I've been talking to a lot of our financial services clients about their innovation programs lately, and the news isn't always good. Some clients can't get buy-in for their complex, long-term innovation projects. Others get buy-in but lose momentum when they try to implement. Often, even short-term, "fast fail" experiments don't get off the ground. Both managers and frontline employees charged with implementing innovation programs ask the same question: Why are we struggling?
There are many ways to fail, so there's no one answer to the question. But based on our observations, firms can boost their odds of success by following five guidelines.
You'll need an innovation strategy. Sounds obvious, but it's surprising how many financial institutions forge ahead without one. If you develop a clear strategy up front, a lot of pieces of your innovation program will fall into place. If you don't, you're likely to struggle.
As part of this strategy, firms that succeed at innovation have a good idea of what they want to accomplish and put together a well-defined innovation charter. What makes for a good charter? A sound investment hypothesis and criteria, clear allocation of authority for investment decisions, and a thoughtfully selected investment committee.
And the innovation strategy has to be aligned with the overall business strategy. Otherwise, you set yourself up for failure. As part of your innovation strategy, you'll need an ongoing source of fresh ideas and a structure for acting on them. Develop a systematic way to source, gather, filter, and select innovation which ideas to pursue.
Innovation is a team sport. You'll need the buy-in of key stakeholders to answer critical questions: How tightly are we going to couple our investment with the core business? Do we want it to impact the core within one to three years? What ROI do we expect to achieve? What happens if we don't make that goal?
Getting buy-in can be a constant struggle, but it's worth the effort. Don't try to force management to see the wisdom of innovation investments. Better to woo them. Involve people organically throughout the organization with various innovation projects. Show them how innovation can help improve business results. Most important, look for a few quick wins. There's nothing better than tangible results to help people see the value of your program.
Choosing the right people to lead your innovation program is critical to success. Having the wrong people in charge is a recipe for disaster.
Too often, we see firms install a leader with no relevant background as head of the innovation unit because either the person wants to move to Silicon Valley or is close to the firm's leadership. The innovation unit becomes a parking place for these managers, with predictably negative results.
The leader should have real-world experience in getting innovation off the ground-or the wisdom to hire someone who does. Look for someone with a forward-thinking attitude, perspective and personality needed to drive change, and concrete experience growing revenue for the business.
You'll need a global strategy for innovation if you want to succeed. But that doesn't mean every region has to march in lockstep. Your innovation strategy should give different geographies the flexibility to tap into a global pool of funds and make investments as they see fit-as long as the investments align with your firm's overall priorities. To make sure that local efforts are aligned with global strategy, establish a global governance structure and investment committee.
0nce you've established a sound innovation program, don't expect immediate results. While some short-term projects can generate an immediate return on investment, you shouldn't judge all projects using the same metric. We see many financial institutions move on to something else without allowing the current initiative enough time to generate returns.
But that's what many firms do. For example, more than two-thirds (68%) of the firms participating in PwC's forthcoming global innovation survey identify sales growth as the most important innovation metric. This can lead to a bias for short-term results and deter firms from making wise innovation investments that can pay off over the long haul.
Strive for a healthy mix of quick wins and long-term aspirational projects. Use metrics that make sense for each project. Allow yourself the freedom to treat some innovation projects as purely experimental, and don't measure them formally at all.
At its core, innovation is a way of thinking that needs to be infused throughout your whole organization - and it is not just about ideas but also on acting on the idea and supporting the implementation of something tangible. It's not simply a new function or department. It's about putting yourself in the shoes of your customers, identifying the problems they face, and finding novel ways to solve them. It's about thinking beyond your legacy technology and the cultural issues that stop you from doing what's needed.
FinTech startups already provide better, faster, cheaper solutions for consumers. Your competitors are working on this, too. Don't be surprised when your customers jump ship if they look around and find better options elsewhere.
John Stadtler is the US Financial Services Industry Leader at PricewaterhouseCoopers. Learn more about industry news by following @JStadtler and @PwC_US_FinSrvcs. All views expressed above are my own.