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, usurped by the startup Netflix it once turned down the opportunity to buy, because it clung too tightly to old business models. Other industries – including banking – are equally ripe for disruption.
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. Besides, big corporates are too hampered by scale, structure, and established modes of behaviour to really innovate – or so the thinking goes.
But the idea that big corporates are blind to the possibility of disruption is dated. 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 per cent of financial services companies have a dedicated innovation lab, division, or new product innovation group.
The challenge for big corporates now is often less a lack of awareness about the need to innovate, and more knowing how to manage innovation properly. Given this, here are six key dos and don’ts for achieving true innovation at a big corporate:
1. Don’t confuse digitisation with innovation
Innovation is not just doing what you’ve always done, but doing it in a digital way. In all industries, firms need to digitise 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.
2. 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 organisational structure.
3. 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.
4. Support for innovation needs to come from the top
To innovate properly, 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.
5. 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.
6. 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".
Bigger corporates may actually have some advantages in innovation, if they do it right. In financial services this includes the 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..
The current narrative is often a simple win-lose between the disruptors and the disrupted, but the actual picture is more nuanced. In financial services we increasingly partner smaller players – bringing the scale of the traditional players together with the agility of fintechs.
According to a survey by consultancy firm CapGemini, 75.5 per cent of fintechs said partnering with a traditional firm was their primary objective, while less than one-fifth 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 beneficial for both sides, helping sharing both culture and expertise. The opportunity for partnerships – alongside properly managed innovation programmes – is there in many industries.
Andrew Connell is Global Head of Partnership Development and Innovation, RBWM Digital, HSBC
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