Identify, Isolate, Destroy #42 #cong17


I explore the notion of ‘innovation’ in retail banking. Using the immune system and sci-fi imagery as metaphor I explain why innovation doesn’t work in banking and why it is counter cultural. I dis the whole digitalization effort of banks as ineffective as they ‘innovative’ their way to servicing their customers. Until they see technology, operations, and data as a competitive advantage and own it, innovation and digitalization will be more of the same; lipstick on a pig. Engineering rigour and discipline is a must!

4 Key Takeaways:

  1. Stop using the word innovation and instead focus on experimentation
  2. Stop using the word digital and instead focus on automation
  3. Don’t be seduced by the FAANGs
  4. Make technology, operations, and data a competitive advantage.

About Liam Ó Móráin:

Liam is an engineer by profession and an innovator by vocation. Working with global banks on creating the bank of the future.

Contacting Liam Ó Móráin

You can follow Liam on Twitter, connect with him on Linkedin or via email 

By Liam Ó Móráin

‘Identify, Isolate, Destroy’: natural reaction of a host system (think biology, then, think company) against something new irrespective of the threat.

I can’t help but have a sci-fi image of a major all-out attack on a foreign body entering a system when thinking of how the idea of innovation and the introduction of new ideas are ‘isolated and destroyed’ long before they have a chance to benefit or threaten a company, like a bank.

In biology, a body’s own immune system is a  ‘natural born killer’ to anything new and ‘foreign’ (i.e. an antigen in biology terms). The immune system creates antibodies to react, attack, isolate, and destroy these antigens. Bad antigens in a system are called pathogens. But not all antigens are ‘bad’; some benefit the system!

So enough of sci-fi, biology, and associated imagery as a lead in, and, now on to retail banking, to which I think the metaphor is appropriate.

Having worked with retail banking in North American and in Europe my experience is that retails banks don’t do ‘real’ innovation!

One way to assess ‘retail banks don’t do innovation’ is in terms of risk. Retail banking is (or should be) a ‘low risk’, ‘low margin’ business and therefore the systems, people, and organization are built to identify and weed out risk and anything that may harm the bank. A mother’s wisdom of ‘that which doesn’t kill you will make you stronger’ had no truck in retail banking where risk is anathema to its very existence. Banks don’t like change. Therefore notions of ‘innovation’ and ‘bleeding edge’ are innately and culturally antigenic to the way a bank and its people think and work and to the fundamentals of how banking as an organization is structured and operates as a business.

Having lived in the ‘innovation’ world of banking for the last few years my suggested antibody/antidote for the banking system and its reaction to innovation is to kill the word ‘innovation’ and ban it use. Instead of innovation I have started to use ‘experimentation’: the antidote to innovation is experimentation. Experimentation is less threating to most people. It sounds less complicated, less risky, than innovation, which is often considered complex, highfalutin, head office type function. Experiments are things that can be tried at the ‘side of the desk’ in an informal, impromptu, ad-hoc way. Whether as an individual or small team, something can be tried and tested, experimented upon, tweaked, developed or abandoned as befits the idea being explored, where it is being explored, and by whom. Trying something at one’s desk is for more doable and, sure, if it doesn’t work, no harm, and in fact, no one needs to know especially those higher up if ‘it’ doesn’t pan out.

In the last 5+ years or so ‘digital’ and more recently ‘digitalization’ have become the ‘nom de guerre’ by which banks hope to ‘innovate’ and modernize themselves. The whole digital racket is perceived by banks as big and complex and the perfect place to innovate. Retail banking (consumer, SME, and corporate) as such is not complex: money in and out plus a fee for the privilege. However, banking organizations have become very complex and unwieldy.  Adding big complex digital transformation programs onto big clunky organization is just adding complexity upon complexity which is just more complexity. This then frustrates and bedevils the heroes in banks who what to change and transform their organizations! Just as I have stopped using the word innovation in banking so too I have stopped using the world ‘digital’ as banks are not yet technically sophisticated enough as organizations. To simplify the message I use the word  ‘automate’. Like experimentation, automation is more understandable and accessibly. Until banks focus on true automation across the whole organization, digitalization or any modernization effort will not remove the current complexity (organizationally, technically, operationally, and indeed culturally) within banking. Automation can be big or small and focused on product, process, people or function for example.

I would suggest that real automation in banking has to happen first before real and meaningful ‘digitalization’ happens. Most of this automation has to happen in the back end, operations, below-the-water-line so to speak. As banking is not complex, it is ripe for automation. Technology and technologists (internal or external) have not served banking well to date. Where exactly the blame lies, is hard to identify.

However companies that do get technology, do successfully experiment internally and externally delivering new operational models and efficiencies and services to their customers. They also do ‘get automation and are ruthless about it. To them, technology, experimentation, and automation are competitive advantages. Modern tech companies like the FAANGs (Facebook, Apple, Amazon, Netflix, Google) have technology in their DNA and are technically sophisticated. With engineering rigour things get automated, enabling rapid experimentation and fast time to market of products to service and delight FAANG customers.

Banks too often look at the FAANGs as the sole source of inspiration and envy in terms of customer engagement. This is a mistake I think, as their business models, knowledge of the power and user of technology, culture, and markets are very different to banks. FAANGS are also unregulated and don’t involve ‘cash’. Banks instead should draw inspiration from the gambling industry: an old industry that had, not so long ago, outsourced its technology and operations. A few years ago, the likes of Paddy Power, decided technology, operations, and data were critical to their business and if done rightly a competitive advantage. Therefore, senior management and the organization made a decision to ‘own’ their technology and operations unlike retail banking. In effect they are technology companies in the gambling space rather than gambling houses using technology. Until retail banks get that they are technology companies selling banking products they will struggle to innovate/experiment never mind automate. Therefore their customers will be underserved and their business models very costly. And as a parting note until banks address their significant ‘technical deficit’ in senior management they will always follow rather than lead, stuck addressing yesterdays ‘problems’ and fighting over the scraps of an old market rather than defining a new world order (the new frontier, going bolding where nowhere no one has gone before: sorry sci-fi/Star Trek again.)

So, good engineering is necessary in banking to bring discipline and rigour. This will help deliver an environment ripe for automation and continuous improvement. This in turn will enable experimentation and engagement that will delight customers, make it a good place to work, reassert control over their own future, and deliver value to shareholders!

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