Answers to Questions from Innovation Webinar
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17 January 2014Michael Fitzgerald
Thanks to everyone who participated in the Current State of Innovation in Financial Services webinar. Over 140 people were listening in! Here is the link to the audio recording: http://www.celent.com/reports/webinar-current-state-innovation-financial-services We especially appreciate all the great questions that came in. A few were more specific to individual company situations and, in those cases, we will reach out to the specific folks that submitted them. We grouped similar questions and also reworded a few for clarity. If you don’t see your question in these, give us a shout and we’ll be in touch. Email firstname.lastname@example.org with any follow ups. Look forward to working with you to move innovation in financial services forward! Mick and Mike Q: Can you help better define "breaking a tradeoff"? A: We have to credit Michael Porter with the thinking behind this important concept. The classic example of breaking a tradeoff is delivering better quality at a lower cost. Normally, increased quality comes at an increased cost. For example, Apple’s iTunes delivered music easier (on an iPod) and at what was perceived to be a negligible cost ($0.99). As a result, the music industry was disrupted. An example in insurance is the multi-tiered rating of automobile policies. Insurers using this approach were able to more accurately price high-risk drivers and the tradeoff between pricing and risk acceptability was broken. Q: Should an organization set up a standard process for innovation activities? How flexible should the process be? A: Contrary to popular belief, innovation is not all art. There are processes which are consistent across companies which are generally recognized as leaders in innovation -- identifying ideas (“ideation contests”), incubating new efforts, rotating staff into an out of standing innovation centers of excellence are all examples. An organization should have process for innovations but a key balancing act is required to ensure that the process don’t encumber the innovations (otherwise it’s the wrong process). Additionally, different types of innovations require different processes. A process improvement innovation within the organization should be managed differently from a disruptive product idea that potentially cannibalizes the traditional business. Q: Where can I learn about "Innovation report card for financial services organizations"? (We promise, this was a question from an attendee and not a plant!) A: The report card is a consulting engagement that provides an organization with an objective and comprehensive assessment on how it rates in key success areas regarding innovation. It is a stand-alone program designed to meet a strong emergent market need of our clients. Celent has teamed with a leading industry innovation consultant, Mick Simonelli, to deliver a practical, expert evaluation of a company’s innovation efforts. The report card results in a multi-dimensional assessment in areas such as: culture, processes, resources, strategy linkage, rewards and incentives, and performance in key areas of competitive pressure. Q: I have a feeling that th[e report card] is the classical framework in organization infrastructure for any program to be successful. It looks like it doesn't help to answer the question on how to make the innovation flourish in a structure? (Again, we promise, not a plant!) A: Yes, the innovation report card framework includes many of the classic change management dimensions as these are necessary for success in innovation as they are with other major organizational changes. However, at its most granular level, key characteristics specific to innovation become clear. For example, the process assessment contains an evaluation of prototyping capability in a financial services company. Failing fast is a necessary skill and the ability to rapidly and effectively build prototypes is key to identifying “winners and losers”. Q: What environment is ideal to build a culture of Innovation within a Company? A: This is a great question, and a real key to success. Generally an innovative culture is characterized by a spirit of open communications, teamwork, the recognition of the art of the possible at all levels, supportive leadership, and processes specifically tuned to identify, evaluate, launch and assess innovations. Cultures are all very different though, so it is important to account for the “way things are done around here” at each organization and use that as a framework for developing a plan to influence innovation within the culture. Q: Do you know on average, how much % is dedicated to an IT innovation, especially in an autofinance company? A: About the closest metric that can compare across companies is for public companies, the reported research and development expense. Building innovation metrics across financial services is a key objective of Celent’s research and we look forward to bringing some clarity here. Q: Some companies have designated a CTO (C Tech O). Is that also an initiative that tries to cater to the same issue (drive innovation) or is that different? A: In our experience to date, the designation of a CTO does not necessarily result in improved innovation results. A key success factor that is emerging is the degree of ownership of innovation by business leaders. While an effective CTO can be a big help to executing innovation, we recommend that a business evangelist be found. Q: Do you think innovation is critical enough for the CEO to integrate the CIO role with his own and become the CIO too? A: Great point. Every CEO should have the heart of a CIO. However, CEOs are also responsible for the business. To ensure innovation thrives, we believe it is important to have a dedicated business executive at the top table, charged with leading innovation across the entire enterprise.