Innovation Needs to Be Made, Not Just Adopted
Adopting new technologies, implementing innovation, digital growth; however you’ve heard it, it’s always about progress by’ getting with the times’. According to Joanne Smith, CEO of TCC Group and Recordsure, it’s more about creating the innovation than making the most of a new thing.
For most companies, innovation is something that is adopted. Executives often boast about how implementing new technologies demonstrates their company’s commitment to innovation. But this outlook sees innovation as the domain of technology companies, whether scrappy startups or brand-name behemoths with their vast research departments. In this view, technology companies create the products that allow others to become innovative in a transactional way, by purchasing and adopting new technologies.
For the first decade of my journey as a CEO and entrepreneur, I thought of innovation in this transactional way. I founded TCC in 2000 as a specialist consultancy helping financial institutions in the United Kingdom comply with Financial Conduct Authority (FCA) regulations and improve their culture and conduct. Not long after TCC was established, our banking and insurance clients became seemingly obsessed with “innovation”. The digital revolution was in full swing, and executives were asking us how we could support their efforts to innovate. They also demanded that we prove we were innovative ourselves. Innovation became an important benchmark for evaluating every strategy or operational decision, even around issues of regulatory compliance. After all, the regulators (then called the Financial Services Authority) themselves were grappling with the implications of rapid digitalisation in financial services and seeking innovative solutions.
Digitalisation in financial services proved so rapid, and regulators had proven so quick to reimagine regulations, that banks and insurance companies had a genuine need for new solutions. The costs of compliance rose sharply following the failures of the financial crisis, and compliance teams struggled to allocate their energies efficiently. Clients were demanding that we help them decide which technologies they should adopt. Innovation continued to be seen as something to be adopted, just more urgently than ever.
At TCC, we knew that many of our competitors were responding to these client needs by incorporating more advice about technology implementation into their consulting practices. Their marketing attested to the supposedly innovative outlook of this advice. But this approach towards innovation felt insufficient. Consultants promising innovation were mostly suggesting off-the-shelf solutions, which, when implemented by clients, only satisfied their minimum requirements. Innovation was really achieved in name only– a tick in the checkbox. By 2011, the push for innovation had become a real dilemma. We knew the financial sector was seeking to demonstrate innovation in compliance, but the onus to create innovative solutions had fallen to technology companies that were still a long ways from prioritising the regulatory niche. After a wave of historic fines for compliance failures, major banks were drawing up plans to spend billions on compliance and risk controls. But the market offerings remained sparse. It became clear that in order to bring transformative results to clients, we needed to stop seeing innovation as something to be adopted from others, but rather something that we could create ourselves.
That year we took a radical step. We established a sister company to TCC called Recordsure, which would develop a package of regulatory technology that would truly meet the needs of our clients. We hired software engineers, computer scientists, computational linguists, and data experts. We began an extensive R+D process, working for four years to develop an end-to-end software platform that is unlike anything on the market and thereby truly innovative. Today, this platform is used by major financial institutions who can adopt a technology that delivers more fully on the promise of innovation to reduce costs and improve outcomes.
Our experience can and should be replicated by others. Business leaders across sectors need to disabuse themselves of the idea that innovation is the natural domain of small startups and technology giants, who create the solutions that others adopt. There is immense potential for innovation among medium-sized enterprises, event those with no experience developing technology. These companies are small enough to possess a first-hand understanding of an unmet need in a particular sector or industry, but large enough to invest in the research for and development of a new product or service, incubating an idea. The combination of these two traits made TCC ideally suited to actually create, and not merely adopt, innovation. In this regard, TCC was not unique. After all, the fundamental requirement for innovation is a deep understanding of the problem that needs to be solved. Development talent can be hired, but an acute awareness of why and how technology should be implemented is rare, particularly in niche sectors. Importantly, ventures developed from medium-sized firms are also attractive for financial investors, who appreciate working with an enterprise that is both proven and stable, but not so large as to be difficult to engage. The Business Growth Fund invested in the development of Recordsure for precisely this reason.
Today, I am the unlikely CEO of a technology company. With hindsight it is clear to me that the principle barrier to becoming a tech CEO was my mindset. Many chief executives incorrectly believe that because of a niche focus, the modest size of their business, or their lack of technology experience, they can only innovate by adopting the offerings of others. In reality, these business leaders can be the originators of innovation themselves. If just a tiny fraction of non-tech business leaders were to recognise and act on this potential in their own sector, the results could be truly transformative.