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Take heed FinTech: Singapore means business!

I recently had the privilege of being asked to be on the jury for the FinTech Awards held at the inaugural Singapore FinTech Festival, as well as take part in a blockchain panel at the event.  It was one of the largest FinTech events, if not the largest, ever organized, with over 12,000 participants across more than 50 countries.

 

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I had a great time meeting all the innovative startups and helping to give away over USD 800,000 in prize money. But while the Festival was impressive, the real eye opener for me was the Singapore financial center itself.

Here is what I mean.

Building momentum 

I have written before about how regulators around the world are finding new ways to support FinTech innovation in their jurisdictions. (The announcement of the new FinTech license in Switzerland is just the latest in a clear trend.)

The Monetary Authority of Singapore (MAS) has been among the most active and innovative regulatory bodies in this regard. Among other things it has been:

  • Promoting the use of cloud computing by Financial Institutions by publishing clear guidelines
  • Supporting innovation in payments by streamlining and simplifying payments licensing
  • Encouraging robo-advice by working on new proposals for the governance, supervision and management of algorithms used in digital advice platforms
  • Starting up a secure regulatory sandbox to safely test innovative new ideas
  • Streamlining compliance through setting up a national KYC utility for use by Singapore residents
  • Creating what it calls an API economy by encouraging financial institutions to develop and adopt APIs and publishing an “API Playbook”

And these are just the headlines. There are a lot of other things happening in the Singapore FinTech scene at the moment. But for me it took being on the ground to really get a sense of how strongly momentum is building.

While I was there, for instance, MAS announced a project to test the use of blockchain infrastructure for inter-bank payments, including cross-border. With such heavy hitters as the R3 consortium and banks like HSBC, Bank of America, JPMorgan and Credit Suisse involved, this is one of the most extensive such projects on at the moment – Singapore is shaping up to become the Blockchain Center of the World.

I also got a chance to tour LATTICE80, the island’s newly opened FinTech hub. The world’s largest FinTech innovation location – they call it a “FinTech innovation village” and it certainly has village-like dimensions – LATTICE80 may well become as important a center for financial services innovation in APAC as Level39 in London is for Europe.

Smart moves

I think this is significant, both for Singapore’s prospects as a financial center and for the industry. In my opinion few jurisdictions have a strategy that is as extensive and well thought through as MAS’s. Its “Smart Financial Centre” vision is based on two pillars:

  • Regulation for innovation: MAS has expressly said that regulation should not stifle innovation but instead run “alongside” it. That means keeping up with developments, assessing risk as new innovations arise and, once they are understood, keeping regulation proportional to the risk involved.
  • Infrastructure for an innovation ecosystem: MAS is keen on ensuring its infrastructure is also conducive to innovation, and has earmarked over USD 150 million for measures to support an innovation ecosystem. This includes opening a FinTech & Innovation Group, complete with the world’s first Chief FinTech Officer.

This vision is based on the belief, which I heartily share, that the best way to foster innovation is through collaboration.

MAS’s approach is sure to keep attracting FinTech businesses and brainpower to the city-state, and it provides I think the right environment for these businesses to succeed.

This will strengthen the already strong Singapore financial center today and, more importantly, help it prepare for tomorrow.

If the Smart Financial Centre vision becomes a reality, and I see no reason why it shouldn’t, Singapore will continue to be one of the world’s most innovative FinTech location (it is already considered number two).

I think other financial centers should take heed. When it comes to FinTech, Singapore clearly means business. Its strategy is one others may want to learn from.

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Blockchain: Swift enough?

Last month I had the honor of being invited by SWIFT to join its Distributed Ledger Technology (DLT) and Cyber Security sessions at SIBOS in Geneva – and to take part in the DLT session wrap-up. It was a fantastic experience, not least because of the excellent organization of my friend Peter Vander Auwera at Innotribe.

The experience confirmed for me two of my current working hypotheses regarding blockchain uptake in financial services:

  • Blockchain is indeed predestined to transform banking
  • Blockchain will not be going mainstream in financial services as fast as many think

I subsequently explained my reasons for believing the second point in both the Financial Times and my blog. So I won’t go into that here.

In this post, I would like instead to summarize some of my other insights from those sessions, as I think they really shed light on the status of blockchain in the industry at the moment, and the role organizations like SWIFT might play.

 

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Off to the races

First off, there is no doubt that blockchain is coming and that we’ve entered a race to get into production.

In a survey we did of session participants, 35% said they had serious proofs of concept in the works, 10% more than last year. They aren’t just working on their own: the R3 consortium has more than 40 proofs of concept in the works.

But right now most of the action – and a lot of the press – is in areas like cross-border payments and trade finance. As I wrote in the FT, these are low-hanging fruit.

The real question for banks is where else can this go? How can banks use blockchain’s promise of real time speed, reduced complexity, and reduced risk to improve current business or operating models. Or better yet, leverage those capabilities for completely new products and services – exploring the blue ocean of possibilities no one is yet focusing on.

I think the answer will depend on several fundamental factors. Among them:

  • Will the financial industry be able to recognize blockchain’s transformational nature as a broad-based, open source, decentralized platform, or will it continue to try and use it as a fancy new database to support the current setup?
  • Can we solve blockchain’s performance and scalability issues?
  • Can we deal with the complexity of multiple distributed ledgers and asset classes to get true interoperability?

 

Coming together

Another theme was collaboration. We naturally talked about the current supportive regulatory environment (the subject of a previous post as well).

We also talked about collaboration on business standards – a prerequisite for broad-based platforms. Will we need new standards, or will we be able to port existing ones – ISO 20022 messaging as recommend by SWIFT comes to mind – into the new arena? This is an interesting question, as well as a reminder that blockchain is by no means just a tech play.

We will also need leadership to drive and coordinate collaboration. We will likely see this from the small teams working in consortia or other cross-industry groups, or perhaps an existing entity like SWIFT, which can act as a kind of United Nations of banks.

 

Not so SWIFT?

Which brings me to the last main thread of the sessions: the role of SWIFT in a blockchain world.

There is no doubt that SWIFT faces a challenge from the blockchain. The best example is what is happening with Ripple, which offers banks real-time payment settlement and radically reduced costs, and will enable new types of high-volume, low value global transactions. SWIFT’s counter effort, its GPI initiative, is very interesting, but – despite garnering considerable support and momentum at Sibos – at the moment doesn’t match Ripple’s DLT capabilities.

Yet the SIBOS sessions underscored for me how organizations like SWIFT still may have a significant role to play.

Let’s not forget that SWIFT’s membership includes more than 11,000 financial institutions in over 200 countries. That’s an asset. So is its experience as a standards setter, and with such things as access control, identity management, structuring of Service Level Agreements and managing a high volume, global network. SWIFT could be a natural home for a permissioned distributed ledger, with the advantage of an established brand and trust.

It will be very interesting to come back to SIBOS next year and see how all this has played out.

Watch the full video of the DLT and Cybersecurity: SIBOS week wrap-up. 

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Why blockchain won’t disrupt banks first

By Oliver Bussmann and Nick Williamson

As two people who have been working closely with blockchain for a while now – Oliver as a FinTech advisor and former Group CIO of UBS, Nick as the CEO and Founder of Credits – we have no doubt about the technology’s potential to radically transform the financial industry.

A far better way to build and maintain interconnected ledgers – the heart of the financial system – it seems predestined for the job.

But while banks and FinTech companies around the world are busy developing blockchain-based solutions, we are likely to see blockchain “go live” in other industries first.

This is something of a paradox, and so we think worth a closer look.

Regulation, regulation, regulation

As Oliver can attest from his own experience, the main drag on implementing innovation in financial services is regulation.

As part of one of the most highly regulated sectors in the world, banks will need to wait for regulatory certainty on any number of issues before they can release blockchain-based platforms. Stringent rules regarding collecting, storing and sharing customer data add layers of rigorous validation, verification and internal signoff on top of the regulatory approval.

Even though many regulators are actively supporting banks in exploring blockchain, this is simply not an environment geared to early adoption in the wild.

The fact that banks are coping with dwindling IT budgets, as well as heavy legacy IT investment, is an obstacle as well. As to an extent are legacy mindsets: The financial industry is heavily invested in centralized models; blockchain represents the opposite worldview.

More fertile ground

We believe blockchain will be implemented first in more lightly regulated sectors, particularly those which face challenges in managing data access control and ensuring data integrity. This can be sensitive personally identifiable information (PII) such as health care records, competitive secrets or other internal corporate data. Or it could be intellectual property, as with managing copyright for music or art.

Areas poised for takeoff include e-government, supply chain management and finance, insurance, real estate and the Internet of Things. BHP Billiton’s announcement last week that it was using blockchain to improve its supply chain processes is a perfect example of how this is already happening.

Useful use cases for all

At Credits, Nick has been observing this trend closely too. The company has been exploring a number of use cases outside of financial services, such as proof of identity, procurement processes, and interdepartmental payments. It recently worked with a client on a corporate identity blockchain solution.

Credits has also been very active in e-government, where blockchain has the potential to inject trust and accountability into many processes. This includes providing means to share sensitive personal data between departments that prevents data leaks while still allowing for data integrity checks.

The good news for banks is that many of the non-financial use cases also provide compelling first customers for the eventual financial ones. If we can solve supply chain management, for example, then we are not far from solving supply chain finance.

So while we may not see distributed ledgers taking over in financial services right away, that shouldn’t be interpreted as meaning it will never happen.

When it comes to blockchain and banks, there is no escaping destiny.

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Best FinTech accelerator? Your regulator.

My good friend Chris Skinner has been pointing out the different ways regulators around the world are supporting the FinTech ecosystem. And rightly so. From setting up dedicated FinTech offices to providing sandboxed environments to safely try new tech, regulators in the UK, Singapore, Hong Kong and elsewhere are actively focused on financial services innovation.

In other words, along with their remit as policy makers, rule writers and enforcers, these regulators are now also taking on a business development role. This is a significant development, and it is to be welcomed. But if regulators want to be really effective, they need to approach this new role in the right way.

Here’s why I think so.

Fast track

Financial services is one of the most highly regulated industries in the world. Even in the most stable times the regulator plays a key role in how banks run their businesses and how a given financial center operates.

In our current environment of highly disruptive new tech and massive innovation, with high numbers of new entrants from outside the industry and banks rethinking business models, regulatory decisions will have even more impact.

If the regulator is not part of the innovation ecosystem it can among other things greatly reduce the speed at which innovative ideas become workable products. And let’s make no mistake: when it comes to business development, time to market is essential.

Your regulator, the FinTech accelerator

As I have written elsewhere, I believe strongly both that innovation can be orchestrated, and that open collaboration – even among competitors – is unavoidable in today’s complex world.

I think regulators are in a unique position to take on the role of innovation orchestrators. In particular I believe they:

  • need to bring the whole ecosystem together – high-tech firms, consulting firms, startups, incumbent banks and other stakeholders.
  • should foster collaboration, if not mandate it.
  • if possible, provide sandboxed real-time production environments to try out new capabilities in ways that are safe for the companies and the financial system.

Sandboxed environments, such as those of the FCA and MAS, are I think particularly powerful tools. They are also prudent measures in our age of highly disruptive, often cloud-based, FinTech, and considering such thorny issues as data location, data privacy, operational resiliency and so on.

A virtuous circle

Building and supporting this kind of an innovation ecosystem can result in the following virtuous circle of advantages:

  • It means all parties go through the learning curve together. This helps avoid redundant work and quickly spreads adoption of the best new ideas.
  • It replaces the traditional, formal regulatory discussions with a more informal, open and proactive regulatory dialog.
  • Working together the ecosystem will not only more quickly understand the new possibilities, it will also more quickly uncover the risks and limitations – as well as ways to overcome these.
  • With the regulator as part of the process, these learnings can be more quickly reflected in better policy and laws.
  • Better policy and laws in turn will reduce regulatory uncertainty and hence attract business.
  • As business flow moves towards a particular jurisdiction, that financial center is naturally strengthened.

 

Compete together

One last thought on competition.

There is no doubt we are seeing a fierce battle between financial centers being played out in the tech and innovation space. When regulators become business developers, they naturally join the fray. But it is in the interest of all regulators to strengthen the global financial system as a whole as well.

The good news is that we are also seeing cooperation between regulators, as with recent bilateral agreements between the UK and Singapore authorities or the UK and Australian ones.

This is the right way to go. Just as in the tech environment, in the regulatory environment we need to build the standards, the rules, and the rest of the foundation together, across jurisdictions.

FinTechs in jurisdictions with supportive regulators should seek them out and become part of the dialog. Those regulators still on the sidelines, or which take an overly restrictive stance on innovation, risk getting in the way of progress – and potentially doing harm to the financial centers they are tasked with caring for.

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5 Powerful Social Media Tips to become a Thought Leader!

As I have written about elsewhere, I strongly believe social media is an essential communications tool for organizations. Today’s platforms offer a powerful and cost-effective way for you to establish yourself and/or your organization as a thought leader in a specific topic, and so raise awareness – and gain important credibility – for your product or service.

The trick is leveraging these platforms in the right way. Here are some of my tips.

Tip 1: Map your product and service to an innovation topic or megatrend.

First consider what you want to say. Go back to your original idea and think about what insights and learnings you have that would be interesting to the wider community. Then see if there are any innovation topics or megatrends that you can link your product or service to – something that gives it a broader significance and/or puts it in a context that people will understand.

Tip 2: Create content that becomes useful knowledge.

Write about your particular insight and the innovation topic or megatrend in your blog. Feel free to talk about what your company does, but avoid a sales pitch (you have other channels for that). Here are some other details to consider:

  • Your headline is very important.
  • You should have a strong visual to go with the headline.
  • Keep your posts short and sweet.


Tip 3: Distribute your content via your website and social media.

Publish on your company website first and then link your blog to all your relevant social media channels. Spend some time on search engine optimization. I recommend buying keywords relevant to your blog and the megatrend you are mapped to. Less expensive solutions, like brandyourself.com, can help you with SEO as well.

Tip 4: Build up your network.

Share your content as widely as possible, but also be sure to share content from others. Some other tips:

  • Analyze your network as well to find out who the most important influencers are, the “net promoters of you.” A tool like commun.it can tell you who in your network has the biggest reach and how actively they are promoting your content.
  • Try to mobilize your most active influencers by giving them a heads-up about upcoming posts and asking them to cascade and endorse them (this will be most effective if you have a history of returning the favor).
  • On Twitter I recommend that you also tag your 10 biggest influencers in the image. This can work wonders: when I tag my top-10 influencers I can sometimes reach a million people or more.
  • Monitor your network and adjust who your top-10 influencers are. It’s normal that over time people will be more or less active on your behalf. I adjust my list once a week, looking to find a good mix of support and reach.
  • Actively manage your relationships with your most important influencers. Here a service like traackr.com can be extremely useful.


Tip 5: Measure your results

To make sure you are on the right track, constantly measure your results.

  • Tools like commun.it and buffer.com allows you to measure the number of impressions and the number of people reached. You can also see if certain topics are in high demand or if there is a part of your network that is particularly receptive to certain kinds of posts. In this way you can quickly take the pulse of your network.

Conclusion

I have been talking about social media for quite a while now, and have had plenty of time to test its effect. Using the techniques described here, and assuming you have an interesting story to tell, I am confident you can establish yourself as a thought leader in your area generally within 6 to 12 months. Diligently followed, this approach not only gives you credibility, it also encourages people to engage with you. And engagement means opportunities, and opportunities mean business.

On top of that, you will learn a lot: about your subject, about your customers, about your ideas and your company, and perhaps about yourself. This is knowledge that can only be of use.

Note: This blog post is adapted from a Founder’s Letter I contributed to the Webb Investment Network. Read more at www.oliverbussmann.com/blog and follow me on Twitter @obussmann. 

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Want to innovate? Then collaborate!

During the course of my career I have learned that innovation has to be open and collaborative. Gone are the days when companies worked behind closed doors to develop the “next big thing.” Today you need to be part of an ecosystem, to collaborate and partner with the broader community in the area of innovation relevant to your organization. That means being transparent: sharing your ideas, learnings and results with others. And it means being open to those that others share with you.

As a senior executive at two global corporations, I championed the setting up of small innovation labs and teams in order to be able to quickly and efficiently develop, prototype and test new ideas. And I insisted on them being located outside the company, preferably in a collaborative environment with startups or others working on the same topic, so we could foster collaboration and exchange with members of the broader ecosystem.

As an example, when I was Group CIO at UBS we became the first global bank to join the Level39 accelerator in London. This allowed our innovation team to work together in an open and collaborative environment with some 150 other startups, and to be full participants in an exciting innovation ecosystem.

This kind of transparency is not always easy for people to embrace, however, especially in competitive industries. I can fully understand this. But in my experience it is a hurdle I think anyone facing an innovation challenge must get over.

Here is why.

Rubbing shoulders

Firstly, today’s tech environment is both highly complex and very fast moving. That makes it increasingly difficult for people to innovate on their own: there is a risk that you will miss important developments.

Secondly, people increasingly recognize the value of crowd intelligence: the idea that large groups of people make better decisions, or solve problems in a better way, than individuals do. Of course, crowds can make big mistakes too. But it is no accident that, even in our highly interconnected world, industries still tend to congregate in specific locations.

The tech industry in particular has embraced open-source, collaborative approaches, and with great success. We have Silicon Valleys and Alleys among other things because technologists see a clear net positive value in rubbing shoulders, even if they are competitors. Other industries can and should learn from this.

Third, collaboration, especially between companies in different fields, fosters cross-pollination of ideas. We see this very clearly in FinTech, where banks gain insights from tech companies into what is happening with the technology while they enrich technologists with their perspective on banking and finance.

Fourth, working in a collaborative environment with potential competitors provides a natural platform for testing your ideas. Either through direct feedback or observation you will be more quickly able to judge what you are doing if you do it as part of a larger community.

Finally, and in my opinion not to be underestimated: being willing and able to do your innovation in an open way can be good for your organization’s reputation. As members of the ecosystem you can increase your credibility among potential partners or suppliers. You can also demonstrate to your clients your continuing efforts to improve. And if your company gets positively associated with an important technological trend you can increase awareness of your brand among the general public.

So while working in a vacuum may be tempting on some levels, I think it is an increasingly ineffective approach. My experience is that openness can turn good ideas into great ones, and that great ideas benefit all.

This was originally published at FinTech Pulse, my blog post featuring megatrends, digital transformation and innovation in the FinTech industry.  Read more at www.oliverbussmann.com/blog and follow me on Twitter @obussmann.

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Is Blockchain going mainstream? You bet!

The arrival of an important new technology is generally met with loud choruses of both hype and skepticism. Some see the next big thing – others say it is all overblown. That is certainly the case with blockchain.

So how to filter out the noise? One way is to take a tip from betting markets: don’t focus on what people say, but where they put their money.

Let me explain.

The mainstream thinks blockchain is going mainstream

I think one of the most significant yet overlooked developments in the blockchain world is the entry of mainstream high-tech firms and consultancies. Both IBM and Microsoft have unveiled large-scale blockchain offerings, and the likes of Deloitte, Accenture, PWC, KPMG and Cap Gemini are setting up or considering blockchain businesses.

This is not to say established players will automatically be successful. But it clearly indicates growing mainstream consensus on the blockchain’s potential, and that is significant: Blockchain is the biggest disruptor to industries since the introduction of the internet but it will not happen overnight.

My discussions with industry leaders bear this out: people tell me time and again that we are at an inflection point similar to what we experienced 20 years ago when the Internet arrived.

I agree. Just consider the breadth of some of the offerings. IBM for instance is targeting the whole enterprise stack – meaning hardware, software and services. We can assume others are looking to do the same: Bletchley is Microsoft’s architectural approach to building an Enterprise Consortium Blockchain Ecosystem. To be clear, this is not a new blockchain stack. It is Microsoft’s approach to bring distributed ledger (blockchain) platforms into the enterprise to build real solutions addressing real business problems while keeping the platform open.

That means that, just as in the early days of the Internet, the whole stack is now in play.

What can we expect from this? I see major disruption among other things in the following areas in the enterprise stack:

Infrastructure layer:

  • Hardware. The distributed ledger will spark a dramatic shift to distributed computing environments. This will be the basis of the coming “value web,” as people’s assets migrate onto blockchains. This favors hardware providers who best understand the needs of this new tech.
  • Network. The value web will be a massive peer-to-peer network. As we connect millions upon millions of nodes and carry out thousands of transactions and consensus checks per second, scale and volumes will explode. Network hardware providers who can meet this demand will have an advantage.
  • Security. Security will be an extremely important concern on the value web: if all our assets are encrypted in distributed ledgers, then encryption and key management is – pardon the pun – key. This can be handled via software or hardware (for example through chip-level encryption). I personally think providers like Intel who can find ways to bake security into a blockchain network will have a leg up on the competition.

 

Application layer:

  • Software. Distributed ledger technology will disrupt the software business. There are new processes to build, for example decentralized consensus mechanisms. Since blockchains are a powerful new way to do databases – marrying record keeping with business logic – they will disrupt the traditional database business too. A big opportunity for new entrants?
  • Services. Microsoft is offering blockchain-as-a-service on Azure. It offers a “sandbox” environment where people can try out the tech, and hopes to scale up into a “certified blockchain marketplace” by this summer. This is a powerful model as it allows companies to exploit blockchain’s benefits in a cost-effective and efficient manner. We are likely to see more offerings along these lines.
  • Enterprise IT strategy. As businesses begin to see the potential in blockchain, they will start adjusting their business models or even developing new ones. That will also affect how they approach IT. Here the opportunity is with providers who can best understand the blockchain use cases in various industries, and deliver the right products and services to meet those needs.

 

All along the Enterprise stack

The fact that so many established players see such potential for disruption up and down the stack just confirms me in my belief that broad-based transformation is coming.

So the next time someone asks you if blockchain is for real, just tell them to follow the cash. When people start putting their money where their mouths are, you can be sure that something significant is going on.

Follow me on Twitter @obussmann.

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Social Media: Why it’s an essential tool

When I first became interested in the power of social media for companies, I was something of a lone wolf.

A 2012 study found that only one in four Chief Information Officers (CIOs) in the Fortune 250 had an active blog, only 10% had a Twitter account, and a third had either no LinkedIn profile or a profile with minimal connections. Since then the situation has improved greatly as more and more C-level executives and organizations embrace these forms of communication internally and externally. That’s good news.

Why? Because I believe more strongly than ever that social media approaches are essential for organizations who want to stay competitive in today’s environment. Let me explain.

Getting down to work

Don’t be fooled by the name: social media is not just about having fun. The same communications principles and toolsets that people are used to using externally – blogs,  chats, social platforms – are powerful means of communication that can be employed internally to help people and organizations work better. Among other things they:

  • increase productivity, efficiency and employee engagement by fostering two-way and multi-threaded dialogues. That means better communication and knowledge-sharing among employees, making it easier for all to keep up-to-date, and be engaged.
  • improve effectiveness of management communications by replacing typical top-down communications, which are increasingly ill-suited to the way people think and work today, with more dynamic, targeted approach.
  • help you take the pulse of the organization: by giving you a clear view of what the hot topics are, what people are excited about or afraid of, and even where pockets of hidden creativity and good ideas may be lurking unrecognized.
  • let you engage with clients and the public in an immediate, contemporary way, with the same advantages of dialogue, knowledge exchange and “pulse taking” you get internally.

Do it right

To get the most out of these tools, organizations need an effective approach. My experience spearheading efforts to introduce and encourage the use of social media tools as CIO at both SAP and UBS taught me a few things. I believe the following points are key:

  • See Social Media as a must-have component: Your social media effort should not be an add-on but a core element of your internal and external communications. and given that priority and resources.
  • Apply the same techniques internally as externally: Social media functions the same way internally and externally: you have to find your right network and establish yourself as an accepted and trusted player, involved in the give and take of information.
  • Keep the hurdle for use low: Make these tools available to as many people in the organization as possible.
  • Manage the line between internal and external. In today’s world you want to be as transparent as possible; the internal and external worlds are mixing more than ever. But depending on industry, you will draw the line at different places. Be as open as you can while maintaining a good risk control.

 

My interest in social media as a tool for work has paid off for me personally, helping me among other things be recognized with a Wall Street Technology Elite 8 award and be named by Forbes as the Most Social CIO. More importantly, it has I think paid off for the organizations I have been involved with, who have gained real benefits from using these tools. Based on my experience I can only continue to encourage C-level executives and management to go social. These are not nice-to-haves, but a mandatory management communication toolset.

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Wielding the baton: How CIOs can best orchestrate FinTech innovation

“How did you do that?” “What do you need to be successful?”

Since leaving UBS I have been hearing these questions often from people interested in my experiences orchestrating FinTech innovation. Typically the questioner is someone facing challenges similar to the ones I have faced in my career as a Chief Information officer (CIO): not just innovation, but innovation in a complex, global organization, with multiple business lines and geographies.

My answer always runs along the same lines. As a CIO you must first keep in mind that business is in the driver’s seat: innovation is not a tech play, it’s a business model, product and service one. But in today’s tech-driven environment, the CIO generally has the conductor’s baton in his or her hand. That means it’s up to you to orchestrate the change. You need to do so from front-to-back, covering all aspects from generating ideas to going to market.

Having done this several times, I’ve thought a lot about the process. For me, the following stages are essential:

Illustration: Jon D. Harper – Strategy and Innovation Process Improvements

 

  • Find key trends: You need to know what is coming down the pike in tech, and how it may be used in the context of your organization.
  • Understand business priorities: You must thoroughly understand where the business is today and, more crucially, where it would like to be in three to five years.
  • Decide on the tech you would like to test like a VC fund: Now you can match what you know about technological developments with what you know about the business. Look for developments with the best potential in your context, be it new technologies, methodologies, software, approaches, whatever seems like it might fit and drive the business forward. Based on this, you can decide on a long list of ideas to be tested.
  • Validate your hypotheses: This is the key part: Get some funding and put a small team together, preferably outside normal business lines, and test the ideas in a sandboxed laboratory environment. Do it quickly but thoroughly, in a non-bureaucratic way, but always with the business and customers in mind.
  • Move validated ideas to the normal investment portfolio: A lot of your initial hypotheses may prove wrong. That’s fine. The ones that make it through the process are likely to be gems. If the expected benefits are indeed confirmed, then move those ideas to your normal investment portfolio, where they can be developed using your regular processes.

There are some other things to keep in mind. You will have to coordinate a number of support services. You need to manage your ecosystem, for instance, from startups and universities through to the regulator. The research, business case and use case selection processes need to be managed as well . You also need to manage and be active on the communications side. And finally, you need to ensure that once new capabilities are available, line managers can easily find out what they are and integrate them into their portfolios.

In other words, you will need a complete framework for your innovation efforts. And whether you work in a centralized way or take a more distributed, federalized approach, you will need teams to manage the overall process.

This process has worked well for me in the past. It’s one of the reasons I was lucky enough to be named among the Financial News’s FinTech Top 40 for the last two years and City AM FinTech Powerlist. While this is a satisfying confirmation of the work, there is really nothing here that anyone else couldn’t do. Just stick to the method, and the results will come.

Follow me on Twitter @obussmann.

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Mastering the 4th Industrial Revolution

UBS published a White Paper for the WEF Annual Meeting 2016 about extreme automation and connectivity: The global, regional, and investment implications of the 4th Industrial Revolution.

See the Executive Summary below and read the UBS White Paper now:

A brief history of industrial revolutions

  • Prior industrial revolutions have centered around improvements in automation and connectivity.
  • The First Industrial Revolution introduced early automation through machinery, and boosted intra-national connections through the building of bridges and railways.
  • The Second Industrial Revolution began when automation enabled mass production and fostered more efficient, productive connectivity via the division of labor.
  • The Third Industrial Revolution was propelled by the rise of the digital age, of moresophisticated automation, and of increasing connectivity between and within humanity and the natural world.
  • The Fourth Industrial Revolution is being driven by extreme automation and connectivity. A special feature of the Fourth Industrial Revolution will be the wider implementation of artificial intelligence.

 

 

What are the potential global economic consequences?

  • Polarization of the labor force as low-skill jobs continue to be automated an this trend increasingly spreads to middle-skill jobs. This implies higher potential levels of inequality in the short-run, and a need for labor market flexibility to harness Fourth Industrial Revolution benefits in the long-run.
  • Greater returns accruing to those with already-high savings rates. In the short run, this could exacerbate inequality via relatively lower borrowing costs and higher asset valuations.
  • As the issuer of the world’s reserve currency, the US’ competitive advantages, sitting at the heart of the Fourth Industrial Revolution, could tighten effective monetary conditions among US dollar-linked economies.
  • The Fourth Industrial Revolution increases the magnitude and probability of tail risks related to cybersecurity and geopolitics, but may spur regional action to invest and embrace Fourth Industrial Revolution benefits.

 

 

Who will be the regional winners and losers?

  • “Flexibility” will be key to success in the Fourth Industrial Revolution; economies with the most flexible labor markets, educational systems, infrastructure, and legal systems are likely to be relative beneficiaries.
  • Developed economies are likely to be relative winners at this stage, whereas developing economies face greater challenges as their abundance of low-skill labor ceases to be an advantage and becomes more of a headwind.
  • Emerging markets in their demographic prime may find that extreme automation displaces low-skill workers, but that their limited technology infrastructures do not allow them to reap the full benefits of extreme connectivity.

 

What are the investment consequences?

  • Given current assessments of relative competitiveness, emerging markets maybe less well placed to profit from Fourth Industrial Revolution benefits, relative to developed markets.
  • We expect further disruption to traditional industries from extreme automation and connectivity.
  • Big data beneficiaries include firms that harness big data to cut costs or target sales; firms that automate big data analysis, and firms that keep big data secure.
  • Blockchain applications could benefit firms that use them to automate processes securely, to cut out costly intermediaries, and to protect intellectual property.