In today’s ever-changing business landscape, where companies need to try and stay ahead of their competition, innovation should be one of the most important focus areas. According to strategy consultant BCG, innovation indeed is a top-three management priority for almost two-thirds of companies. This is however the lowest level since the financial crisis in 2009 and 2010—perhaps reflecting the uncertain economic outlook amid geopolitical tensions and the outbreak of COVID-19. In a world where every industry is becoming a technology industry tech driven companies are the innovation leaders. Silicon Valley investor Marc Andreessen phrased it like this “Software is eating the world”, and now AI is eating software. And indeed, according to BCG, world’s most innovative companies are technology and software savvy companies like Alphabet, Amazon, Apple, HP, IBM, Microsoft, Samsung and Toyota.  They have been leading the global innovation play for almost 15 years now which is reflected in their impressive financial performances. So, if the strategies of these innovation leaders have been successful for fifteen years now and there is no incentive for them to change their strategies, what could bank leaders learn for their own strategies to break through the Nash equilibrium? The Nash equilibrium is a concept within statistical game theory where the optimal outcome of a game is where there is no incentive to deviate from their initial strategy.

Innovation lessons from big tech

First of all, great innovators have a mission that drives innovation from the top. Amazon CEO Jeff Bezos has spent nearly half of his life inventing and revolutionizing e-commerce. Alphabet founders Larry Page and Sergey Brin had the mission to organize the world's information and make it universally accessible and useful and they did. Apple’s mission to revolutionize customer experience by bringing the best user experience to its customers through its innovative hardware, software, and services brought the company to all kind of new market disruptions. But also, innovation leaders from Asia thrive on their mission. Samsung devotes all human resources and technology to create superior products and services, thereby contributing to a better global society. There are multiple stories known that the recently passed away owner Lee Kun Hee throwed away thousands of products during site visits at Samsung factories as they did not comply to his high set quality standards. And Toyota strives to lead the global automotive industry, especially through design and innovation that address current trends and customer preferences. Not mentioned in the BCG list of innovation leaders, but in my opinion other companies to follow are Alibaba and unicorn fintech banks like Monzo and N26. Alibaba's overarching mission is to make it easy to do business anywhere and at any time, Monzo makes money work for everyone and N26 is building world’s first digital bank, centered around you!

What we learn from the mission of world’s innovation leaders is that they are customer obsessed rather than competitor focused. They all think longer term and want to contribute something big to the world. Easiest buying of products, easiest access to information, most convenient access to internet and software, superior products and technology, best fit cars for customer preferences, most convenient money matters. And they all do it in a scalable way through technology and software.

World’s most innovative banks have also been adopting these lessons. BNP Paribas embraced a partnership with Silicon Valley accelerator Plug & Play to bring innovation across the company. The program has been led by Jacques d’ Estais, the banks Deputy chief operation officer and Head of international financial services and was run from innovation hub Station F in Paris. A fantastic program that in my opinion in its set up can be a guiding example for financial innovation. Recent research also shows that innovation leaders differentiate from others by their use of artificial intelligence, external innovation channels such as incubators and academic institutions and properly digitized processes. They listen to their customers through data, use artificial intelligence to find new solutions and services and disrupt markets by doing that. They survived the so-called AI-paradox which is the ease of achieving powerful results with AI-pilots and the difficulty of replicating those at scale. But it also helped them to succeed in making innovation successes replicable and transform the opportunities into large sources of revenue. In the recent years these cultures of listening to the customers through data transformed them into boundary bursting innovators. Amazon and Alibaba entered the consumer and business finance and software markets, Apple revolutionized traditional markets like music and gaming with their software and Samsung and Toyota are in all kind of different markets. Also, innovative banks like Barclays and BBVA acknowledge this innovative power of data and AI and appointed a Chief Data Officer on their board of directors. However, most banks lack a well-developed competence of creating sustainable high impact value with data and AI.

Drive, size & skill

The ambitious mission, innovation leadership from the top, obsession for customers and data driven customer led-boundary bursting innovation are lessons to be learned from these innovators. However, their passionate innovation culture also stands out and binds all the above tight together. Innovation cultures with a drive to move first, experiment constantly and fail fast binds all of these assets together. It creates an outside oriented culture of finding and realizing high potential scalable ideas. It helps them to invest big and easily build eco-systems and platforms that revolutionize markets and improve their solutions and services to their customers. An example from the banking market comes from ING. The Dutch market leader changed its company culture a few years ago. The bank fully embraced the (Spotify) agile way of working across the retail bank. The bank benefited by growing its results and digital market leadership in the Netherlands.

Strategy change to break through the Nash equilibrium

BCG research again shows that 56% of financial institutions globally are committed innovators. This is a 11% higher percentage than the benchmark across sectors. A lot of them embrace partnerships and try to build eco-systems. However, the lessons from global innovation leaders teach us that sustainable market leadership cannot be captured by just connecting to the outside world through an accelerator or other program or changing the company culture. It rather is a strategic combination of art and science that can only be captured by linking obsession for customers with an inspiring and ambitious mission, innovation leadership from the top, data driven customer led-boundary bursting innovation and an innovative company culture. Financial institutions have to adapt their innovation strategies fast now as disruptive innovations from smart tech players come to the financial markets. It’s a battle on volume in segments with sustainable customer value that urgently requires business model innovations from financial institutions. The only way to win is to fundamentally change the innovation strategy and break through the Nash equilibrium big tech is causing.