Financial services industry innovation: when, where, and how?

Since most financial services products are intangible, the pace of innovation is usually higher and multi-faceted compared to other industries. However, as in every other business, frequent investments and considerable innovation activity raise questions on a fundamental subject: return on investment.

Achieving a sustainable return on investment from innovation activities in financial services requires a methodical approach and single-minded execution, which is usually easier said than done. In this article, we aim to touch upon some key points related to successful innovation practices in FSI.

• Watch the S-curve. Innovation does not happen in a vacuum. Understanding industry trends, where things are moving, and how business models are evolving is critical in guiding and delivering innovation activity. The end product and service of FSI innovation should expedite progress along the S-curve or it should lay the groundwork for jumping into new S-curves.

• Stay curious. Innovation is not just about following trends and picking ideas from what other companies have done; it is also about understanding what is ‘under the hood’. Applying a good degree of curiosity into business activities and approaching the subject at hand from different angles are critical success factors in executing game-changing innovation. 

• Circular approach. The outputs of innovation, together with lessons learned, should feed into the business lines as well as their outcomes. Achieving this symbiotic relation is quite important, not just in FSI but also in other industries. This helps a business’ innovation function become relevant in the strategic planning process.

• Dual lives, dual worlds. FSI innovation should draw energy, experience, and resources both from the organization it is positioned in and from the ecosystems it is aiming to connect with. Working with both sides and establishing a healthy balance is also vital for effecting the previous points. The innovation function should aim to be active in both worlds through projects, events, or other engagement types.

• All hands on deck. Just as you cannot build your muscles by just watching dumbbells, you cannot build capability for innovation just by watching trends or establishing tactical collaborations. The key point is to get into the nitty-gritty details of the subject at hand and to build some parts of it hands-on. Perceiving innovation activities like startup projects might be the real differentiator in this area.

A sustainable competitive advantage requires innovation, which itself requires genuine – and sometimes innovative – approaches to make a real difference.

The views expressed in this article are the views of the author only. This article provides general information and a point of view; it should not be considered as professional advice.