptors and the disrupted, the reality is often more nuanced. In financial services we increasingly partner with smaller players to bring together the scale of the traditional players with the agility of Fintechs.
According to the Capmini, World Fintech Report 2018, over three-quarter of Fintechs said partnering with a traditional firm was their primary objective, while less than 20% stated a preference to compete.
HSBC is already working with a wide range of Fintechs across the group where we’ve identified a clear benefit for our customers.
Partnerships can be highly favourable and beneficial for both sides, helping share and both culture and expertise. The opportunity for partnerships – alongside properly managed innovation programmes – is there in many industries.
