Every wondered why banks are so poor a certain types of innovation? Here's an explanation worth listening to

1. Nairobi April 2017
Haydn Shaughnessy
Why Banks Are Failing the
Innovation Test

2. Advising: SWIFT, CLS, RBS, Swiss Stock Exchange, Earthport, JP Morgan,
Rabobank, BNY Mellon, GARP, ING, Nokia, CEC:
Published in HBR, Forbes, Wall St Journal,Strategy and Leadership, Innovation
Management
Currently helping companies accelerate innovation and save 30% of cost
Haydn Shaughnessy

3. Why Do Banks Fail The Innovation Test?
Data from from the Elastic Innovation Index in Finance, SWIFT
All co / All fin / Only banks / Top 10 G-SIB
All co
All fin
Only banks
Top 10 G-SIB
Top 10 firms
100
87.5
75
62.5
50

4. A GENERATION OF INNOVATION PASSED THEM BY
IN TWO MAJOR STUDIES INVOLVING OVER 200 COMPANIES
the qualities of excellence we found in the Top 10
Thinking as
a platform
business
Having or
planning
open APIs
Having
executives
with founder
experience
Engaging in
open-source
initiatives
Making use of
externalised
skills and
labour sources

5. Convergence in industry structure
Experimental
period
1998
1999
2000
2001
Copyright Haydn Shaughnessy 2017

6. Convergence in industry structure
Experimental
period
New
Information
layer
New
ecosystems
mobile
computing
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Copyright Haydn Shaughnessy 2017

7. Convergence in industry structure
Experimental
period
New
Information
layer
New
ecosystems
Business
platforms
Horizontal
businesses
finance
logistics
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
manufacturing
mobile
computing

8. Threats
to bank
revenues
$300 billion transaction
increase 2016/17 seeking a defensive
response
Hundreds of millions of
new products in one year
2 billion customers
by 2026
UNEXPECTED COMPETITORS ?
Copyright Haydn Shaughnessy 2017

9. Question 1
Where do you imagine your main competition to be in three years time?
1. Global or regional banks
2. Alibaba or other Chinese platforms
3. Western tech platforms
4. Social networks
5. Fintech
6. Other
9

10. Why are banks failing the innovation test?
Scale, Scope, Speed
at Low Relative Cost

11. Driving Scale, Scope, Speed. Garden and a Platform
Copyright Haydn Shaughnessy 2017

12. New business models in the platform economy
Ecosystem
Revenue
Supplier
H
ardw
are
Gardening
Hardware

13. New business models in the platform economy
Supplier
D
evice
m
aker
H
ardw
areSoftw
are
Ecosystem
Revenue
HardwareSmart
dosing
Gardening
Software

14. New business models in the platform economy
Supplier
D
evice
m
aker
D
eveloper
C
ontentprovider
H
ardw
areSoftw
are
Subscriptions
Ecosystem
Revenue
HardwareCloud and
Content
Smart
dosing
GardeningSmart
gardener
Software

15. New business models in the platform economy
Supplier
D
evice
m
aker
D
eveloper
C
ontentprovider
H
ardw
areSoftw
are
Subscriptions
A
pps
SD
K
Ecosystem
Revenue
HardwareCloud and
Content
Apps
Smart
dosing
GardeningSmart
gardener
Garden
as system
Software

16. New business models in the platform economy
Supplier
D
evice
m
aker
D
eveloper
C
ontentprovider
D
ata
analyst
H
ardw
areSoftw
are
Subscriptions
A
pps
SD
K
Ecosystem
Revenue
HardwareCloud and
Content
Data and AI
Apps
Smart
dosing
GardeningSmart
gardener
Garden
as system
Garden
as data
Software

17. New business models in the platform economy
Hardware
Software
Cloud and
Content
Data and AI
Marketplaces
Ecosystem
Revenue
Apps
Supplier
D
evice
m
aker
D
eveloper
C
ontentprovider
D
ata
analystEveryone
H
ardw
areSoftw
are
Subscriptions
A
pps
SD
K
%
ofrevenue
Smart
dosing
GardeningSmart
gardener
Garden
as system
Garden
as data
Garden
as service

18. They are or want to be huge transaction
engines
Have rapidly adopted high performance
processes
Moved away from core competency
Drive price towards zero
Why they are a threat?

19. Question 2
What is top of your innovation agenda right now?
1. Operational cost reduction
2. Non-performing loan solutions
3. Other risk management/cyber security
4. AI
5. New business/stronger margins
6. Other
19

20. What then should be top of the CEO agenda?
How to SCALE at low relative cost
while becoming more adaptive
“Much of what we do is no longer on a roadmap. It cannot follow a linear
workflow”
Executive in the Finnish software industry

21. Scale

22. Scale at low relative cost
1.Aiming for regional to global markets by
exploiting third party assets and adjacent
services
2.Creating additional advocacy effects
through stronger value propositions
3.Continuous delivery in IT supported by
Cloud computing (66% price drop 2014-16)
4. Devolving risk onto ecosystems
5. Correcting goal and work misalignment
30% overhead

23. Matching objectives with projects to kill Zombie work
The Executive Portfolio Wall
Set out top five strategic objectives
Bring all projects into public view
With project size estimates
Ask which projects meet which objectives
Kill those that don’t = 30% savings
Copyright Haydn Shaughnessy 2017

24. Scope

25. The significance of the ecosystem
Source: Accenture 2017
Percentage of
executives who
believe competitive
advantage will come
from the ecosystem
75%

26. Building
ecosystem
as process

27. Question 3
Do you have any plans to expand your innovation capacity through the use of third
party ecosystems
Yes
No
Not sure
27

28. Ecosystem mapping - New process models

29. Ecosystem mapping - Identification
Educate Prove Prototype Adopt

30. Ecosystem mapping - Close up
Prototype
Normalize data
Refine model
Test & Iterate
Analyze PayOffImplement feedback
loop and Monitor
Assess workflow
implications

31. Ecosystem mapping - Refinement
Normalize data

32. Capital Markets Are Ripe for The Ecosystem
CAPITAL MARKETSSample High Level Areas
Front Office
Client Experience/Tools
Client Management
Pre-Trade Analytics
Execution
Risk Management
Order Management
TECH THEMES
Artificial Intelligence
Big Data
Aggregation
Analytics
Governance
Standards
Blockchain
Cloud
Communication Tools
Cyber Security
Legacy Architecture
Machine Learning
Natural Language
Processing
Open Source Software
Process/Service
Externalization
Robotics
Compliance and Control (including Regulatory Reporting)
Human Resources
Technology / Infrastructure
Middle Office
Trade Matching/
Confirmations
Trade Processing
Trade Enrichment
Treasury
Risk Management
Back Office
Confirmation
Settlement
Clearing
Finance / Accounting

33. The problem of market information in banking

34. The Problem of Product Market Fit in Finance
FinTech
Professionalize
Democratize
Standardize
The ASPIRE™
Scorecard
RegTech
Ai
Blockchain
MiFiD

35. Funding
Company Objectives
Company Product
Offices
Staff
Score
Clients
Offices
Staff Clients
Amit K. Sikdar
Co Founder and CEO
With more than 30 years of experience in
the global financial markets with a focus
in the OTC derivative business.
Taxonomy: Cloud based
Trading Technology; Financial Applications (Mobile)
Business Model:
NEW YORK
500 Wall St, Suite 1600
New York, NY 10005
Phone : +1-646-777-7500
info@smarttradar.com
SmarTTradar delivers innovative software
solutions to well established exchanges, inter
dealer brokers, electronic communications
networks (“ECNs”), Automated Trading
Systems (ATSs), market data, analytics and
other financial services providers
SmarTTradar has developed a pre-trade
connectivity and information management tool
for traders that focuses on organising and
processing ever-proliferating amounts of data
at speed and is MiFID 2 compliant.
The product allows trades to be managed in a
modern way and interacts with different parts
of the client’s infrastructure maximising the
value throughout the firm.
40
LONDON
1 Fore Street
London EC2Y 9DT
Phone : +44 207 345 7878
5 - 10
2
The ASPIRETM Scorecard
Company Profile Company Score Company Description
Company Score 79/100
Technical Score 74/80
Larry Thompson
Co Founder and COO
With over 30 years of IT experience 20+
years in the financial industry, creating a
secure, robust, 24x7 application
distribution architecture
Michael Reuter
Co Founder and CTO
Former Chief Information Officer for
Deutsche Bank's Capital Markets
business, having previously been CIO for
Instinet Fixed Income

36. Speed

37. Key problem: most projects, even Agile ones deliver in batches and create
integration and security problems: work processes need to be more fluid
SkyScanner
• 2013 24 software releases per year
• 2016 95 per day
• 2017 10,000 per day
High performing organisations create at least 10% additional time for
experimentation

38. Accelerating innovation through highly delegated decision processes

39. Total visualization of work to promote continuous delivery

40. Creating Ideas For a Broad Range of Customers

41. Increase the cadence of interaction

42. Flow for strategy
Customer
Wall
Evaluation Work Up
Digital
Business Wall
Executive
Portfolio Wall
Project Walls

43. Total visualization of the flow of work
Executive
portfolio wall
Projects in
play wall
Risk and
issues wall
Project wall
Team KanBan
wall Automated
continuous
delivery

44. Summary
1. Competition is coming from outside finance, from high performing
organisations converging sectors
2. Lowering cost:
(i) Average 30% saving on major resource allocations is available to you.
(ii) 60% savings on IT infrastructure
(iii) Delegating risk
3. Additional IT delivery resources can be freed up
4. Scale: Drive stronger value propositions on a regional basis
5. Scope: Delivered via ecosystems
6. Speed: Where you now have one project think 20 and deliver through
visualization

45. Conclusions
● Simple but profound goals: scale, scope, speed;
● Quick wins in process flow: rescue wasted resources, accelerate
innovation and make people feel good;
● And devolve risk onto ecosystems to accelerate change and build
advocacy;
● Benchmark
● The Big Ask? Dare to change the franchise before it is changed for
you. Ask Nokia!