The process of innnovation

As I’ve been getting settled here at the bank in my new role, its been interesting to see the way that my colleagues – both in Group IT, and elsewhere in the group – have reacted to the advent of an innovation team. In general, everyone applauds the initiative on the one hand, while they are hesitant about the results we’ll be able to achieve on the other.

Why are they hesitant? Because they wonder how we will ever get the support of the business to fund any of our initiatives given that budgets are fixed in advance (often yearly), and that other business-as-usual projects always take precedence.  Keeping the existing revenue is important, of course, but spending all your dollars doing that is a problem as well. I’ve often quoted the Accenture statistic that 70% of all budgets get spent on keeping the lights on.

That is an ongoing problem for the people that want to do new things in any organisation, and in talking with some of my peers in other banks, I’ve found they have the same dilemmas as well. Just how do you get money out of the business when they have none to give?

But, you know, I was having a conversation with a member of the innovation team here at the bank. He was expressing concern that the hard innovation metrics he’s been given to hit each quarter are going to be a stretch, if not impossible to achieve given the challenges of reaching into the business for money. And in responding, I just couldn’t help comparing the situation of an internal influencing team with that of vendors in general.

The business always seems to have money to give vendors (I know, having been one), and vendors often manage to get projects up, even though there is no formal line item in anyone’s budget at the start. The fact is, vendors are very good about winkling out money where none exists. They wouldn’t be in business if they weren’t.

What is it that vendors have that banks don’t? Salespeople. And what do these people do? Sell new ideas.

In our team here, we are about getting new ideas up. And difficult though it might be to accept (for an internal team), we have to sell these ideas – just as a vendor would – if we want to get any traction. I’ve challenged my team to find the dollars. If a vendor can do it, we most certainly can too.

I think (having looked at the literature and spoken to my colleagues) that many innovation teams in financial institutions fail for failing to understand that new ideas (yes, even great ideas) never go anywhere in a vacuum. They have to be nurtured and loved. You have to cost justify them, and market them, and invest in them.

And then, after you’ve invested yourself emotionally in getting support and traction, you have to be strong enough to kill the idea if you can’t make anything of it regardless.

Actually, we’re running the innovation process at Lloyds TSB as a numbers game. We’re planning to evaluate just over 1500 new things this year. That will lead us, we hope, to some 64 outline business cases, which we will distill to around 30 pilots. Of those, probably one in 4 will see the market and/or go live internally. Each individual in the team has to get to their "big bets" every quarter. Since they will be goaled on the change they create in the group, their skill in picking winners and getting them up will be the main thing that contributes to their success.

Looking at the numbers in one way, that’s a lot of things we’re going to toss out. On the other hand, though, we will, at the end, have some new things that might not have happened otherwise. That’s the key metric for our team really: what would not have happened if we hadn’t been here?

To guarantee that the answer is something other than nothing, the numbers game seems to be a good bet to me. Somewhere in all those numbers, we should find the nuggets which will let us shake the money out of the business.

13 Responses to“The process of innnovation”

  1. May 15, 2007 at 12:09 pm #

    James, this is an interesting approach, and when you think about it, it is easier to wow a bank as a vendor – ad agency, consulting group, etc. As an internal group that really doesnt add to the bottom line until further down the track, its harder to get your story sold, and so you need sales techniques and a bloody compelling pitch – forecasts, projected benefits, customer experience scenarios – all before you actually do any business cases.
    An ongoing challenge it is.

  2. May 15, 2007 at 3:55 pm #

    Hi Rob,
    Yes, I agree with that. Although, you would think with internal knowledge of process, challenges and issues, an influencing team should be as impactful as a sales team.
    Also, and IMHO, there should be no reason why bottom line benefits can’t be very visible right up front.
    A key metric for our group is potential innnovation in the pipeline in every quarter – and we measure that against the number of points of change this would generate in the cost-to-income ratio every quarter.
    We’re hoping that will go some of the way to addressing what you correctly identify as a significant issue…

  3. May 16, 2007 at 10:52 am #

    James, there’s a good interview by Ron Jacobs ( of the chap at Microsoft that runs the ASP.NET and CLR teams: Scott Guthrie. In the interview Scott reveals how the process of selling the team’s ideas relied upon demonstrable prototypes. Using these prototypes they managed to grow their team from 3 or 4 people up to presumably some hundreds.
    It seems to me that envisioning the final outcome at the beginning of a conceptual development is exceedingly difficult, and it is only through the prototypes developed along the way that you can ensure progress and provide the collateral to keep selling your ideas.
    Scott’s internal marketing must have been a critical success factor for ASP.Net. The same success factors apply for those of us working in banking innovation.

  4. May 16, 2007 at 11:51 pm #

    Another good post, and it’s great that innovation is seen as a key focus.
    I would see innovation as a collaborative/iterative exercise with the business, IT and innovation, as all will have strategy leaders also seeking to do the same and everyone will be looking for new ideas – so you shouldn’t be on your own for the pitches and business cases.
    Applying “Lean Process” approaches would suggest much of the innovation will come from people doing the work now, with the ideas on how to improve current business processes or create better product offering – as an internal group you should have access to/foster those ideas directly (Our global wiki has really helped other groups identify best practice). Creating an culture of innovation, where it is “safe” to come up with new ideas.
    Vendors I think have a few key advantages: they have access to key stake/budget holders experiencing actual “pain”; they will have been sought out for their product/skills (and tested to be world class); they have an external viewpoint on the problem as consultants, “no baggage”; they have budget to influence and prototype solutions.
    I find some of the most valued innovations are those that enable people to do what they want for less – that is within their existing budget allocation. These can be sold and implemented really quickly once identified (like changing development processes, automating manual processes).

  5. May 17, 2007 at 6:09 pm #

    As I’m sure you’ve experienced, and what you’re eluding to, getting internal support for innovation is very difficult. Occasionally, vendors not only have it easier because they have the “salesmen”, but they are also viewed as outside “experts”. Many times innovations come from outside the realm of expertise of a particular team or group so selling the idea becomes very challenging. The same idea could be sold by a vendor though with much more success because they’re viewed as the experts in the subject.
    I don’t think anyone ever said internal innovation was easy…

  6. May 18, 2007 at 11:41 pm #

    A key advantage that outside vendors have, from PR to Tech is that they can’t be pulled into supporting routine activities — meetings, last-minute crises that need a could of warm bodies, etc. So they can focus on innovation. As a friend who consulted at Citi remarked, they hired consultants to do the work so employees could attend all the meetings.

  7. May 21, 2007 at 9:09 am #

    Thanks for your comments all. Yes, I agree that getting the internal support is the key thing. On the subject of vendors, though, I think there is a danger when vendors pitch themselves as “experts”. It is a mistake to tell bankers how to be bankers. Vendors might be technology experts, but that doesn’t necessarily fly with the business… in my experience, vendors with innovation that are successful know how to get business people excited without being “expert” in anything but getting people excited. Those are the sorts of people we need here at the group.
    The problem, as everyone agrees it seems, is not creating innovation, nor is it understanding the technology. It is getting the message out.

  8. May 22, 2007 at 1:32 pm #

    You may want to check out:
    -“an official measure of innovation” was interesting. No banks made it into the top 50 innovative companies list. Top FS companies are 1 Citigroup; 2 Goldman Sachs; 3 Bank of America; 4 ING Group; 5 Fidelity Investments; 6 HSBC; 7 Charles Schwab; 8 American Express; 9 JP Morgan Chase; 10 Merrill Lynch. These seemed to just be ranked by public perception.

  9. May 22, 2007 at 1:47 pm #

    That is a super interesting post Sailesh. Thanks for pointing it ou.

  10. May 24, 2007 at 2:28 pm #

    Sorry to be late to this party, but I’d like to add one other thing regarding your point about “vendors having salespeople”: The good salespeople sell benefits and solutions to problems. Too often, the internal group is “selling” their pet offering — in your case “innovation”. Nobody wants innovation for the sake of innovation. They want to improve their results and eliminate their problems. If “innovation” helps them do that, then great. But if your new “salespeople” only sell innovation, I’m not optimistic about their future success.

  11. May 25, 2007 at 8:57 am #

    Hi Ron, that is a great point, and one well made. We aren’t selling innovation, of course. What we are selling, at least we hope, are solutions to problems and benefits. Time will tell, of course.

  12. May 29, 2007 at 5:12 am #

    As unfair(?) as it may seem, there is a reason why salespeople usually make the most money: no sales = no business. Another version of this point is that even though you have the best product (or idea) it will still fail if you cannot sell it. Over time I have developed a great appreciation for people who can sell things. Perhaps you need to post for a salesperson position 🙂

  13. May 29, 2007 at 12:36 pm #

    I too have developed a great appreciation for sales people. Here at the bank it is very clear what the value of great influencers are. I’m actually hiring at the moment. Key skill is great influencing.

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