Open Innovation In Financial Services Innovation Summit 2009


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Maggie Fikkerts Presentation on Open Innovation in Financial Services

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  • Definition of services
  • Open business models: A business model is an abstraction of the business, which identifies who the customers are and what the customer value is and how the business makes money. Pace of change has become so rapid and adapt business model continuously in line with the changing business environment. Shift from market places (sellers, buyers and physical placed) to market spaces (free of bond of time, virtual) (43)
  • Outside in (pv11)
  • Outside in (pv11)
  • Definition of services
  • Page 45
  • Interesting example on page 52 Bank of America has proved that service development can be as structured and thorough as product development. They created a new corporate unit called innovation and development with a mandate to test new ideas. They then created an “Innovation market” by setting up 25 out of 200 branches in US with the existing network into prototype branches. They reconfigured the prototype branches into different categories each with a dedicated physical set-up , processes and knowledge of employees. “Financial centres”
  • Definition of services
  • Definition of services
  • Definition of services
  • Definition of services
  • Mention the collaboration between banking and postservices p 107. multichannel distribution p 107 white labelling
  • Why not focus on clients? Possibly data demand overwhelming p122 Adding value adding services – developed fanatical approach to this = 123 art banking, innovative services for sports stars,
  • Allows the bank to do online meetings between the advisors and customers in a form of a chat, audio and video.
  • Open Innovation In Financial Services Innovation Summit 2009

    1. 1. Presented by Maggie Fikkert Open Innovation In the Financial Services Sector by Innovation in a Box (Pty) Ltd
    2. 2. Implications of Collaboration <ul><li>Charles Darwin noted “In the long history of humankind (and animalkind, too) those who learned to collaborate and improvise most effectively have prevailed” </li></ul><ul><li>“ 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 </li></ul>by Innovation in a Box (Pty) Ltd
    3. 3. Financial Services <ul><li>Service-driven, knowledge-intensive Economy affected by Information and Communication Technology </li></ul><ul><li>Changing nature of demand </li></ul><ul><li>Knowledge sits beyond organisational boundaries </li></ul><ul><li>Business models – blend of Openness, flexibility, focus on core business, customer in centre </li></ul><ul><li>[Growth, profitability] and risk management </li></ul><ul><li>Leverage Innovation for growth </li></ul><ul><ul><li>Value Innovation </li></ul></ul>by Innovation in a Box (Pty) Ltd
    4. 4. Financial Services <ul><li>Financial Services (FS) typically enjoy little or no Intellectual Property protection. </li></ul><ul><ul><li>Merrill Lynch “Sweeping” innovation was rapidly copied </li></ul></ul><ul><ul><li>Frequent people moves between Financial Services firms </li></ul></ul><ul><ul><li>More solution integration (customers) </li></ul></ul><ul><ul><li>Impossible to meet ALL customer needs – have to open up </li></ul></ul><ul><li>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. </li></ul>by Innovation in a Box (Pty) Ltd
    5. 5. Journey from closed to open <ul><li>Not an easy journey </li></ul><ul><ul><li>Shifts in Business Models will be required </li></ul></ul><ul><ul><li>Cultural changes need to take place </li></ul></ul><ul><ul><li>New reward systems will be needed </li></ul></ul><ul><ul><li>New relationships with growing network of participants developed and managed </li></ul></ul><ul><ul><li>Time, Money, Risk </li></ul></ul><ul><ul><li>Open Innovation manages real dangerous risk </li></ul></ul>by Innovation in a Box (Pty) Ltd
    6. 6. Services Definition <ul><li>“ Services are not separate entities over which ownership rights can be established. Services are heterogeneous outputs produced to order and consist of changes in the condition of the consuming units realized by the activities of the producers at the demand of the customers. By the time their production is completed they must have been provided to the customers” (Fasnacht, D. 2009) </li></ul>by Innovation in a Box (Pty) Ltd
    7. 7. Industry specific Innovation by Innovation in a Box (Pty) Ltd Create new service-specific knowledge Make use of existing scientific knowledge Knowledge condition Ad-hoc Systematic Scientific R & D approach Mainly incremental Attempt to be radical Innovation form Technology/market pull Consumer/client led Technology-push Science & technology led Technology orientation Weak Copyright Strong Patents Intellectual property Intangible Easy to multiply and transport Tangible Easy to store High transport & distribution costs Product Characteristics Services Manufacturing Innovation System trait
    8. 8. Financial Services Innovation <ul><li>Innovation Generic Categorisation: </li></ul><ul><ul><li>Product and Service Innovations </li></ul></ul><ul><ul><li>Process Innovations </li></ul></ul><ul><ul><li>Innovations common to organisational function and service delivery </li></ul></ul><ul><ul><li>Open business models </li></ul></ul><ul><li>Not strictly linear or sequential </li></ul><ul><li>Ideas for new services emerge almost everywhere in the organisation </li></ul><ul><li>Customers, front office personnel and intermediaries rarely involved in entire development process </li></ul>by Innovation in a Box (Pty) Ltd
    9. 9. Open Innovation <ul><li>Innovative technology will be the centrepiece of customer-focused strategy – Nykredit </li></ul><ul><li>New management style that facilitates collaborative operating models for innovation </li></ul><ul><li>Focus on the customer </li></ul><ul><li>Services added to products (may even be supplied by third parties) </li></ul><ul><li>Structures that aid responsiveness – more flat, flexible, process-orientated and team-based with focus on collaboration across boundaries </li></ul><ul><li>New forms of innovation management </li></ul>by Innovation in a Box (Pty) Ltd
    10. 10. Externalisation of Innovation <ul><li>Shift of particular set of products/services generation to outside organisation </li></ul><ul><li>Collaboration beyond boundaries for all phases of innovation process. Benefits being: </li></ul><ul><ul><li>Multiplying building blocks of innovation </li></ul></ul><ul><ul><li>Resourcing strategy – leverages development of new and existing knowledge </li></ul></ul><ul><ul><li>Knowledge that offers solution – internal and external to organisation </li></ul></ul><ul><ul><li>Can concentrate on core competencies </li></ul></ul><ul><ul><li>Breaks down thought worlds </li></ul></ul>by Innovation in a Box (Pty) Ltd
    11. 11. Open Architecture <ul><li>“ Open Architecture” popped up around Millennium as a disruptive business model in FS - fund distribution (Bank delivers funds from third-party providers) </li></ul>by Innovation in a Box (Pty) Ltd
    12. 12. Principles of Open Innovation <ul><li>Not all smart people work for us and we need to work with smart people inside and outside the organisation </li></ul><ul><li>External R&D can create significant value and internal R&D is needed to claim some portion of the value </li></ul><ul><li>Generation of additional revenues from selling research outputs to other firms </li></ul><ul><li>We do not have to originate the research to profit from it </li></ul><ul><li>Building a better business model is better than getting to the market first </li></ul><ul><li>Win by making the best use of internal & external ideas </li></ul><ul><li>Constantly seek knowledge from others </li></ul><ul><li>Open architecture is part of our thinking </li></ul><ul><li>We invite the customer into the innovation process as a partner and co-producer </li></ul><ul><li>Network of collaboration partners from development to distribution </li></ul>by Innovation in a Box (Pty) Ltd
    13. 13. Open Innovation Dimensions <ul><li>Internal ideas, research and developments of products can be taken to markets through manifested internal distribution channels </li></ul><ul><li>or through external, outside the current businesses of the organisation </li></ul><ul><li>Integration of external resources for each phase – from idea generation to research and development to distribution 100 </li></ul>by Innovation in a Box (Pty) Ltd
    14. 14. Transition to Open Innovation <ul><li>Open architecture 103 – open innovation dissolves the distinction between producer of services and consumer of services </li></ul><ul><li>Swiss army knife – 104 </li></ul><ul><li>From open architecture to open business models p112 - settlement </li></ul>by Innovation in a Box (Pty) Ltd
    15. 15. Client Integration <ul><li>360 degree view of clients needs </li></ul><ul><li>Then apply solutions from across product and service portfolio including third-party products </li></ul><ul><li>Essential to generate value proposition for customer first and then develop a value proposition for the innovation as such that satisfies the clients needs </li></ul><ul><li>Identify clients needs earlier than the competitors and react to the needs with innovative solutions </li></ul>by Innovation in a Box (Pty) Ltd
    16. 16. Process Innovations <ul><li>Initiate process innovations through benchmarks </li></ul><ul><li>Building circle of excellence can be incubator to innovation </li></ul><ul><li>Continuous accumulation of knowledge in the form of best practices and case studies </li></ul>by Innovation in a Box (Pty) Ltd
    17. 17. The future of banking <ul><li>All products through all channels with focus on cross-selling </li></ul><ul><li>Co-creating innovations through SOA – Web 2.0 technologies p139 </li></ul>by Innovation in a Box (Pty) Ltd
    18. 18. Meeting the challenge <ul><li>Inter-organisational knowledge through alliances formed by customers, suppliers, distributors, and even competitors to share experiences and knowledge </li></ul><ul><ul><li>“ coopetition ” (Ray Noorda, Novell founder) </li></ul></ul><ul><li>Learn from other sectors and industries </li></ul><ul><li>Cultural change which includes adapting of management practices to dynamic practices (Ambidextrous thinking & intrapreneurial attitude) </li></ul><ul><li>Operating models that embrace flexible service-orientated architectures that align business and technology </li></ul><ul><li>Requires a set of new specific processes and capabilities to incorporate knowledge from business partners and customers </li></ul>by Innovation in a Box (Pty) Ltd
    19. 19. Ambidextrous Thinking <ul><li>Dealing with contradicting phenomena </li></ul><ul><li>Two business models </li></ul><ul><li>Held together through leadership qualities (e.g. balance closed innovation with open innovation, product focus with client focus, etc.) Midland bank example </li></ul>by Innovation in a Box (Pty) Ltd
    20. 20. Intrapreneurs <ul><li>Act of innovation by the initiator of new business idea within the organisation </li></ul><ul><li>Integrates external environment and organisational context as well as individual processes into a business plan that produces value </li></ul><ul><li>Same capabilities as an entrepreneur – but is within the business </li></ul>by Innovation in a Box (Pty) Ltd
    21. 21. Systemic Holistic View <ul><li>Do not think in Silos 168 </li></ul><ul><li>Implies integration of structures, processes, and patterns such as relationship and learning </li></ul><ul><li>Collaborative learning </li></ul><ul><li>See example p 169 bottom “another good” </li></ul><ul><li>See if social capital relevent p 181 </li></ul>by Innovation in a Box (Pty) Ltd
    22. 22. Final Thoughts <ul><li>Open innovation in the context of the financial services must always be part of strategic thinking – at every managerial level </li></ul><ul><li>Industry and universities must improve partnerships </li></ul>by Innovation in a Box (Pty) Ltd
    23. 23. End? <ul><li>“ Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.&quot; </li></ul><ul><li>Sir Winston Churchill </li></ul>by Innovation in a Box (Pty) Ltd