BankerVision

Suppliers and innovation - our challenge.

Yesterday, I sat on a panel at 360 IT, a big infrastructure event. One of the questions I got asked (I paraphrase) was "supplier innovation - do you want it, and expect it?".

My answer to this question was what you'd expect. Of course we want innovation from our supplier base.

But I tempered my answer with a caveat, and that is we don't often get innovation from our supplier base.

Big firms always tend to write very big contracts for stuff. We do that because it means we can get the best price. We'll often add some kind of "innovation" or "transformation" part to the deal, as if by doing so we'll magically get all the new stuff we'll ever need.

Practically speaking, though, you almost never get anything other than the basic service or commodity you paid for when you do this. And that's not really the fault of the vendor.

Lets say, for example, you've contracted to have your technology operations outsourced. You ask for innovation, and the vendor naturally shows up with lots of great ideas about how they can do technology better. Its the sensible response, and perfectly reasonable that a vendor would want to innovate around the services that they're presently providing.

The thing is, making something a little bit better that's already working is usually not that interesting to us. The fact is this: when you buy services from a vendor they either work or they don't. It is only in the latter case that anyone other than the relationship management team spend any management time on the service and that's usually staggering from crisis to crisis, not working out how to make things better.

The rest of the time, we're worrying about stuff which has nothing at all to do with the service a vendor provides. Like, for example, deciding the best way to get payments to millions of people, or how to cope with a prospective reform agenda without much in the way of money. In that scheme of things, incremental improvements from incumbent vendors are - I know I'm sounding arrogant - a distraction.

Our reality is there is limited free management time available, and spending it wisely means you have to focus on things that give you the biggest bang for the buck, which is more often than not, some internal meeting or policy or initiative, not something coming from outside.

I accept this is something that large organisations have to become much better at managing. Clearly, when we just write "innovation" into contracts and hope for the best, it doesn't work very well. I think what's needed is for us to take a much more active role in guiding our partners towards things that are materially important to us so they can then show up with propositions that will make a real difference.

Of course this would exacerbate something else, which is that such a practice would naturally focus our attention even more onto a few very large suppliers with whom we do most of our business. Considering we want to be much more active with a range of organisations, both small and large, this is not really a good thing.

I actually don't have an answer. But I'd love to hear from any of you in the comments who have suggestions. If you were trying to advance the supplier-innovation agenda, and trying to make your business more accessible to a broader range of vendors, what would you do?

The future of financial services innovation

Over at Bankwatch, Colin says: 

Its too bad this innovation panel brought out the usual bank thinking by focussing on what they thought they were doing that was innovative rather than greater focus on lessons learned.

Now, let me just be clear and say that I was the moderator of that panel so I have a vested interest. But whether the content was illustrative of the true state of banking innovation or not, I think Colin's comment brings an important point to the fore: that innovators in banking perceive themselves as unable to talk about what they are really doing. 

Now, I had plenty of time to talk with all the panel members before the recording session, so I could see that they were planning to be careful about what they'd say. It is the pereneial problem for any highly commoditised industry, of course: even the minor incremental changes you make have some competitive value, however short lived. Therefore, you say nothing. 

Similarly, one doesn't wish to be seen critising one's own employer, which I suspect is what management would have thought of any of my panel who dared to explain the mistakes and lessons they'd learned from their innovation efforts. I well remember one case that occurred when I was at LLoyds: I'd written a post about the then-new Bank of America Centre for Future Banking and said something along the lines of "gosh, imagine how much incremental innovation they must be doing to afford that". My management came down on me for implying that I wasn't being given enough money to innovate. I changed the post.

Bankers tend to be nervous disclosure of anything, really.

This, actually is the real problem with innovation in banking, and in commoditised industries in general. The mania to protect intellectual property and reputation means that innovation teams are constrained from sharing anything at all. And we know that little islands of innovation are only every able to accomplish little things, left to themselves. If you want really groundbreaking innovation in banking, then first you must free your innovation teams from such constraints.

Two years ago I moaned about this problem here. I'd suggest that nothing much has changed since. 

I guess the ultimate point I'm making is that whilst it may seem from public disclosures that nothing much is happening in the innovation space in financial institutions, that's not really the case. I'm getting lots of emails from institutions that are picking up the practices from Innovation and the Future Proof Bank, and I conclude that there's a realisation that its time to take a position in the emerging innovation economy. Bankers aren't stupid, and they are as capable of realising the changing competitive reality as anyone else.

All this secrecy is fine, of course, so long as your satisfied with incremental innovation in banking. Little innovation islands in institutions, as I said, are rarely capable of much more.

The next step, I expect, will be recognition that truly groundbreaking change can be had if institutions combine their innovation assets. That time is coming, I think. This will not be more of the same M&A, it will be institutions recognising that together they can create systemic changes, and that their position of strength in doing so is more than enough to combat the much more agile startups that are eating their business at the edges.

Self organising systems of adults

We're getting ready to upgrade our desktop and server environments. Its about time, actually, since we're still running on Windows XP with a backend that is really pretty antiquated. The upgrade will be to Windows 7, the latest versions of Office, and all the rest.

One of the key things we're concerned about is training our users. The look and feel of everything will be quite different to that they're used to. We have the usual concerns about productivity and so forth, and the issue is taking people out of their day to day jobs for long enough to give them what they need, whilst not shutting down the day to day business. A typical challenge for any business, whether it be public or private.

The other day, though, I came across this wonderful talk by Sugata Mitra at TED. As a teacher, he'd been experimenting with the idea of allowing children - supported by a computer - to learn things themselves. The key result here was groups of children can work as self organising systems - with the capability of learning things surprising in scope. His main experiment is one I'd already heard of: go to a developing nation, put an internet computer in a wall, turn it on, and see what happens. Children using the computer teach themselves to browse, without any intervention at all.

Later on in the talk, he explains how he had children learn molecular biology to exam pass level without any teachers. 

Now, of course, there is a difference between adults and children because the older you are, apparently, the harder it is to break old habits and learn new things.

But all this got me to wondering whether we're really barking up the wrong tree thinking we have to spoon feed everyone because we're about to roll out a new desktop environment. What would happen, I wonder, if we put people in groups and told them to explore?

As you know, it is a big hobby horse of mine that self organising systems of people can do miraculous things if you allow them to do so.  When those systems are comprised of children, it is apparently possible to learn science and biology. What might self organising systems of adults achieve?

I think I may try to get an experiment started to see.

Webcast: Retail Banking Innovation

Late this afternoon I'm moderating a webcast on banking innovation at the LSE television studios with leaders from banks across Europe. Organised by Finextra, we're going to be talking about the challenges for banks who are innovating and how some institutions are dealing with them. We'll also be hearing the opinions of the panel on the future of bank innovation, and how technology innovation will bring change in the industry.

The webcast will be broadcast tomorrow at 2PM BST (9AM EDT) , and you can register here.

Payments Boot Camp

For those of you interested in banking things, the very excellent Glenbrook Partners - home of Payments News - are coming to Ireland in conjunction with the Financial Services Innovation Centre at the University of Cork. Its the first time they've done anything outside the US, and their content is always exceptional. Payments in a Mobile World is the theme of the event, and it sounds a cracker. Registration is here.

Game dynamics in the workplace

The other day, I was watching TED and came across this talk from a guy called Seth who wants to put a "game layer" on the real world. His arguments starts with the observation that the last decade was all about building the infrastructure to support connections between people. He goes on to say that that game is over, and has been won by Facebook,  an assertion I'm not necessarily in agreement with, but useful as a starting premise, I suppose.

But the next part, startling to me at least, was his suggestion that this decade is going to be all about behaviour systems and layers, or more precisely, infrastructures that go to management of the behaviour of people. In other words, putting gaming tools on the types of stuff we do day to day.

He then goes on to talk about 7 drivers of behaviour that are typically implemented in games, and leaves the viewer to mull over the consequences if you incorporate those drivers into systems that are useful for every day work. The nett-nett: when you build a game layer into things, there are many positive outcomes for workers and not only in terms of productivity. 

Now this is a topic I'm interested in, because I've written before about how gaming dynamics can make really boring work interesting. As I said then, this is something the team and I implemented at LLoyds Banking Group wtih Innovation Market, and got pretty good results. 

Now that I'm working in the Department, we've implemented something quite similar, and again, we see the same behaviour dynamics arising as at the bank. The tool - we call it IdeaStreet - isn't a toy, but because it has competition dynamics based on a virtual currency with leader-boards and other motivational devices, we're getting very good results.

Now I fully expect that someone is going to chime in here at the horror of having a civil servant using something that might actually be enjoyable. That, by the way, happened at Lloyds regularly as well.

But I think we must be realistic about things. I really believe the world of work is moving towards a blurring of the line between work and play. In fact, the changing dynamics of the workforce make it an inevitable consequence for the future, I think.

I think the time is swiftly approaching where we won't be able to get talent in the door who suspect they won't be entertained at work. Its not like real talent can't move around pretty much as it wants, after all. 

And I think there's another hurdle coming as well, and that's the entrenched view that entertainment at work is inconsistent with work. The line that separates the two, for many, is pretty inviolable. I remember working at an employer in the late nineties who determined, for example, that listening to music on work computers whilst working was actually a sackable offence because you were supposed to be working.  It's laughable now, I know.

Anyway, Innovation Market, IdeaStreet and Seth's talk have led me to a conclusion which I think may be important: when you start  building workplace tools with game dynamics built in, other kinds of work seems to be less interesting. Consequently, you get some people who spend disproportionate amounts of time on fun workloads, letting the rest suffer. This leads, inevitably, to the situation where you have line managers screaming at you and their employees. These line managers then try to shut down your game dynamic to get some control back.

Yes, that's happened in both places as well.

My point is this: in a workplace that starts implementing game dynamics in one system, you'll probably have to implement them in all systems to get back to equilibrium. That requirement, I suspect, will make it harder for large organisations to agree to the entertainmentisation of work in the first place.

It will be a great pity if that happens. Think of all the lost talent that chooses to go a workplace that's actually fun to be in!