Cultural change must come before technology innovation

Think of ‘Fintech’ and the assumption is that it will be a start-up run by a couple of Ivy League graduates wearing shorts and flip-flops. It’s time to dispel this myth.
Many who operate within financial services seem to view fintech, or digital technology, as a panacea to all their problems; better cost efficiency, more value-added services etc. The same buzzwords keep surfacing: blockchain, artificial intelligence, robotic process automation, the cloud, and so on. Everybody wants to organize the debate around these various technologies and I think that is fundamentally wrong.
I would argue that there has to be a cultural change within any organisation before embracing technology change. You must have the determination or desire to want to change in the first place. Technology on its own is not going to radically change the world. It is because someone is determined to radically change their way of doing business, using the right technology to facilitate cultural change. The change has to be internal.

Why shoot yourself in the foot?

Within the financial sector, the banks are all looking to jump on the ‘fintech’ bandwagon.
I always ask the same question: Why? And I’m never very satisfied with the answer. “We’re doing it because everyone else is,” I hear them say, or, “We’re doing it to make us more efficient and become a disruptive player.”
By following this approach, they risk end up becoming so disruptive – acquiring digital start-ups they perceive as a threat – that they end up jeopardizing their core business model. Effectively killing the goose that lays the golden egg.
To my mind, a lot of financial services organisations are using digital technology as an alibi. They feel they need to be seen to be doing something: a blockchain project, an AI initiative. It’s done simply to tick the box. There’s no determination to change the internal culture of the organisation or change the business model.
Ultimately, though, if you want to change any industry you have to be willing to change internally.
At KNEIP, I have moved away from day-to-day management to spend more time overseeing our new digital division, Accelerator. From the beginning, I made a point of separating Accelerator from our flagship business: our main revenue source, which has to keep on growing and improve the client experience over time.

Autonomous team

I firmly believe that the digital transformation of any organisation has to happen in a different environment so that it doesn’t become unnecessarily influenced or distracted by the day-to-day flagship business. You have to plan for the transformation of your business model.
This requires having a separate team who can work autonomously and build the tools that can ultimately then help the flagship business adapt to the changing needs of the market. These teams must not only be autonomous but also cross-functional: product developers, analysts, user interface specialists, programmers who write the code for each new application etc.

90-day cycle

When we kicked off Accelerator on the 15^th February 2017 there were two or three people in the room. Now, there are 24 people, including senior industry experts and transformation experts and the mission is simple: they must take no longer than 90 days to create a new product with true value-add to our clients, supported by an economic model.
This is in order to make sure the team doesn’t get sucked in to ‘project creep’. We’ve set innovation hubs up several times over the past 12 years and each time they ended up being consumed by the day-to-day business. The 90-day cycle is a way of avoiding this trapdoor.
Once we get to the proof of concept stage we bring in our flagship team to see how well the product works. It doesn’t have to be the perfect product, it just has to have the minimum level of functionality.
Then it transits out of Accelerator into the flagship business and we deploy it to our entire client base. It’s an iterative process.
We’ve just completed our first product innovation, which is scheduled to go live at the end of May. This is going to be truly transformational; a completely different way of handling a part of the fund’s lifecycle.
It’s the first step along a long road for Accelerator. After all, cultural change doesn’t happen overnight.