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Spin It!: "There might be gold in them hills"

Thursday, December 7, 2017

 

As any parent of young kids in the last few months knows all to well, we unfortunately are living through the craze of the "fidget spinner". Kudos to whoever thought of this idea and it is probably another story to understand how this fad spread so quickly. Enough about spinners, but watching these things spin seemingly endlessly got me thinking about spinouts in the innovation space. This is certainly not a original topic, but I think in the UK financial sector, it is not that commonplace yet.

 

The concept is fairly simple. As you meet many of the fintech CEOs you realize they almost always start with, "I used to be the *blank* at *blank* bank" trying immediately to establish credibility. From the other side, if we were able to identify these folks BEFORE they leave, we might be able to gain the value while they were with us. And if they want to leave and go it alone, if we think the idea is noteworthy, we should encourage and support this spinout.

Like many things in banking, the concept is fairly simple but it is the execution that is difficult and needs some thinking before embarking.

 

I see three major hurdles in trying to set this up in a large incumbent bank:

  1. Identifying the right ideas/people

  2. Incubating these ideas within the existing structure

  3. Striking the right deal on exit to ensure value for all players

Identifying the right ideas/people: We all have idea boxes, feedback loops, innovation awards and the such in our businesses. Most of these fail because they have not thought through the process from end to end. There normally is some good thinking on how we capture the ideas, but the triage of these ideas and rapid scoring, deciding and supporting is lacking. The other area that usually gets a cursory glance in design is collaboration to improve these ideas by working with similar or adjacent ideas within the organisation.

 

Problem usually lie with tools, process and people. Thankfully on the first two, there are some really nice examples of how to do this and tools are emerging everyday that can support. Think about how you could use a Kickstarter type tool to bring ideas to life and increase collaboration while "scoring them". Then you could use AI to set-up rules based decision making to quickly find ideas that are gaining traction and meet your success criteria. Lastly, try to focus the organisation around key challenges, be clear about the problem you are looking to solve and people will flock to help. On the people side, I think you need to let the ecosystem work to identify the "right" people that like to work this way. Once you see them emerging, think of building out that network.

 

Incubating these ideas with the existing structure: Everyone has their own examples of "Death by hitting the mother-ship" yet many companies still insist on putting new ideas through the normal business hurdles for success. In The Innovator's Dilemma, this is clearly articulated by Clayton Christensen as a strategy that never works. 

 

If you are designing this process, you MUST insist that the criteria for success is relevant to size of the initial opportunity, not what it will do for the overall current organisation or you will kill them off early. Speed to decisions, governance, funding and access to resources all need to be thought through as you design this system.

 

Striking the right deal on exit to ensure value for all player: You have found the right ideas, nurtured them within the organisation and now want to spin them out. Like any negotiation, this has to work for all parties to be successful. I suggest that these types of deals require some very specific skills that normally do not exist within our current organisations. These need people skilled in structuring partnership agreements, clear/simple contracts and valuation experts used to working with more ambiguous products/services. 

 

Specifically on the funding side, probably best to look for a special pot of money to do this type of work. Certainly better to have earmarked money to speed up the funding once the decisions are made. Also try to think about investing in these new spinout ideas as an alternative to paying people redundancies to leave only to start up as a competitor.

As I mentioned in the beginning, the concept is certainly fairly easy, it the execution that trips us up. Good luck on the journey, there is certainly big payoffs if done correctly it but needs some proper thinking before starting!

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