Post on 15-Mar-2020
1Innovation | Strategy | Leadership
Innovate on Purpose
2Innovation | Strategy | Leadership
@JPNicols
JP Nicols has been internationally recognized as a
leading voice for innovation, strategy and
leadership, and his work has been featured in
leading conferences and publications.
He is Managing Director of the FinTech Forge, and
was founder of the Bank Innovators Council, now a
part of Next Money.
He is also an instructor at leading graduate schools
of banking, and a regular guest host of the global
fintech podcast Breaking Banks.
@JPNicols
3Innovation | Strategy | Leadership
3Is a Poor Teacher
Success
Innovation | Strategy | Leadership
4Innovation | Strategy | Leadership
Rising Asset Prices
5Innovation | Strategy | Leadership
Falling Interest Rates
6Innovation | Strategy | Leadership
1980
• Depository Deregulation and Monetary Control Act
• Authorizes new thrifts and phase out deposit rate limits
1982
• Garn-St. Germain Depository Institutions Act
• Deregulates S&Ls and allows ARMs
1994
• Riegle-Neal Interstate Banking and Branching Efficiency Act
• Eliminates interstate banking and branching
1999
• Gramm-Leach-Bliley
• Repeals part of Glass-Steagall
2000
• Commodity Futures Modernization Act
• Prevents CFTC from regulating most OTC derivatives and swaps
2004
• SEC proposes Voluntary Regulation
• Allowing investment banks to hold less capital
Source: Center for Economic and Policy Research
In an Era of Deregulation
7Innovation | Strategy | LeadershipInnovation | Strategy | Leadership
Global Financial Crisis
BroadbandMobility
Smartphones
Social NetworksApps
Big DataCloud
Blockchain
8Innovation | Strategy | Leadership
Threat of
New Entry
Supplier
Power
Buyer
Power
Threat of
Substitution
Competitive Rivalry
Porter’s Five Forces
9Innovation | Strategy | Leadership
Blockbuster’s Head of Digital Strategy, 2010
“We’re strategically
positioned better than just
about anybody out there.
Never in my wildest dreams
would I have aimed this high.”
10Innovation | Strategy | Leadership
Video Americain in Baltimore - Image credit: Baltimorefilmguide.com
11Innovation | Strategy | Leadership
30%
20%18%
16%
10%
4%
1%2%
18%
26%
23%
13%
9%
6%4%
1%
Branches nearme
Leadingonline/mobile
No foreign ATMfees
Many branchesand ATMs
ATMs near me Convenientbranch hours
Phone OtherSource: Novantas ® 2016 The Financial Brand
2014
2015
What is Convenience?
12Innovation | Strategy | Leadership
U.S. Smartphone Penetration
6%11%
17%
27%
42%
54%
65%
75%79% 81%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Source: comScore
13Innovation | Strategy | Leadership
2010 2011 2012 2013 2014 2015
Mobile Banking vs. Branch Banking(Weekly Transactions)
© 2015 GA Javelin LLC
Branches Mobile
40%
30%29%
30% 28%
24%
9% 9%11%
22%
27%
30%
14Innovation | Strategy | Leadership
Bank of America 2016
18.7 19.6 20.2 21.3 21.6
15% 16%17%
18% 19%
0%
10%
20%
30%
0
5
10
15
20
25
4Q15 1Q16 2Q16 3Q16 4Q16
Active Mobile Users
Mobile % of Total Deposit Transactions
12xWeekly Mobile
Interactions
Weekly Branch
Interactions
15Innovation | Strategy | Leadership
DisruptionIs already hereIt’s just not widely distributed yet
16Innovation | Strategy | Leadership
”By 2025, the largest financial institution in
the world won’t be a bank for a leading
developed economy.
It will be a technology company working in
emerging economies.
They won’t sell bank products, they’ll surface
bank utility through every day experiences.”-Brett King
17Innovation | Strategy | Leadership
Experience Level
Tactical Level
Strategic Level
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2012
2013
$ 26M
$800M
19Innovation | Strategy | Leadership
20Innovation | Strategy | Leadership
20
21Innovation | Strategy | Leadership
22Innovation | Strategy | Leadership
23Innovation | Strategy | Leadership
Short-term
Cash
Receivables
Inventory
Long-term
Vehicles
Equipment
Real Estate
Equity/Other
•Reduced Friction
•Customer Experience
24Innovation | Strategy | Leadership
Digital Threat… and Opportunity
-16%
-13%
-6%
-35%
+5%
+10%
30%
+45%
Increased revenue from innovative new
offers and business models
Innovative new offers from
competitors
Margins
New products, distinctive digital sales,
and using data to cross-sell
Increased
operational risk
TOTAL
McKinsey Analysis, 2015
Impact of Digital - % Net Profit for Retail Bank
Lower costs
25Innovation | Strategy | Leadership
Digital Threat… and Opportunity
-16%
-13%
-6%
-35%
+5%
+10%
30%
+45%
Increased revenue from innovative new
offers and business models
Innovative new offers from
competitors
Margins
New products, distinctive digital sales,
and using data to cross-sell
Increased
operational risk
TOTAL
McKinsey Analysis, 2015
Impact of Digital - % Net Profit for Retail Bank
Lower costs
26Innovation | Strategy | Leadership
$4.7Trillion
Goldman Sachs, 2015
27Innovation | Strategy | Leadership
The Industry Will Survive
Innovation | Strategy | Leadership
28Innovation | Strategy | Leadership
But Will You?
Innovation | Strategy | Leadership
29Innovation | Strategy | Leadership
Your Own Kodak Moment?
30Innovation | Strategy | Leadership
“If you don’t like
change, you’re going to
like irrelevance even
less.”General Eric Shinsecki
31Innovation | Strategy | Leadership
You Don’t
Out on the
Edge…
Have to be
32Innovation | Strategy | Leadership
…But You Do Have to
Close the Gap
33Innovation | Strategy | Leadership
89.1%
74.3%
68.3%
49.5%
39.6%
35.6%
26.7%
81.9%
0.0%
76.9%
47.7%
79.6%81.4%
63.5%
54.8%
Ease of Use Speed to Market Lower Fees Social MediaIntegration
GoodService/Experience
QuickTurnaround/Faster
Service
PersonalizedService/More
Features
Lack of Service byPrimary Bank
Capgemini/EFMA World Retail Banking Report, 2016
Bankers
Customers
Why do Customers Like Fintechs?
34Innovation | Strategy | Leadership
39.6%
35.6%
26.7%
79.6% 81.4%
63.5%
54.8%
Good Service/Experience Quick Turnaround/FasterService
Personalized Service/MoreFeatures
Lack of Service by PrimaryBank
Capgemini/EFMA World Retail Banking Report, 2016
Bankers
Customers
35Innovation | Strategy | Leadership
36Innovation | Strategy | Leadership
37Innovation | Strategy | Leadership
$40B invested in fintech
companies in last 3 years
New strategies, acquisitions and
acquihires by incumbents:
•Citi
•Capital One
• BBVA
•Others
Encroachment from
adjacent players:
•Walmart
•Amazon
•Others
38Innovation | Strategy | Leadership
Incubators PartneringInvesting Building OwnAcquisitions
Build, BuyOr Partner?
39Innovation | Strategy | Leadership
4 KeysTo Innovating on Purpose
40Innovation | Strategy | Leadership
Look Beyond
the Next Few Quarters
1
41Innovation | Strategy | Leadership
We always overestimate the change that
will occur in the next two years…
…and underestimate the change
that will occur in the next ten.
Don’t let yourself be lulled into inaction.- Bill Gates
42Innovation | Strategy | Leadership
Technology
Trigger
Peak of Inflated
Expectations
Trough of
Disillusionment
Slope of Enlightenment
Plateau of Productivity
The Next Big Idea?
The Gartner Hype Curve, 1995
43Innovation | Strategy | Leadership
Early
Majority
34%
Late
Majority
34%
Laggards
16%
MIL
Early
Adopters
13.5%
Innovators
2.5%
Chasm
Diffusion of Innovation
Everett Rogers, 1957
Geoffrey Moore, 1993
44Innovation | Strategy | Leadership
Early Majority
34%
Late
Majority
34%
Laggards
16%
Early Adopters
13.5%Innovators
2.5%
Technology Trigger
Peak of Inflated
Expectations
Trough of
Disillusionment
Slope of Enlightenment
Plateau of Productivity
Chasm
Financial Services
45Innovation | Strategy | Leadership
Early Majority
34%
Late
Majority
34%
Laggards
16%
Early Adopters
13.5%Innovators
2.5%
Trailblazers vs. Traditionalists
46Innovation | Strategy | Leadership
Trailblazers vs. Traditionalists
• Master Known Knowns
• Enforce Best Practices
• Explore the Unknown
• Discover Next Practices
47Innovation | Strategy | Leadership
The Alloy Organization
48Innovation | Strategy | Leadership
Business Prevention
Department
Innovation | Strategy | Leadership
49Innovation | Strategy | Leadership
Innovation
Theatre
50Innovation | Strategy | Leadership
Innovation
is about
Value Creation
2
51Innovation | Strategy | Leadership
Plan your Work,
Work your PlanDoesn’t work anymore.
52Innovation | Strategy | Leadership
No Battle
Plan
Survives
Contact
with the
Enemy
- Helmuth von Moltke
53Innovation | Strategy | Leadership
Everybody has a
plan until they
get punched in
the face.- Mike Tyson
54Innovation | Strategy | Leadership
Test and Learn
55Innovation | Strategy | Leadership
FIRE™ Process
56Innovation | Strategy | Leadership
FastIterativeResponsiveExperiments
57Innovation | Strategy | Leadership
Be Willing
to Partner
3
58Innovation | Strategy | Leadership
– JP Morgan Chase CEO Jamie Dimon
They (fintech startups) are very good at reducing the 'pain points' in
that they can make loans in minutes, which might take banks weeks.
We are going to work hard to make our services as seamless and
competitive as theirs.
And we also are completely
comfortable with partnering where it
makes sense.”
59Innovation | Strategy | Leadership
Consumers Trust Banks…and Fintechs
0% 20% 40% 60% 80% 100%
Banks
FintechsCompletely
Somewhat
Capgemini/EFMA World Retail Banking Report, 2016
90%
96.4%
60Innovation | Strategy | Leadership
Willingness to Refer
Banks
Fintechs
Capgemini/EFMA World Retail Banking Report, 2016 (North America)
63.7%
50.5%
61Innovation | Strategy | Leadership
“We already partner.”
“We have some tech vendors and
a procurement department”
62Innovation | Strategy | Leadership
Bankers are from Mars…
• Technology
•Culture
•Cost
•Compliance
…Fintechs are from Venus
63Innovation | Strategy | Leadership
‘Move fast and
break things’
doesn’t work in a
highly regulated
environment.
64Innovation | Strategy | Leadership
is an Act of Leadership
INNOVATION
Innovation | Strategy | Leadership
4
65Innovation | Strategy | Leadership
Customer Relationship Management
Product Innovation
Infrastructure Management
66Innovation | Strategy | Leadership
Customer Relationship Management
Infrastructure Management
Product Innovation
Efficiency/RenewalStrategies
Growth Maturity Decline
67Innovation | Strategy | Leadership
“And-I’s” need support
68Innovation | Strategy | Leadership
Innovation vs. Core Business• Existing Products
• Existing Customers
• Existing Markets
• Internal Resources
• Reduce Variability
• Meet/Exceed Metrics
• Increase Volume
• Maximize Profit
• Manage Known Knowns
• Enforce Best Practices
• New Products
• New Customers
• New Markets
• Partner with Others
• Increase Variety
• Create New Metrics
• Nail it, then Scale it
• Maximize Learning
• Explore Unknowns
• Discover Next Practices
69Innovation | Strategy | Leadership
“Management is doing things right.
- Peter Drucker
Leadership is doing the right things.”
70Innovation | Strategy | Leadership
Look Beyond
The Next Few
Quarters
Innovation
Is about
Value Creation
Be Willing
To Partner
Innovation
Is an Act of Leadership
1 2
3 4
71Innovation | Strategy | Leadership
New Landscape
Do Nothing Take Action
Old World Order
Embrace,
engage, and
partner with
new players
Give way to
Fintech
innovators
Double down
on existing
strategies
Hope this is a
temporary fad
72Innovation | Strategy | Leadership
The best way to
predict the future
is to create it.
73Innovation | Strategy | Leadership
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