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Regulated Innovation

How two large banks navigated the challenges of going lean

9Aug

If you haven’t heard, banks are heavily regulated.

A 2015 Congressional Report on Bank Regulations reads 'many modern innovations are really just minor variations on old practices.' Banks today, though, are using Lean methodologies to create disruptive innovations that look nothing like old practices. In practice, regulators are having trouble 'distinguishing banking from other services.'

It’s no surprise that when ING’s Innovation Studio invited internal teams to take part in a 6-month accelerator, 90% of their participants came from the risk department.

Where most companies wonder if customers are ready to adopt each iteration, banks have to wonder if regulators even allow customers to adopt innovations. Company lawyers kill the buzz in rooms full of innovation teams or, put another way, protect the banks from a devastating risk.

Two banks, ING and Capital One, found success creating Lean frameworks that safely aligned with their internal procedures. Lawyers are appreciated, and for us, money is evolving.

The Innovation Studio

ING’s Internal Accelerator is off to a hot start with Lean methodologies at the core.

When we spoke to ING Innovation Studio Founder Daniele Dondi, ING had already finished two accelerators. Though 'way too early to tell', all of the teams were off to a great post-accelerator start.

The Innovation Studio is ING’s version of the most typical three to four-month startup accelerator. Due to risk compliance, branding, and other major factors referred to as The Fab 4 within ING, the team decided to expand the program with an extra few months to give teams enough time to really create something.

Three internal ideas are funded and staffed with members from the inside and placed beside three external startups competing in the financial space.

The Studio is designed to establish proof of concept. Lawyers are present to ensure teams are playing safe. 'I have seen teams complaining about the lawyers, but they are only there to protect the company.'

ING’s board waved internal procedures that were roadblocks throughout the first accelerator. 'We didn’t have it for the first studio, we had it for the second and it changed the speed.'

Daniele expands on his learnings from the Studio’s first two years in this LinkedIn post.

Curious why the Innovation Studio site is using .ninja for the domain name?

'We always say that entrepreneur and intrapreneur should act like ninjas. The Samurai is all about honor — obeying the rules and the following procedure, while the Ninja really wants to get things done. It doesn’t matter how they get the result in the quickest way possible.'

Internal employees who choose to join the accelerator are asked to temporarily forget how to Samurai, and learn how to Ninja.

Iteration Tolerance

Capital One’s Teams Are Empowered to Practice Lean

A few years ago, Capital One CEO Richard Fairbank set the company on a path to become a tech company. Understanding that his teams were not equipped to make this transition, Fairbank hired experienced startup founders and Lean counsel to seed the organization with the mindset and skills needed to realize the new vision. Fairbank then commissioned Capital One Labs to build the next generation of financial products.

While startup hires educate existing employees on Lean methods, existing employees teach them about Capital One’s core business and customers.

Employees are buying in with support from leaders across the company, all of whom, are embracing the iteration cycles and challenging their teams to be more Lean. The company brought in a coach to help facilitate the Labs initiative.

Amee Ricketts Mungo is one of the serial entrepreneurs whom Capital One hired to realize their new vision. As Product Manager, Amee is partly responsible for making the company 100% agile. 'We’re using facets of Lean and rapid iteration cycles. I’ve been able to introduce it in a way that people can latch onto and be excited about. When we’re with our design partners, it makes great sense for learning about customers. It’s not just about learning, it’s about learning and saying what’s next? Where’s our next improvement line? Can we get to Beta with this? What is our thin slice?'

Amee goes on in this episode of Inside Outside Innovation:

https://www.acast.com/insideoutsideinnovation/ep.1...

So what does Lean look like at Capital One?

We asked Senior Experience Design Lead Scott Childs. Capital One looked at the Design Sprint from Google Ventures to accelerate product validation.

The Design Sprint is a 5-day process, wherein teams unpack problems on day 1 and finish with user research on day 5. 'What it really does is, it forces everybody to sit in a room together and just say ‘we’re going to take these five days, attack the problem, and see what we come up with.’'

After five days of iterations, collaborative sketching, and prototyping, Capital One finishes with a new perspective.

One challenge with a design sprint is knowing how to facilitate teams for a full day. 'You can’t wing it. You have 5–8 hours that you need to plan out.' Scott says, they’ve improved by preparing better for each session. 'But there’s also this understanding that is kind of chaos.'

In the end, Capital One and its competitors’ innovation teams are tasked with revolutionizing one of the oldest, widely adopted, and heavily regulated industries.

Amee realized the challenge, shortly after joining Capital One: 'We’re talking about banking customers, we’re talking about money. We can test all we want, and we get great banking insight, but until we make customers' money theirs, we don’t know exactly what we’re after because money is very personal.'

Key Takeaways

CEOs and members of the C-Suite are responsible for enabling Lean to become a real part of their operations. Innovation leaders should consider themselves individual innovation ecosystems.

- Existing operations may stifle innovation processes. Leadership could wave internal procedures or establish an Innovation Outpost with a completely new structure.

- Employees responsible for maintaining the core operations play a critical role in the innovation process, by teaching startup hires about the existing business, customers, and systems.

- There are multiple models that can successfully manage innovation. This report details at least 4: In-house Innovation Labs, University Residence, Community Anchor and Innovation Outpost.

- Hug your lawyer

Sources

https://mng.lincolnwdaniel.com/regulated-innovation-how-two-large-banks-went-lean-fbfdf732033c#.jz0cfgx77

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