EXCLUSIVE: ‘Forging ahead’ – Stephan Hartgers, Mobiquity and Lieven Haesaert, ING ‘The Fintech Magazine’
Stephan Hartgers, VP of Digital Strategy at Mobiquity, and Lieven Haesaert, Global Lead for Innovation Transformation & Management at ING, discuss the importance of methodology and organisational structure in creating great ideas
Innovation, by definition, is never ‘done’: it’s an endless quest to do better, do different, and do right. When it comes to digital finance, Dutch banking giant ING has been on that innovation mission for the better part of five years, with notable success: it was named western Europe’s most innovative bank in 2020 and its ING Ventures €300million fintech fund, which currently holds more than 30 investments, was awarded most active fintech Corporate Venture Capital fund in Europe.
The ING Labs, in Amsterdam, Brussels, London and Singapore, have so far been responsible for open banking platform Yolt, the multi-bank portal for corporate accounts, Cobase, and bond analytics platform Katana, while working on a host of other, internal solutions that might yet also find a commercial future outside of the bank. But it still felt it could improve. ING recognised there were roadblocks, constraints to idea generation and realisation, within the existing organisational structure of the bank.
So, in October 2020, it announced that its multiple innovation programmes were being rolled into a single, independent business unit: ING Neo. It will ‘create space for breakthrough innovation’, as Annerie Vreugdenhil, previously lead for Wholesale Banking Innovation, who moved across to head up the unit, has described it. ING Neo will be focussing (as in fact the bank did before but perhaps in a more fragmented way) on ’value spaces’: where it can improve client experience of its services, specifically around housing, lending, trade, financial health and compliance.
Stephan Hartgers, VP of digital strategy at Mobiquity, a ‘full-service digital transformation enabler’, which has worked with banks across the world in helping them manage their approach to innovation, takes his hat off to ING’s achievements so far. And the new organisational approach is, he says, a mark of maturity in this space.
“Banks saw the opportunity to jump on the innovation management cycle and be competitive against the challengers, in order to stay relevant for the future, as well as securing future revenue streams,” he says, but now they need to take a more structured approach.
He’s seen three trends emerge in banks’ innovation strategy: optimisation of current banking practices, evolution and adoption.
“Maybe the innovation factory [in a bank] started by collecting all the random ideas that were floating around the company and putting them on a list. There would be hackathons, or boxes where employees could submit their ideas. That was just the first iteration of idea generation,” says Hartgers. “What we see now is a strategic framework emerging. There can be tools or concepts applied – the innovation thesis – that really sets out where to innovate and where not to. Then the concepts become much more targeted on where a clear potential to disrupt exists – what ING calls value spaces. That’s where to play, how to win. At this stage, there is more investment needed; otherwise, the pipeline of ideas will dry up and your innovation factory comes to a halt.
“Where investment was initially made into understanding the concepts – around user validation, prototyping and building minimum viable products (MVPs) – now those ideas need to be proven to be able to generate value. And if it has value for the customer, it also has value for the organisation,” says Hartgers. At this stage – building them into products that generate the value that’s been promised – other people and other capabilities are needed.
The journey through this innovation funnel can be hazardous for ideas – it’s meant to be a testing process, after all. But life can be just as dangerous for those that are safely delivered from it and make it through to the final stage – adoption. This is where they need careful nurturing. And it’s a lesson ING learned the hard way.
“You can spin them back into the business; but sometimes you spin them in too fast,” says Lieven Haesaert, ING’s global lead for innovation transformation and management. “They’re still too small. It’s not because they don’t work, or don’t address a customer need in an agile way. They fall off the table, because there was something more urgent to be done, and, before you know it, the idea is floundering.
“It’s one of the key reasons for setting up ING Neo as a separate business area with. its own profit line, specific IT risk and HR policies – so those businesses can scale.”
For a bank operating in multiple territories, scaling ideas, not just from concept to implementation, but across the organisation, can be a big challenge. DealWise, a popular retail cashback platform developed by Haesaert’s colleagues in Romania, couldn’t realise its full potential for the bank because there wasn’t the organisational structure to replicate it in other parts of the world.
“One country unit wouldn’t scale it for another. So we took it on, to scale it in a separate business area where we could apply different policies,” explains Haesaert. DealWise launched in Germany, and became the platform that powers the Deals+ in Belgium, this spring. Another shift in ING’s innovation management is seeing the potential in former rivals to be friends: “It’s not always the other bank that is our competitor out there,” observes Haesaert.
Cobase, for example, was spun out as a consortium initiative. The multibank platform solution, providing a single point of access for corporate customers, operates at arm’s length from its main shareholders (ING, Nordea and Crédit Agricole) after ING concluded that it wouldn’t make any sense to scale the initiative on its own. Belgium’s digital identity service, Itsme, is another that demanded cross-industry co-operation. ING partnered with other banks as well as telcos, in this case, to bring forward the app, which replaces multiple passwords and security tokens with a single virtual token and PIN for accessing a range of banking and non-banking services.
Fintechs are also valued, not just for their technologies, but as potential partners.
“We have an active fintech scouting team,” says Haesaert. “We ask ourselves how we can use those fintech propositions and embed them into our core. Banks should be a bit more like car manufacturers. We should become the assemblers of components that somebody else has made.”
In a big bank, there is often an institutionalised incompatibility between innovators on one side – the passionate individuals feverishly generating great ideas, but who have no idea how to build them into a business – and executives and directors on the other, who must sign off investment in the idea for it to scale further, or strangle it in infancy.
As Stephen Hartgers observes: “The first thing managers at the top are looking for is ’how can we de-risk the project?’. And that’s almost counter-productive to the whole innovation methodology.” Mobiquity’s job, in part, is to resolve those internal business frictions by looking at the organisational alignment; the way products are ideated and developed. There’s no point having a rapid methodology for market testing and ideas analysis, for example, if it’s going to take 10 weeks for decision-makers to green-light the next stage.
“It’s not guaranteed that all the board members understand the concepts that we are accustomed to within these innovation hubs, like the methodology of agile for decision-making,” says Hartgers. “Innovation is all about speed, so anywhere you lose it, there’s opportunity to improve the process.”
Mobiquity conducted research into how banks in the Netherlands were organising their digital innovation and came up with two broad conclusions. “The first is that if the motivation for innovation isn’t aligned across the bank, it’s very hard for the teams to come up with ideas that get approval at board level. The second is, you really have to look at key performance indicators (KPIs) to drive the right behaviour, both across the innovation hubs and the business that’s going to adopt the innovation – KPIs to manage risk, for example,” says Hartgers.
So, what are the key takeaways for generating more speed and less friction in the innovation management process?
“New business models, disruptive innovation… don’t do that in the core. People will need to de-risk it to the degree that they’ll lose the opportunity of what they are trying to do. So, they need to do that separately,” says Haesaert. “They also need to know why they are innovating. Agree the area where there’s a big opportunity or a big threat. That’s the concept of our value spaces. We have one around disruptive lending, for example, because there is so much happening in the lending sphere, from crypto, to the front end, to AI. The bank realises this is something we need to own, so ING Neo has the mandate to go all-out on disruption.
“Another error we see people making is that they don’t fully understand the customer problem before they start thinking about the solution – even building the solution. In our governance – not only in the labs, but also in the core business – we try to avoid this jumping to conclusions, by requiring teams to do their homework first. Understanding the problem requires discipline from the user experience design and customer journey experts, tribe lead, but also the executive member that has to sign the cheque.
“Finally, try to make it a repeatable process. Innovation isn’t about having one lucky big shot, although we all hope we find that unicorn; it’s about methodology, leadership, governance and organisation.”
For Hartgers, banks should ‘learn by doing, adjusting what is not working in the innovation process’. “If they enter a stage where it’s not clear who is facilitating the next step or they are not taking care of the approvals fast enough, maybe that’s what needs solving. So, also dig into problems in the innovation management cycle and come up with pragmatic solutions.” In other words, apply the concept of innovation management to implementing innovation management!