Ensuring a firm has a steady, incoming stream of innovation goes beyond simply partnering with startups.
Innovation is at a premium. There is no denying this fact. Regulations have hamstrung technology departments over the past five years, taking the majority of their budgets and time.
So it’s easy to see why many banks have been drawn to the innovation lab model. On paper, the concept seems like an easy way to implement new technologies: Create a space where a group of your employees can interact with new technologies and fintech vendors to find creative solutions to problems the firm is facing.
But the issue is much more complex than that. If the process was that simple, then innovation would be easy, and banks would have no problem creating and integrating new solutions and platforms into their firm.
Clearly, that’s not the case. There are a plethora of boxes that need to be checked before a solution from a fintech firm can be properly implemented into a bank. Is it compliant? Is it scalable? Does it fit within the firm’s current infrastructure?
And while these all seem like obvious issues that need to be addressed, there’s another question that’s just as pressing that does not get asked nearly enough.
Will stripping the innovation out to a separate area of the firm negatively impact the entire organization?
Throughout the Firm
Concerns around issues of isolation that innovation labs could cause was a topic first brought to my attention during the C-level panel at Waters USA back in December. Blackstone CTO Bill Murphy, who you might have heard on a recent episode of the Waters Wavelength podcast, raised some problems he sees with innovation labs.
“It can’t be separate. It has to be thoroughly part of the culture,” Murphy said. “The people who say, ‘Well, I can get one cool space and hire people on hover boards and suddenly I’m going to be innovative,’ are crazy. It needs to be every person at your organization, or at least the majority, in order to really build the culture and get people to think like that.”
I think Murphy makes a good point, and it’s one I’ve brought up to people involved in innovation labs I’ve spoken to over the past few months. The first was Bruno d’Illiers, COO of Corporate and Investment Banking (CIB) in the Americas and deputy head of CIB Americas at BNP Paribas. While speaking to d’Illiers at the French bank’s New York innovation lab, I asked how he ensures innovation still remains an important attribute of the entire organization.
D’Illiers answers was simple. “I want to contaminate it,” he said.
He went on to say that while he recognized there would always be those within the firm who would resist change, the lab could be a jumping off point to infect the rest of the firm. Even if the lab was able to convert 20 to 30 percent of the people at the bank, d’Illiers said, real change in the culture and mindset could be possible.
Stay on Point
I asked Elly Hardwick, head of innovation at Deutsche Bank, which recently opened up an innovation in New York, the same question, and she had a slightly different perspective. For Hardwick, it was about ensuring the labs recognize they are part of a bigger picture that ultimately ends with servicing the banks.
“I personally believe strongly that innovation doesn’t happen in a vacuum. It takes place relative to something. In our case, that something is Deutsche Bank,” Hardwick says. “We always work in close partnership with a business unit to make sure the technology we’re bringing in meets an actual demand of the business. If the labs were to bring in technology that didn’t have a customer that was in the bank, then we really wouldn’t be doing our job.”
Interested in hearing more about this topic? Funny you should ask. We actually have a panel covering this very topic, featuring the aforementioned Bill Murphy, at the WatersTechnology Innovation Summit, taking place in New York on April 5. To see the conference’s entire program, and to register, click here.
Anthony and James delve into how the systematic internalizer regime is shaping up, and then examine the regtech sector.Subscribe to Weekly Wrap emails