"Our intuition about the future is linear. But the reality of information technology is exponential, and that makes a profound difference. If I take 30 steps linearly, I get to 30. If I take 30 steps exponentially, I get to a billion." – Ray Kurzweil
Without a doubt, every industry is being impacted by the exponential rate of technological change these days. Consider this – 2017 is the 10-year anniversary of the iPhone. Today, there are 2.6 billion smartphone subscriptions globally, and that number is expected to increase to 6.1 billion smartphone users by 2020. Simply put, we are at an exciting inflection point in our collective history as science fiction becomes our reality.
So what does this mean for you? Companies need to re-imagine experiences and act on ideas quickly and nimbly in order to keep pace with the speed of disruption, regardless of the industry. Given the constraints of legacy systems, complex security, risk and compliance requirements, and siloed data stacks, it can be particularly difficult for financial institutions to not just think differently, but to act with the right degree of speed and agility.
Enter, the need to build up an innovation competency.
But what does that innovation competency look like? Is it a lab? An innovation center? A skunkworks team? A black ops crew? An agile group within a waterfall organization? Regardless of how you define that subset, the underlying mechanisms to grease the wheels of an enterprise innovation engine can be tied to four key components:
Figure A: Innovation Engine
In this article we will explore the first two modules of the engine – Focus and Enable – which are tied to business, technology and process levers. The other two modules – Connect and Foster – are tied to company culture – an immensely important aspect of the innovation competency that will be addressed in the subsequent article.
Let's start off with the first two modules.
Focus your innovation efforts through deliberate curation of your pipeline initiatives while taking a portfolio approach on your investments. Create an Innovation Agenda: the intersection between customer needs/value, business and strategy objectives, and technology trends.
Defining your own Innovation Agenda puts parameters around where you’ll invest in any given year and signals to the organization your intent to focus on value-driven innovation rather than going after the next new shiny object. How could that play out? A simple equation can help you gain that focus:
Figure B: Innovation Agenda Equation
Once you’ve defined different concepts and initiatives tied to your innovation agenda, you now have to act on them and enable a set of test and learn capabilities, of which there are two major categories:
Methodology as an enabling capability may seem antithetical to fostering innovation, but the right dose of process is critical, ensuring that whatever you put through the innovation pipeline is truly an experiment that is time-boxed, measurable, and provides you with a learning at the end of its run. One way to do this is by approaching your test and learn initiative as a circular learning loop instead of a linear project. This allows you to measure the outcome (not the output), learn from it, and pivot appropriately to make the next investment decision. One caution would be to ensure the learning loop isn’t so heavyweight that it takes too long to get the learnings. Taking a lean approach to breaking down the work into bite-sized, manageable and ‘stoppable’ chunks is a critical success factor that will help you get learnings sooner, so that you can move your investment forward, or fail it fast.
Technology platform investment can go a long way in enabling your innovations. With the risk and security-adverse nature of financial institutions, it makes sense to carve out a separate technology platform and set of resources to focus purely on innovation experiments. This way, you can focus on testing and learning without being burdened by the usual processes that can bog down a production initiative. Again, be as lightweight and nimble as possible – only building out your minimum viable experiment – just what you need to make that next investment decision. The spectrum of test and learn options might include:
One challenge that many innovation teams have is making the leap from test and learn to production. Once you’ve deemed a concept a success, how do you go from a test and learn environment to production path with minimal friction? It’s a tough nut to crack, but there are ways to increase the likelihood of a more seamless graduation path by bringing in the right technology subject matter experts in advance, leveraging APIs and reusable services whenever available, and introducing greater automation that addresses security, compliance, ADA, and other constraints.
The nuts and bolts of building an attainable innovation competency requires you to 1) Focus: being disciplined about your investment – triangulating on tech trends that amplify customer and business value, as well as 2) Enable: by establishing the right set of capabilities to accelerate test and learn activity through your innovation pipeline. These first two aspects of the innovation engine can have a material impact on what you take through the pipeline and how quickly you move through it, so that you can keep pace with the exponential change happening around you.
The innovation networks and culture you build to supplement your innovations are oftentimes neglected but equally important. Part 2: The Heart of the Innovation Engine, will cover the softer side of building up your innovation competency, serving as a reminder that there’s an art to the science.
Miranda Hill is Director of Innovation and Commerce Strategy at Thoughtworks, a global firm of 4,000+ passionate advisors, designers, product leaders and technologists in over 42 offices across 15 countries whose purpose is to revolutionize software design, creation and delivery in order to transform legacy enterprises into high performing, entrepreneurial organizations. She can be reached at Mihill@thoughtworks.com.
Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.