Blog 4: Is It The Time to Build?

Marc Andreessen, founder and venture capitalist, generated energetic debate this week with his latest essay. Called ‘It’s Time To Build’, it makes a passionate case for a restatement of the American dream and using the current crisis to redirect effort towards that dream. He argues that through aggressive investment in new products, industries, factories, science, and in big leaps forward, we can ‘build’ solutions to the biggest challenges in housing, education and healthcare - as well as solving less ‘rocket science’ problems like lack of medical equipment and lack of systems to disburse financial support. While Andreessen’s scope is broad ranging and speaks to the purpose and activity of a nation, it prompted me to ask questions about the more specific worlds of banking and payments. In particular, when is the right time to innovate and what should we be innovating on?

The ‘when’ question is possibly easier to answer. Having worked in innovation for some years, one thing I have learned is that there is no good time to innovate, just as there is no good time not to innovate. On the positive side, at any point in the economic cycle, innovation efforts can be spurred by a visionary CEO with a talented ExCo and the support of an understanding Board. Equally, at any other point, innovation can be curtailed by the pressures of running an organisation, such as the need to meet quarterly financial targets. This cadence is a fact of life for an innovator in a business environment.

Of course, the pressures are different at different points of the economic cycle. At the crisis point where we are now, many companies and people are simply fighting to survive, both physically and financially. However, we also know that some of the greatest innovations have been borne out of adversity and extreme situations such as war and disaster; for example, the first computers, radar technology and the mass production of antibiotics, amongst many others. I think the reason for this is two-fold. First a crisis forces extreme clarity on what is and what is not important. Second, there is the willingness from government, authorities and business leaders to reassign resources (people and financial) in sufficient quantities to really drive those initiatives forward - resources that they would have struggled to attract in quieter times.

Being at the heart of a major bank through the global financial crisis, I saw both factors at work in the utter commitment of those in the firm to ensure its survival. The financial crisis taught us some important lessons about the need to focus on balance sheet financial strength, as well as the need to focus on doing things that were truly meaningful for our customers and clients – and to stop doing the things that weren’t. Yet, these types of insight tend to dilute over the passage of time. People’s memories are short and good intentions can fall prey other business imperatives like the desire to ‘make plan’ - a classic temptation in banking (for example) is expanding a balance sheet faster than its organic capital generation can support. The lesson from the global financial crisis is that window of innovation opportunity from a crisis is a finite one and that opportunity must be actively seized if change is to happen.

But what to build? One way to answer this question is to think about the things that we wish we would have built, had we been born earlier. I’ve heard commentators say there is little innovation in payments. I think the opposite is true, and in fact there’s been more change in payments in the last 100 years than the previous 1,000. Take the first cards and acceptance capability in the UK in 1966 pioneered by Barclaycard: it was explicitly developed and marketed as a radical new way to pay, to replace cash and cheques (partly due to the excellent Leslie Priestley, first Head of Marketing - later CEO of TSB Bank). Or the card schemes Visa and Mastercard and the banking network SWIFT, achieving global electronic interoperability and ubiquity. More recently, instant payments. And now contactless and mobile payments – whose growth is being propelled by the current crisis. All these innovations were not an incremental widget but made a meaningful difference to people’s lives and created business opportunity (and as such, could be commercialised).

Of course, it’s easy to say that we want to develop meaningful innovation, and much harder to actually do it. Having a great understanding of where we are innovating: the market and competitive dynamics, together with consumer and client behaviour trends, is necessary but just a start. We need to bring innovation successfully into a company context. In other words, innovation needs to be relevant to what a business wants to achieve. And in order to do that, the business itself needs to know what it wants to be. One of the many smart things Professor Alf Rehn does in his recent and recommended book ‘Innovation for the Fatigued’, is to link innovation with company purpose. Whilst much has been written about purpose-driven leadership, the ‘purpose’ I’m talking about here is relatively simple: it’s the company knowing what it wants to achieve and what it’s place in the world is. Purpose is vitally important to an organisation and an adverse situation can cause that to be articulated with much greater clarity. I recall working with Antony Jenkins back in 2010, soon after the financial crisis and before he became Barclays CEO, as we sought to redefine the role of the retail half of the bank. The  purpose developed – ‘Lives Made Much Easier’ – captured a truth about the role that banking plays in people’s lives (people want to buy a house, not get a mortgage, for example) and also Barclays role in achieving that. As a result, that clear purpose, and the strategy that underpinned it, strongly resonated with our colleagues and gave renewed energy to a bank needing a new direction following an existential crisis.

If a company knows what it wants to achieve and what it’s place in the world is, then strategy and innovation also become much easier. Without purpose, innovation risks become incremental or just ‘playing’. With purpose, though, the corporate strategy becomes the way that the business will realise its purpose over a specific time horizon and defines the choices it makes in doing that. Innovation can then explicitly align with both the purpose and the strategy, and become the way to accelerate achievement of both. As a result, innovation becomes an essential engine to achieving the strategy and at heart of what the company is seeking to do and become. Alf Rehn quotes Bempu, an Indian company that manufactures low cost bracelets to monitor the temperature of newly born babies; the tagline for its purpose is ‘Simply Saving Lives’. Just as Bempu is doing in healthcare, so we can do in banking and payments. The opportunities and challenges are just as big and, if you believe, as I do, that going forward financial services will be embedded in everything we use, it’s no less important to society. It’s time to build the next generation of payments.