open innovation in financial services innovation summit 2009
DESCRIPTION
Maggie Fikkerts Presentation on Open Innovation in Financial ServicesTRANSCRIPT
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Presented by Maggie Fikkert
Open Innovation
In the Financial Services Sector
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Implications of Collaboration
Charles Darwin noted “In the long history of humankind
(and animalkind, too) those who learned to collaborate
and improvise most effectively have prevailed”
“Era of open innovation” is to seek knowledge iteratively
from various sources, such as suppliers, customers,
universities, research laboratories, consortia,
consultants, start-ups, new business units and
competitors
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Financial Services
Service-driven, knowledge-intensive Economy affected
by Information and Communication Technology
Changing nature of demand
Knowledge sits beyond organisational boundaries
Business models – blend of Openness, flexibility, focus
on core business, customer in centre
[Growth, profitability] and risk management
Leverage Innovation for growth • Value Innovation
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Financial Services
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Financial Services (FS) typically enjoy little or no Intellectual Property protection.
• Merrill Lynch “Sweeping” innovation was rapidly copied
• Frequent people moves between Financial Services firms
• More solution integration (customers)
• Impossible to meet ALL customer needs – have to open up
FS has to embrace both “outside-in” and “inside-out” component of open innovation model. Open up architectures in view of adding value and superior performance for customers.
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Journey from closed to open
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Not an easy journey
• Shifts in Business Models will be required
• Cultural changes need to take place
• New reward systems will be needed
• New relationships with growing network of participants developed and
managed
Time, Money, Risk
Open Innovation manages real dangerous risk
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Industry specific Innovation
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Innovation System trait Manufacturing Services
Product Characteristics TangibleEasy to storeHigh transport & distribution costs
IntangibleEasy to multiply and transport
Intellectual property StrongPatents
WeakCopyright
Technology orientation Technology-pushScience & technology led
Technology/market pullConsumer/client led
Innovation form Attempt to be radical Mainly incremental
R & D approach SystematicScientific
Ad-hoc
Knowledge condition Make use of existing scientific knowledge
Create new service-specific knowledge
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Financial Services Innovation
Innovation Generic Categorisation:• Product and Service Innovations• Process Innovations• Innovations common to organisational function and service
delivery• Open business models
Not strictly linear or sequential Ideas for new services emerge almost everywhere in the
organisation Customers, front office personnel and intermediaries
rarely involved in entire development process
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Open Innovation
Innovative technology will be the centrepiece of customer-focused strategy – Nykredit
New management style that facilitates collaborative operating models for innovation
Focus on the customer Services added to products (may even be
supplied by third parties) Structures that aid responsiveness – more flat,
flexible, process-orientated and team-based with focus on collaboration across boundaries
New forms of innovation management
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Externalisation of Innovation
Shift of particular set of products/services generation to outside organisation
Collaboration beyond boundaries for all phases of innovation process. Benefits being:• Multiplying building blocks of innovation• Resourcing strategy – leverages development of new
and existing knowledge• Knowledge that offers solution – internal and external
to organisation • Can concentrate on core competencies• Breaks down thought worlds
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Open Architecture
“Open Architecture” popped up around Millennium as a disruptive business model in FS - fund distribution (Bank delivers funds from third-party providers)
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Principles of Open Innovation
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Not all smart people work for us and we need to work with smart people inside and outside the organisation
External R&D can create significant value and internal R&D is needed to claim some portion of the value
Generation of additional revenues from selling research outputs to other firms
We do not have to originate the research to profit from it Building a better business model is better than getting to the market
first Win by making the best use of internal & external ideas Constantly seek knowledge from others Open architecture is part of our thinking We invite the customer into the innovation process as a partner and
co-producer Network of collaboration partners from development to
distribution
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Client Integration
360 degree view of clients needs Then apply solutions from across product and
service portfolio including third-party products Essential to generate value proposition for
customer first and then develop a value proposition for the innovation as such that satisfies the clients needs
Identify clients needs earlier than the competitors and react to the needs with innovative solutions
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Meeting the challenge
Inter-organisational knowledge through alliances formed by customers, suppliers, distributors, and even competitors to share experiences and knowledge
• “coopetition” (Ray Noorda, Novell founder) Learn from other sectors and industries Cultural change which includes adapting of management
practices to dynamic practices (Ambidextrous thinking & intrapreneurial attitude)
Operating models that embrace flexible service-orientated architectures that align business and technology
Requires a set of new specific processes and capabilities to incorporate knowledge from business partners and customers
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Ambidextrous Thinking
Dealing with contradicting phenomena Two business models Held together through leadership qualities (e.g.
balance closed innovation with open innovation, product focus with client focus, etc.) Midland bank example
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Intrapreneurs
Act of innovation by the initiator of new business idea within the organisation
Integrates external environment and organisational context as well as individual processes into a business plan that produces value
Same capabilities as an entrepreneur – but is within the business
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Final Thoughts
Open innovation in the context of the financial services must always be part of strategic thinking – at every managerial level
Industry and universities must improve partnerships
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End?
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“Now this is not the end. It is not even the beginning of the end.
But it is, perhaps, the end of the beginning."
Sir Winston Churchill