Innovation is More than the Next Big Idea

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During the last 15 years, 47 fintech companies grew from startups to “unicorns” (valued at $1 billion or greater), with another 38 companies quickly approaching that level, as Jim Bruene posted to the Finovate blog. This has caught the attention of investors, who poured $12 billion of capital into the fintech space last year alone. Some of the more savvy bank CEOs are starting to pay attention too, as evidenced by JP Morgan Chase CEO Jamie Dimon’s pronouncement that “Silicon Valley is coming” in his annual letter to shareholders this Spring.

Mindless Myopia

Plenty of leaders still have their heads buried in the sand, though. I speak a lot about the need for innovation at financial services conferences, and I often ask for a show of hands to gauge the awareness of the executives present about some of the disruptive fintech companies changing their industry. The number of hands in the air is usually dwarfed by the numbered of confused looks and hastily scribbling pens.

Maybe they should spend more time on what’s happening outside and on the edges of their industry and less time worrying about the hierarchy of corporate dress codes. Except cool socks. Nothing wrong with cool socks.

Jim Marous at The Financial Brand reported on research by Adaptive Lab that showed similar results in the UK, leading to banks being “displaced, diminished and disintermediated”.

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This myopia begins with an ignorance that is unnecessary, and often willful. Most of these companies are hiding in plain sight, but it is more comfortable to keep doing what you’ve already done. Despite popular belief, no industry is too big, too entrenched, or too protected by regulations to be disrupted. It’s too late, banking is already being disrupted.

This digital disruption is not just happening in financial services. During that same period since 2000, 52% of the Fortune 500 companies listed in 2000 have already gone away through M&A or bankruptcy, according to a recent report by the Altimeter Group and Capgemini.

Innovation to the Rescue?

The best way to predict the future is to create it; and other industries, especially those driven by technology, make regular investments in research and development to stay ahead of the curve. This has been virtually unheard of in financial services until the last few years, when the more forward-looking organizations began to establish innovation teams and programs.

Organizations that are innovation leaders treat ideas like assets— they actively acquire them, protect them, grow them, manage them in a portfolio to optimize risk and return, and monetize them. Innovation laggards treat ideas like liabilities— they avoid them when at all possible, and the activities they spend the most time on are geared to reduce their numbers and look for ways to get rid of them.

More importantly, the most innovative companies know that innovation is about more than the next big idea.

An idea itself is worthless.

An idea shared, built, tested, and iterated upon begins to gain value as it becomes infused with human potential.

Then, the real hard work begins.

Powerful corporate antibodies efficiently seek and destroy new ideas before they get too much traction. Budget guardians ensure that no funding is diverted from existing products and programs, not matter how long in the tooth they may be. The larger the company, the longer it has been around, and the more mature its industry, the larger and louder this group becomes. These Traditionalists think they already know what works and what doesn’t.

Until it doesn’t work anymore.

The companies that thrive during times of disruption make the tough decisions to redirect resources from legacy programs to new ideas that might help them invent their own future.

They know that innovation is more than just the next big idea.