Author: Marc Butterfield, SVP, Innovation & Disruption
Without a pressing need to fix something, businesses often assume there is no reason to form an innovation team or strategy. In reality, nothing could be further from the truth.
Exploring innovation keeps the business on its toes and alerts internal stakeholders to key trends in the industry that could disrupt the organization’s ability to remain competitive. Better yet, taking an active approach to exploring innovation can put the business onto solutions long before the impact of change is felt on the bottom line.
Despite the advantages associated with innovation initiatives, it can be a hard sell to get leadership onboard. If your business falls into this category, here is how to make your case for innovation and how to take innovative concepts forward in today’s market.
Look at Innovation as a Tax
In the U.S., $476 billion is spent annually on innovation, with over 70 percent of the spend coming from businesses. Returns, however, are usually realized months or years down the line, so it’s important for the organization to have an internal culture that supports exploration.
Often, innovation teams are held to the same standards as product development teams, so there is an expectation for a timely return on investment. In actuality, innovation is a forerunner to new product development, providing the insights and concepts necessary to bring new offerings to market. As such, innovation teams need to be free to fail on occasion or to switch gears when a new big idea comes along.
To support this environment, businesses need to stop looking at innovation as a revenue-generating aspect of the business, and instead, view it as more of a tax. Businesses pay taxes and expect to receive certain benefits in return, but they are not responsible for the day-to-day management of those funds.
For example, taxes typically provide revenue for roadway improvements. As long as bridges, streets and highways are kept in working order, it’s easy not to think about the taxes paid. However, when municipal byways fall into disrepair, the taxpayer feels gypped and wants to know how their money is being spent.
Innovation can be viewed under the same context. Businesses must pay the innovation tax, but should have little say in the day-to-day management of the team’s efforts. This removes the conversation around ROI and allows innovation to flourish.
However, if innovation concepts consistently fail to make it to market, or provide little-to-no value added back to the business, it’s time to take another look at how the innovation tax is managed and spent.
Like all taxes, the innovation tax should be capped according to the needs and capacities of the business, and innovation teams should be held accountable for making progress.
We’re Sold on the Innovation Tax, Now What?
With an innovation mindset in place, teams are free to explore industry trends and identify concepts for addressing emerging issues. When it comes time to acquire innovative capabilities, companies typically address acquisition in one of three ways.
If the capability aligns to the core business, many companies will acquire an organization or license technology. For instance, Johnson & Johnson licensed stent technology from Dr. Julio Palmaz, allowing the company to augment its medical operations and expand into new markets.
This approach is particularly advantageous for companies when horizons are short. Since the product or technology is already developed, acquiring the company or license allows the organization to take full immediate advantage of the innovation.
Building the capability in-house is another option when it comes to meeting core business needs. The only disadvantage is that time to market can be slower, but the company will realize the advantages of ownership in the end.
When the need is urgent, but not necessarily core to business lines, it might be easier to consider partnering with a company that already specializes in the type of innovation. Financial institutions often take this approach with technology providers to build out ancillary services, such as bill payment technology support AP automation.
The business has the option to buy or license the innovation, realizing lower cost than in-house developments, but the real advantages come with speed. Companies that already specialize in a type of innovation will be able to swiftly bring the company up to modern standards utilizing their expertise.
In the end, your innovation strategy should be aligned to your business needs. Think about what you want to be good at doing and then evaluate the factors that prevent you from reaching the goal. These gaps in your current strategy will form the foundation of your innovation approach.
About the Author
Marc Butterfield is responsible for leading the Bank’s Innovation & Disruption team and the Bank’s digital transformation initiatives. He is accountable for accelerating innovation throughout the enterprise, identifying disruptive business model threats to financial services, establishment & creation of new business models and fintech engagement. He also leads change management and strategic thought leadership to drive process and cultural evolution necessary for effective innovation practices.
In his tenure at FNBO, Marc has served in leadership positions in Digital Banking, Marketing, Consumer Lending, Credit Risk and Product Development. Marc began his career at FNBO in 2001, joining First National from Nexterna, a wireless technology company owned by Union Pacific Railroad.
Marc completed his Bachelor’s degree in Business Administration with a Marketing specialization from the University of Nebraska at Omaha.