The Three Musketeers of Innovation

Let’s talk specifically about business model innovation today — I bet many of you are passionate about the subject! If so, please feel free to contribute! Your comments definitely add value to these blog posts! (Also, many thanks for the lively discussion on the future of Asset Management on Blockchain you initiated last time! And, just to let you know: the Melonport ICO was over in 13 minutes and 23 seconds, with 99% of the funds received within the first 3 minutes!)

The stars of today’s blog post are Fabian Vandenreydt and Chris Skinner, the two musketeers of innovation I have enormous respect for. I managed to catch up with both of them at an event organised by Hewlett Packard Enterprise in their Innovation Centre in London. Chris & Fabian kicked it off.

What I admire most about the guys is the clarity of their thinking when it comes to innovation. Fabian is Global Head of SWIFT’s Securities Markets, Innotribe, and the SWIFT Institute. He believes in innovation as a sustained process embedded in organisational culture rather than one big, new, disruptive product. Frankly, I was impressed with Fabian’s story of how SWIFT created a whole ecosystem to drive innovation. They established Innotribe seven years ago. (That’s even before the term Fintech was invented!) It is a small team of five within SWIFT, but they manage all the stakeholders who help SWIFT innovate: around 650 startups, more than 30 VCs, 550 judges who screen the startups, then 350 universities and 420 more mature software vendors. Although this extensive network gives SWIFT access to a pool of external talent, they also encourage the development of internal talent since they believe that R&D should not be removed from SWIFT’s day-to-day business.

Here is how it works in practice: the research side analyses the new technologies and trends, and evaluates if they should be incorporated into SWIFT’s existing business processes. Then, the development side works at an accelerated pace to create new products and bring them to market. The early stage of the whole process also includes SWIFT’s customers. (That’s a pretty sound innovation and R&D strategy!)

During our conversation I asked Fabian for his best advice for other big players in the Financial Services industry regarding innovation culture and strategy. Fabian’s message is that the key to innovation is to keep one’s innovation efforts in motion all the time – because companies nowadays need to constantly innovate to keep the costs down and to uncover new sources of revenue. Another important point is that innovation has to be in the hands of people who own the P&L in order to be successful. Besides, innovation goals have to be top-down! They can be very broad, but they need to exist!

On top of that Fabian highlighted that, when working with others, one needs to create a win-win situation since everybody involved should benefit! Also, to keep in mind that understanding of the market and its dynamics is more important than the technology itself! (I could not agree more!)

Just to mention that Innotribe is building an exciting four-day programme for Sibos 2017. It is going to cover the trends, opportunities, and challenges the Financial Services industry is facing at the moment.

Now, many of you will be familiar with Chris Skinner’s name from his blog The Finanser. Believe it or not, Chris blogs every day! (I definitely appreciate that! I can barely produce one or two pieces per month!) Chris is also the chair of the Financial Services Club, a network of 3,500 financial professionals across Europe, and author of 14 books. (Wow! I am on my first chapter at the mo!)

In addition, Chris is building a multimillion-dollar investment fund in partnership with 11:FS and Life.SREDA. The fund will invest in blockchain fintech startups in Europe and Asia with focus on trade finance, digital identity, insurance, provenance, payments as well as activities in the supply chain.

His latest book ValueWeb is about Fintech revolution, blockchain and mobile. It clearly shows why we need another fundamental shift in how we think about value and trade. Consider the following: there are currently seven billion people on this planet who communicate, trade and transact 24/7 in real time thanks to mobile! That requires a completely new financial system — the Internet of value — able to support that globalised network where people are also going to have smart things (IoTs) — which means trillions of transactions of very small value.

In order to achieve that, existing banks have to become digitalised! Since Chris realised that this was going to be a real challenge for some, in his book Digital Bank he puts forward different strategies. Chris’ vision of the business model of the future is based around a back office that is focused particularly on Machine Learning combined with Distributed Ledger shared databases; a middle office that is all open APIs so we can ‘plug and play’ between the front and back office; and a front office that is all about connecting ‘smart things’ to ‘smart data’ to ‘smart services’.

Chris is of the opinion that banks have to move to an open marketplace structures in order to be able to compete. That would mean that both corporate and commercial customers could buy services as they suit their purpose rather than being delivered to them as an integrated service internally developed and controlled by the bank.

When it comes to innovation currently underway in the Financial Services sector, Chris is more excited about smaller projects that are a ‘quick win’ rather than larger projects focused on building a brand new shared infrastructure service that are going to take years. As an example he quoted the world’s first blockchain trade finance transaction completed in September 2016 organised by Barclays and Israeli start-up Wave that cut the whole process from seven or ten days to less than four hours. The parties involved tracked documentation through Wave’s new blockchain platform without requiring third-party verification, with funds sent via Swift. The transaction showed how much simpler, safer and faster trade finance will become via paperless trade on blockchain.

Chris sees blockchain as the fundamental part of the forthcoming revolution in banking that will create more efficiencies and lower the costs, but thinks that a widescale adoption is still five to ten years away.

So, why did I say at the beginning that I would like to discuss specifically business model innovation when we have so far talked about ‘incremental innovation’ and small ‘quick wins’?

It is a no-brainer that our business model needs to change if we wish to stay competitive and provide the level of service our clients expect nowadays — I am talking about speed, transparency, and new products and services here! At the same time we could capture new markets created by new businesses, emerging markets and global hyper-connectivity. (I am as optimistic as ever! The opportunities are as numerous as the threats, right?) Besides, most new technologies require new business models!

What I would like to communicate is that we should adopt a non-siloed approach to innovation rather than box it in top-down and bottom-up, incremental and disruptive, centralized and decentralized, product vs. process innovation, business model vs. tech innovation, in-house vs. open innovation, etc. That’s why I like the ecosystem model of innovation Swift has utilised. I think it is ideally suited to our current times since it enables companies to build an innovation portfolio in a very efficient manner by simply bringing together many different parties. (Great ideas can come from anywhere and anyone, believe me! I run innovation workshops and find myself very often amazed by the participants’ solutions. It is not true that innovators are born! We all have the capacity in different degrees!)

Moreover, my expectation is that in the future business model innovation is not going to be once-in-a-decade undertaking. Business model will probably have to be reassessed on a pretty much regular basis, like products, services and processes.

Of course, I am totally open to other opinions! And, to help us create a culture of innovation, and start innovating like Google X-ers by practicing moonshot thinking, I am sharing the eight ideas that work for them! (Click on the link!) Please do not forget that Google has a hundred projects in its portfolio at each moment and that nine out of ten fail!

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