Connect the dots instead of building everything from scratch

“You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future.”

These words were spoken 11 years ago by Steve Jobs, during the graduation ceremony at the Stanford University. No matter how we see his accomplishments and views, it’s hard to disagree with the quote. Although there is a small difference — in the case of technological innovations the dots can be connected looking forward. And then patiently wait for a moment to let the relations between them start reaping benefits and surpass the competition. Yes, I know this completely changes the meaning of the quote. But it still remains true. How come?

An IT department is a factory which needs time, decisions, planning, resources and parts to produce sets of cogs and ratchets of various sizes. Then the workers put them together into a mechanism, they test it, and that’s how a new service or a product is created.

A startup is a small manufacture that already has a cog — tested, working, and with a designed business model. All that remains is to connect it with something else to create something new. No need for half-finished products. The process is much quicker and cheaper. And the biggest benefit is that if it doesn’t work, it can be immediately dropped and replaced with other elements, until achieving the desired effect.

Source: http://insights.venturescanner.com/category/financial-technology/

As an example of how this approach is a relatively quick and easy way to create something innovative let’s use “landscape”*, showing only chosen startups from the “FinTech” field divided into subgroups. The mobile application from the “Crowd-funding” category connected with a startup from “Lending” and “Personal Finance” creates a platform for financing and granting loans on chosen goals in the peer-2-peer (p2p) model. Santander Bank noticed some time ago the potential of this service and created its own investment fund, InnoVentures, which supports small companies and startups, has been cooperating with Finding Circle since 2014 (they offer p2p loans), and has been lobbying for formalizing proper bills for transactions of this type. It was a great decision, because even during the financial crisis the p2p loans were generating profits. And they weren’t creating anything from scratch, only using already existing solutions. This approach required connecting a few dots looking forward, and it earned Santander Bank the leading position in the field. There are more cases like this, e.g. the Chinese WeChat or Kakao.
 Based on our experience, at K2 Disruptive Lab we advise our clients against building things from scratch. It’s better to search for finished solutions which, even if they realize the goal on a small scale, after putting them together they will live up to the expectations. That’s how you create innovations that omit complex internal processes, procedures and rigorous planning. To do so, you’ll need to:

  1. Determine the company’s and its clients’ needs, then find startups, ideas, garage concepts, academic experiments, which can more or less realize the Key Performance Indicators (i.e. KPIs). They might even exceed the indicators, the sky’s the limit! This approach allows surpassing them if we reach for finished solutions, and the product is being created outside the organization structure.
  2. Select the most fitting ones, get to know their products, business plan, development plan and legal factors (e.g. who is the shareholder, what are the plans for development, who owns the patents).
  3. Realise the “Proof-of-Concept” which means creating the test version of a product with chosen startups, and seeing if the solution realizes the KPI.
  4. If it doesn’t — pick another startup that offers a slightly different approach and business model. See if it realizes the indicator again (read more — Build, Measure, Learn).
  5. Obviously the third and fourth step will generate costs connected with analysis and development. But these might only comprise a fraction of the investments that are necessary to create a product inside an organization, or buy a “boxed” solution which rarely meets all the requirements. And there is no guarantee if it’s going to be marketable and profitable. Proof-of-Concept allows checking this at a much lower cost. Integration with startup services (API) will be much simpler and less time-consuming than creating an application traditionally from scratch. Often small companies making their debut are ready to share their solutions for free for the sake of Proof-of-Concept, to prove their effectiveness and enter into a financial cooperation in the future.
  6. If the company is satisfied with the results, the only thing left is to choose a cooperation model with startups (buying shares, buying the company, paying for SaaS model licenses, etc.) and implement the solution for broad use.

It’s the easiest and quickest agile way to discover and implement innovations in the IT field. It can be treated like practicing before a marathon. Everyone who follows the right rules, whatever their age, sex or figure, will eventually cover the distance. Same here. K2 Disruptive Lab cooperated with a global FMCG company (listed in the top 20 in Forbes 500) and successfully realized these goals, which you’ll find described in the next article.

*Landscape is becoming an increasingly popular method of categorizing companies and startups. The difference is that it’s not limited to fields, but to clients’ needs. For this reason, a financial institution can notice that it’s valuable to broaden its range of traditional services by using a solution that, at first glance, has nothing to do with banking.

The article was written by Marek Rakowski, Business Analyst at K2 Disruptive Lab. See his profile on LinkedIn.

At K2 Disruptive Lab, we help the largest corporations launch innovative business ventures. We’re a team of innovators, entrepreneurs, investors, technology architects and UI geeks. We design, build innovative enterprises in cooperation with corporations, and co-finance their development.

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