An interesting article by consultants Ernst & Young (EY) asks the question ‘Do you have to be a start up to set the disruption agenda?’

The article is based on the findings of an EY think tank to explore leading and emerging trends, made up of 15 chief innovation officers, academics and thought leaders, most of them holding, or having held, senior innovation positions with Global 1000 companies.

This virtual global was invited to discuss ‘how corporate leadership, culture, innovation structures and external sensing capabilities contribute to disruption readiness’.

Is disruption the preserve of start-ups?

As the article states, ‘We all know the narrative of the nimble start-up that brings down industry titans’.

This narrative positions large corporates as slow; wedded to unwieldy systems and processes that hold back their agility; behemoths that are ‘buffeted by the disruptions springing from the intersections of technology, globalization and demographics’.

In this story, innovation and disruption are confined to nimble start-ups – businesses that respond to customer demand, unhindered by legacy systems or outdated thinking.

In UK banking, this story has played out pretty much as scripted. Incoming firms have put incumbents on the back foot, harnessing new technologies to pre-empt customer demand for mobile, consumer-centric solutions.

Can large companies be disruptors?

But the article asks us to consider what would happen ‘if we could flip the narrative and instead focus on what enables a large company to disrupt, to innovate a new business model that displaces the existing ones in a market?’

This is something the Financial Conduct Authority (FCA) has been alive to in the UK banking industry.

In January last year, the regulator launched a New Bank Start-up Unit. The Unit is designed to help not just new firms, but to enable existing firms to launch new models.

The FCA’s Regulatory Sandbox, meanwhile, gives regulated firms a space to innovate without incurring the full weight of regulation – with the list of companies approved to join so far including both start-ups and established banks.

How can you embrace and encourage disruption?

So how can large organisations capture the positive aspects of disruption, and use them to their advantage?

Four organisational attributes are key

The panel identified four essential attributes for any large global firm wanting to disrupt.

  1. Leadership models innovative culture, empowers and asks the right questions 

An enabling leadership is vital. Leaders need to give ‘the rest of the organization the confidence to take risks and explore by advocating, celebrating and rewarding disruption efforts’.

Senior-level project sponsors and empowerment that enables teams to make progress on projects independent of senior management involvement, are essential.

  1. Culture: diverse, open and customer-focused

A culture that embraces and drives disruption is one ‘that values diversity of thought, background and life experience’.

This diversity sparks the ideas and thinking that fuel disruption, while a culture of openness, trust and transparency encourages risk-taking.

This is something the FCA has also identified, with CEO Andrew Bailey stating that banks should be more open and encourage challenges to existing practices. Not only will this encourage firms to challenge non-compliant behaviours – perhaps Bailey’s main objective – it will also drive the ‘out of the box’ thinking so crucial to innovation.

Another message from the panel was that ‘Speed should be valued more than perfection’.

While speed to market is of course vital when it comes to new approaches, if you’re a regulated business, you also need caution.

The panel believes in cultures where failure is embraced as a necessary step to innovation. But as a regulated firm, you need to temper this with regulatory compliance requirements.

Any processes, products or communications you develop must be in line with FCA requirements. This applies whether you are trying to produce quality marketing content in less time, design sales processes or create operational procedures.

  1. Innovation structures: separate, globally networked

The panellists stress that any firm ‘disruption unit’ needs to be freed of institutional challenges. This might mean separating it from your main business – both physically and in terms of governance and reporting.

It shouldn’t be too separate, though. It’s important that ‘the disruption unit must interact with rest of the company to set the stage for integrating disruptive innovations back into the organization’.

The panel believes that achieving a new, disruptive business model ‘requires getting people to think differently, together’.

Establish networks across the business, both in terms of business units and countries. Making sure you have systems that enable people to collaborate in real time will be essential here.

Working with people outside your business is also a must. As one of the panellists said, ‘We stand no chance of success if we face disruption alone’.

  1. External sensing: looking beyond

One of the benefits of collaborating outside your business is that ‘The best ideas often come from companies, people or industries with different experiences, motivations, perspectives and knowledge’.

In other words, people outside your core market might well come up with some of the best ideas for your business.

  1. Disruption is a journey

The timeframe for innovation is recognised as long and unpredictable. Disruption may seem to come from leftfield, often taking established businesses by surprise. But in fact, as in many areas, there are few overnight successes.

As the report says, ‘Even disruptive innovations are usually the result of years of experimentation and iteration to make them market ready and aligned to a large market’.

Disruption itself, therefore, shouldn’t be your goal.

Instead, focus on your customers and their future needs, and you will be better-placed to identify the solutions and approaches that – as a side-effect, rather than your sole aim – are likely to be disruptive.

Conclusions

The panel identified that some core attributes support innovation.

Diversity; networks; innovation; openness and a willingness to learn from failure; empowerment and structures that enable incubation are essential.

Today’s connected business environment, where digital transformation is driving change and up-ending traditional industries, give firms a new and unchartered landscape to operate in.

Encouragingly for established firms, the conclusion was that any business can be a disruptor. You just need the right culture and structure to encourage innovation.

Source: Perivan Technology

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