Innovation is critical for every organization, but it is complex and can be very confusing, too. Poor innovation management and ineffective execution are among the key reasons causing innovation failures in organizations.
Many companies lack well-defined innovation strategy and alignment with business strategy, resulting in poor innovation delivery. While it takes time to build the innovation culture, companies must leverage the startup ecosystem, capabilities of partners to augment the innovation gaps and emerging technologies effectively to deliver innovation faster. Innovation silos within the companies are key impediments that dilute innovation and generate poor innovation results.
It is the time for companies to get honest and acknowledge innovation gaps, prioritize top factors affecting innovation and develop clear innovation strategy and plans that are well-aligned with business strategy. This article covers key considerations, describes the current state of innovation within financial services and the insurance industry and provides recommendations for effective innovation delivery.
Balancing Innovation, Startups and Emerging Technologies
Today, there is lots of buzz on emerging technologies, startups and innovation. While the business environment, economic conditions, political situation and core capabilities of many companies have not changed dramatically over the past year, nevertheless the innovation agenda has taken the front seat in almost every organization.
The big question remains: How effectively are companies managing innovation?
Are companies focusing on business innovation or technology innovation or a combination? Which are the proven models for innovation that deliver results? Is partnering with startups sufficient to drive innovation? Which emerging technologies have higher potential for innovation?
See also: Don’t Just Indulge in “Innovation Theater”
Well, there are no straight and simple answers to these questions. What matters today is: There need to be serious attempts of organizations toward driving innovation, commitment by senior stakeholders, collaborative culture across teams, alignment between top-down and bottom-up innovations, bridging innovation silos within organization and focus on customer-centricity.
Business Values Are Driving Innovation Initiatives
In my interaction with senior business and IT stakeholders of leading financial services companies in the last few months, one thing has emerged clearly: that business values and outcomes are the most
critical element in getting innovation funding. I have met CIOs of leading insurance companies who have expressed concerns about getting buy-in from the business team for business cases as
one of the key hurdles in delivering innovation. While a majority of innovation efforts are still technology-driven or technology-led, only a portion carries real potential to disrupt the business or push the organization to a rapid growth trajectory. Many organizations are still focusing on incremental innovation, while many others are burdened with operational priorities and legacy challenges.
The good news is that financial services and insurance companies are not fearing experimentation. The partnership with startups, the pace of pilot projects using emerging technologies and the participation of companies in industry events, technology conferences and startup events has grown significantly in recent times. Many financial companies are sponsoring hackathons and are welcoming innovation of all types. A good number of companies within financial services and the insurance industry have already partnered with fintech and insurtech and are clearly finding value. The hunt for innovation is furious. The FinTech, InsurTech influence is pushing companies to innovate faster.
Technologies Enabling Innovation Within Financial Services
SMAC (social, mobile, analytics and cloud) technologies that were new a few years ago have become a new normal, with high adoption rate across industries. Emerging technologies include blockchain, artificial intelligence (AI), robotics process automation (RPA), Internet of Things (IoT), augmented reality (AR) and virtual reality (VR). However, companies are being pragmatic about adopting these technologies.
For example, while it is true that in the last three years more than $1 billion of investment has gone into blockchain technologies alone, with 90-plus companies being part of blockchain consortia across 24-plus countries (according to recent World Economic Forum findings), many companies (insurers, banks and other financial companies) still struggle to identify suitable, viable use cases. The technical complexities and shortage of skills are another big hurdle for adoption of emerging technologies such as blockchain.
While some of these technologies are still evolving, technologies such as AI and RPA are moving faster in terms of adoption within financial services and the insurance industry. For example, AI-enabled chatbot and robo-advisers are moving beyond delivering basic conversational response to enabling channel expansion, enabling cross selling, targeting new segments, delivering training and enabling end-to-end transaction processing within the financial services industry. RPA technologies are also gaining popularity and are in use within financial services and insurance companies, helping
companies automate mundane, repetitive, manual, rule-based tasks or processes. The adoption rate and focus on IoT technologies has been hampered by increased fear of companies toward cyber security risks after various ransomware attacks in the recent past. AR and VR technologies are still hunting for viable use cases within the financial services industry amid the changing shapes and characteristics of AR/VR devices. Emerging technologies are the key enablers for delivering innovation and cannot be ignored any more.
Bridging the Gaps and Making a Balance With Innovation
While every company has a well-defined business strategy and IT strategy that are reviewed periodically, many lack a well-defined innovation strategy. It is time for companies to revisit their innovation strategy, align it to business strategy and make it an integral part of the operating model. The innovation silos, poor governance, complex organizational structure, lack of funding,
talent gaps and organizational politics are a few known elements that hinder innovation delivery. Only a few innovation-driven companies take tangible actions to overcome these challenges and
work toward building an innovation-centric culture. Agility, experimentation, customer validations, pivots, failures and talent development are integral parts of innovation delivery, and
companies that understand that, will measure innovations regularly, reward teams and encourage open innovation.
See also: Pursue Innovation or Transformation?
While corporate venturing, partnership with startups and acquisitions are some methods to fast-track innovation efforts and mitigate risks, without addressing the root cause that hinders innovation, companies are just postponing the real problems. Startups are a good catalyst for innovation, but many companies merely leverage them as a reference model or mitigation element, which they think they can mimic, buy or obtain through partnership using brand and financial muscles. If companies find many gaps with the existing innovation model, they must explore partnership and acquisition of appropriate startups seriously and integrate them effectively into the companies' ecosystem to ignite innovation delivery.
Business model innovations that are market- or industry-driven typically deliver successful innovations that are disruptive. Companies that bring together the best elements of
business and technology (talent, people, vision, insights, partners) at the right time, collaborate effectively internally and externally, learn from failures and involve customers in every stage of the innovation life cycle are the ones that are most successful in innovation delivery. In addition, emerging technologies offer numerous opportunities for companies to fast track innovation efforts when coupled with the right business case. Companies must balance the innovation, startups' influence and the power of emerging technologies for competitive advantage and market leadership.