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Delivering growth through innovation in the era of FinTech


The below article is a session write-up from a presentation delivered by Amy Radin at FundForum NextGen Distribution in Boston, October 2016. Join in the conversation on Twitter via #FFNextGenDist.

Amy Radin has been working at the intersection of finance, technology and innovation for much of her career. Among other roles, she was Citi’s first Chief Innovation Officer, and later became Chief Marketing Officer at AXA, where she guided digital transformation. In this talk, she focused on conveying an active and engaged operational perspective, answering the question, “What do executives, innovators, and employees need to do to bring about positive change in their organizations?”

She noted that it is hard to express negative feelings about innovation, but when it comes to taking actions that may be disruptive to existing products, services or processes that are working reasonably well already, it can become extremely difficult. Although we are all interested in continuous improvement, we also tend to resist extreme disruption.

Surveying the industry landscape, Radin observed that financial services, retail banking, payment systems and wealth management are facing a similar set of challenges and opportunities. These days, they are in the midst of a perfect storm, as they grapple with the impact of regulation, while also confronting the changing nature of the advisory relationship and consumer expectations. There are substantial pressures on the conventional business models and there is no clear flight path to a stable mode of operation that we can abide by in the current economic, financial and technological environment.

“Innovation is any type of differentiation in your business that drives preference.”

On the positive side, there has been intense investment around fintech this decade. Some of the world’s largest and most influential venture capital firms and asset managers have made bold forays into the field, developing large portfolios of related companies. There has been a fair amount of hype in the fintech space as well, perhaps a dampening feature for those who have lived through the Crash on ’87, the dot com bubble and the global financial crisis.

Clearly, when it comes to early stage start-ups, we should not lose sight of the fact that most of them will fail. Nevertheless, there is considerable energy around innovation labs and incubators at the moment – such activities are a way to get in the game, learn how it works and develop plans for the longer-term. For firms embarking on the journey, Radin offered the following definition: “Innovation is any type of differentiation in your business that drives preference.” She added that this does not mean preferences the way we might think of them from the inside; this is rooted in the point of view of constituents outside the firm – the clients, suppliers and external innovators who have capacity to push the levers and influence the profitability and overall success of the enterprise. When we think about innovation in this way, it becomes an approach that stimulates real impact on the P&L, she said.

As important as it can be, innovation is plagued by hype and mispercetions; Radin offered detailed observations on the flaws in thinking about what innovation is and its impact on the firm.

Misperceptions about Innovation

First and foremost, is the romantic vision of innovation: we tend to equate innovation with moonshots. However, much of the value lies in incremental, not radical, change. Incremental changes drive over 90% of the value in most industries. However, it can be difficult to tell whether something will be incremental or disruptive technology. Further, it is challenging to have deep insights into what will succeed and what will fail over the long term and why. This blindness leads to the next observation.

As the Chinese philosopher Lao Tzu once said, “If you do not change direction, you may end up where you are heading.”

We don’t connect innovation to measureable results in an appropriate way. All too often, new ideas are forced through the filter of a traditional P&L and this is one of the most effective ways to kill innovation. Those truly interested in change must be willing to operate with a different kind of precision. Innovators are always looking at questions around the market – where and what is it, how should the firm reach out to potential customers and what are their spending behaviors like? If the firm could capture 1 % of the market, then how would that look and where would growth come from after that?

Too often, promising ideas are saddled with preconceptions and traditional metrics early. Radin encouraged taking a diversified portfolio approach instead, where the questions center on attaining sufficient numbers to keep going and then address the timing of the expected payoff, as well as the size and likelihood of that payoff. This highlights why people are building out incubators and partnering in joint ventures; a wise strategy is to take on various positions in market, managing the risks and rewards over time.

We tend to gravitate towards product innovation, but innovation can take many forms – see the Ten Types of Innovation website for elaboration on that: https://www.doblin.com/ten-types. We also tend to prefer practicality, stability, and control in our effort to manage risk, but innovation requires a different way of thinking. Radin provided details on four mind set shifts that will help innovators conceptualize their goals and embark on the path towards having a positive impact on customers, the market and the firm’s bottom line.

As the Chinese philosopher Lao Tzu once said, “If you do not change direction, you may end up where you are heading.”

Radin points out that, indeed, irrespective of the choices we will make, the future will happen. However, innovation can be managed in a way that allows new ideas to flourish. It requires some old-fashioned leadership, vision and persistence. In the end, it’s not about a single innovative moment, it’s about wisdom and the sustained commitment of leadership.

Many thanks to Amy Radin for sharing her thoughts, not only through her talk, but also through the slide deck that she was kind enough to share. Those interested in her insights on the practice of innovation can learn more at www.amyradin.com

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