How do you change the way an industry functions? Some people might say: that is the job of disruptors, maybe startups, maybe new entrants from other industries who come in and shake up the incumbents.
We have got in the habit of thinking more about how a single company should defend itself in these circumstances but, along with colleagues from an organisation known as Innotribe, I had the pleasure and pain of thinking about how a whole industry adapts. Let me tell you the story of financial services post-2008.
The threat to financial services
Talking about the threats to banking is not intended to elicit sympathy from you. Far from it. But bear with me while I set the scene a little. SWIFT, the financial telecommunications company of which Innotribe is a part, was bang in the middle of the threats I will outline. We tried to do something about it. But first what were the threats?
The threats that the financial service industry faces have changed substantially over the past ten years. Each of those changes brings new requirements to innovate. That is not to say that banks do innovate always in response to new threats. But what it does illustrate is that the debate about what is necessary in innovation changes over time, sometimes quickly. We think we know innovation but we do not. It’s often like soap. Squeeze too hard and it moves. It just so happens banking is a great example of slippery, ever-changing innovation needs.
At a critical moment Lehman Brothers went bust, trust in financial organisations was fatally eroded and the world has not been the same since. Solution? Many banks have taken the view that they must retrench to their core business (it may surprise you to know there is no real core in banks and that the retreat to the core has been problematic to say the least).
That immediate post-Lehman threat, when people were being called back to their desks from wherever they were in the world, to help firefight a real and present crisis, has been replaced by others.
One is trust, the critical term I used just now. 2008 destroyed trust and financial service firms have had to find ways to rebuild. Response: build a new customer-centric narrative.
Another is that regulators have heaped more and more conditions on companies every year since. To do business today means carrying a costly overhead of what the industry calls KYC – Know Your Customer and other anti-fraud, anti-money laundering techniques. Response: Employ more risk managers and attempt to build industry-wide solutions to share cost.
There is also the startup community, snapping at the heels of banks and offering a different trust model. Response: Try to integrate the startup community through investment funds, incubators, accelerators and bootcamps.
More worrying, a new generation of technologies like blockchain…. Internet enabled financial transfers (Ripple, R3, Hyperledger)… real time transactions….giant technology platforms (like Alibaba) that encroach on profitable areas of business like transaction banking. And then of course there is digital transformation. Responses: Some attempts at industry-wide collaboration but in general the response dial has been turned down. Banks have not really known how to cope. A few have renewed their core technologies – there are always vendors to help with that. But in general the mission is long term, piecemeal and risky.
As an example, the much discussed Blockchain/Distributed Ledger Technology will prove to be one of the biggest distractions of this era in that it does not solve any existing problem. Maybe it solves some future problems to be identified, but with a price to pay: the price of fundamental process re-engineering. Very few will be up to this task which involves community management and regulation. The result will be many wasted years where key changes are avoided.
The role of SWIFT’s Innotribe
In 2007, before Lehman, SWIFT set up an innovation team that later in 2009 evolved into an initiative called Innotribe. SWIFT is what? It is best known as a code you put on some bank transfers. In fact SWIFT is non-profit co-operative made up by more than 11,000 financial institutions in more than 200 countries, offering primarily the messaging system that tells banks where to transfer money to. That task is made relatively straightforward by the very nature of being a cooperative;
SWIFT’s messaging services are used by many of the world’s banks to transfer money between countries and territories around the world.
Before the Lehman crisis SWIFT was like most organisations of that time. Aware it had to innovate more. Seeing the drift to mobile and the pervasiveness of digital ways to work.
They set up Innotribe in a very conventional way to respond to new needs in the industry. I will argue that it went on to become very unconventional but only for a short time. Its rise and its integration into the mainstream is a real lesson in how innovation actually works.
So we had Innotribe but what was it? It began as a product innovation department for SWIFT. We developed new products such as Alliance Lite 1 (a web-based lite interface for low volume customers) and Alliance Integrator (an EAI layer on top of our interfaces portfolio), to extend the reach and service portfolio of the organisation.
When the Lehman crisis triggered its mayhem, SWIFT, like the banks, had to retrench.
In a world of economies and re-evaluation, SWIFT’s executive team was asked to make a decision about Innotribe. But they had a problem in defining its value. For many in the banks, Innotribe was a nuisance; for others it was a tolerable excursion into the world of new ideas. But on the whole the banks did not know what to do with it. The company decided they didn’t want an R&D type innovator but could tolerate something else, something that would act as an enabler for change in the industry.
We already had an ideas system in place. In order to feed our own R&D work we were doing what people then called Open Innovation. To generate new ideas we began hosting innovation sessions at different banking events including our own, Sibos, a forum for 7,000 banking professionals. We were pimping for ideas and we got plenty.
We followed the typical open innovation model in assessing these too. Initially we referred the ideas to a group that had been volunteered for the task by their managers. They were not so interested in the task, by and large. We tried people who volunteered of their own accord. But they found themselves often marked down in annual assessments because they’d given up time for us. We tried to get agreement between managers and volunteers and publicly celebrate their enthusiasm for innovation. Guess what? Not a lot happened other than we had a lot of ideas. Hundreds of them.
This open innovation system was supposed to be tied into an overall innovation framework: idea, evaluation, Proof of Concept, Prototype, incubation, acceleration…..but not much go to market. In effect we had a system that was geared towards experimentation and that’s what we got – really good experiments. Life lesson 1: A focus on experiments will give you experimental solutions and not much else. Little ships to market.
The move to an industry catalyst
By this stage, around 2011/2012, Innotribe had begun to develop a new competency. We had been at many events and hosted dozens of ideas’ hackathons or jams, call it what you will. We knew how to work an audience.
We had also begun to work on industry specific projects rather than internal projects, such as digital identity – what could we do to create a standard or greater transparency around the trust claims that banks make for themselves. With thousands of banks in our network it would be important to each bank that they could trust the claims of all the others.
When we worked in this area we started labelling our initiatives in all kinds of smart ways – we talked about digital but before people in banking found digital at all interesting. We were ignored because we didn’t talk to the concerns of the day in the language of the day. Life lesson 2: Language is essential to success. Never try to sell yellow oranges or speak Urdu to a Mexican. Tell the narrative in the audience’s language and be sure to convey the value in the way they will feel it.
Gradually over some years we had competency in events and audiences, competency in innovation projects and in looking at industry-wide problems. And we had begun accumulating life lessons.
Life lesson 3. You get used to progress in a backwards direction. We had seen progress in all directions – forward, backward and sideways – and felt the pain and frustration. But we were still alive.
We were about to be one of those right time-right place initiatives. Except we created the place.
We had been a participant at the annual Sibos conference already for a couple of years when in 2013 we began to push the boundaries of what you can do, or what you are expected to do, at a banking conference.
Up to that point we had been very much on the fringes of the Sibos programme. But people were starting to seek us out. We began programming an umbrella session called The Future of Money. It talked directly to the banker’s heart. And it was packed. Standing room only. Under this umbrella we introduced Bitcoin and the Block chain.
We also began programming under the organisational change umbrella and that allowed us to run many sessions that looked at post-hierarchy organisations. We even turned the spotlight on emotion at work!
2014 was our breakthrough. Sibos hosted 7,000 bankers in Boston and we were closer than ever to the heart of the event, even having our own stand in the exhibition hall. Part of the motivation was to reign in the perceived excesses of Innotribe. But, our track record in attracting people meant we had to remain radical.
We ran sessions on the biggest threats and opportunities for banking – Ripple, the Internet transaction protocol, a direct competitor of SWIFT’s; Bitcoin again but also Ethereum and the idea of smart contracts, crazy non-hierarchical organisational systems, platforms as innovators that could take over whole segments of the banking market. We had the competition in the room.
But we had learned one more important lesson. We had professional communicators on our side, in particular the Innotribe communications specialists like Audrey Rase. For the first time we were guided in how we spoke to the industry. To date we had tended to think too many of the things we were saying were obvious and participants should get on board. Audrey changed this spectacularly well. Life lesson 4: Just because you like talking it doesn’t mean you know what to say or to whom.
A year later we were in Singapore and already the pressure to become an integral part of Sibos rather than its naughty child, was growing too strong to resist. We had a huge and spectacular multi-media booth right next to the main stand of the SWIFT mothership. We ran sessions where we posed to the banking world the real challenges of platforms like Alibaba. But by this stage every session in the main conference was asking us for contacts in the new world of finance so they could bring those innovators right to the heart of the banking business.
The Startup Challenge
An essential part of our journey was the startup challenge. From 2010 onwards we began bringing aggressive, smart new startups to Sibos. These were the people who could eat the incumbents lunch.
Since then it had become a commonplace to talk about the financial sector using startups as a way to transform different parts of the industry.
But it was Innotribe who took startups to the heart of the business and said, you have to look at these – and engage with them. We played a big part in democratising the startup community in finance because we did not just look to London or New York, We went to Africa, Asia and Latin America (and Russia in 2017) and put hot startups on stage there too, as well as at Sibos. We and the banking community applauded them! Who would have thought it. Life lesson 5. Successes can be surprising. We didn’t set out to achieve what we did with startups or events. It didn’t just happen but nor was it planned this way.
Our successes were only possible thanks to an amazing multi-disciplinary team of sense-makers, community evangelists, rebels, communicators, and executors. Many of them found new opportunities to expand their competencies outside of the organisation.
Running the Startup Challenge till 2012, Nektarios Liolios has gone on to found the highly successful FinTech Startup Bootcamp programmes. Matteo Rizzo (one of the co-founders of Innotribe) went to Sberbank to help manage its $100 million startup fund and Mariella Anatassova is a key facilitator in banking innovation projects around the world. Kosta Peric, who was the first Innotribe leader, now works for Bill And Melinda Gates on financial Innovation in emerging countries. Everyone connected to the founding of Innotribe now has a key role somewhere else while of course Fabian Vandenreydt, Peter Ware, Kevin Johnson and the R&D teams continue to carry the flag. Many of these people come from very different backgrounds and came together for a relatively short period of time. Life lesson 6. Diversity really works wonders.
The radical, transforming Innotribe lasted maybe three years. And to get to that point took a buildup of experience that in many senses we didn’t know was happening. We didn’t know what direction we would take or where success would eventually come. Some of what we learned, it really did happen by accident. The many setbacks that we faced felt crushing to us but we kept on often unaware of how we were growing or of the influence we were nurturing.
But let me mention life lesson 7. Success is constrained and it might not last for ever. Banks are becoming more innovative and that has to become their permanent state: by now they all have created their own corporate investment funds, accelerators, etc. Many others created financial industry hubs, in many cases public-private initiatives by cities or countries.
We had created a strong brand, especially appreciated by the outside world. But we still had to articulate to the inside world why this was important. Branding is great, but bottom line and actual deliverables that benefit the membership is equally important.
After the success of the brand, we knew it was time to move on. Our job as a catalyst for industry change has to evolve. The pendulum was swinging again: from enabling industry at large to a more focused R&D practice and framework closed to the core. We moved from tactical across-the-board initiatives, to coordinated and focused activities that were more targeted towards our own community.
The Startup Challenge became more focused on specific regions and we also launched Industry Challenges, a structured way to tackle industry wide problems in a highly collaborative way with all stakeholders, and especially with customers in the driving seat.
This was our way to get more integrated into the mainstream of our business along with many radical ideas about the future of money and the nature of organisations and change.
My life lessons again?
- Experimentation should not be the intention. At best, an experimental intention gives you… experiments. The intention must be to ship. The goal has to be concrete business outcomes that tangibly change a market.
- Don’t speak Urdu to a Mexican. Speak the language of the people you want to change and build the narrative around their value gains.
- Progress works in all directions, including backwards. But you are always learning.
- Just because you like talking it doesn’t mean you know what to say. Professionalise your communications around innovation.
- Success is transient, know when to move on. Also innovation has to pivot.
- Diversity is so important. That team I mentioned up there comes from all over the place and they are very different characters. Diversity helped because somebody was always capable of seeing the gains we were making.
- What you end up achieving is not necessarily what you set out to do.