When It Comes to Innovation, Find Your North Star

Finger touching symbols of interconnectedness

In the digital age, we tend to gravitate toward shiny objects.

In fact, many of today's top fintech companies have built their entire strategic vision around a shiny product or concept – like digital wallet, E/Mcommerce, smart terminals, dongles, biometrics, wearables, beacons, tokenization. And the list goes on.

Yet with few exceptions – PayPal, Venmo, Square – new disruptors have come in with big money, bold ideas and Silicon Valley smarts, but have been unable to come up with a repeatable model for success. And most big banks that made large investments in digital and mobile have similarly fallen short.

While many blame this on the fundamental conservatism of finance, I believe in their zeal for first mover advantage, many banks started to run toward a shiny object before we actually knew where – let alone why -- we were running.

During my 20+ years in the industry, I've worked across many different areas, from finance to high tech, from eCommerce to mobile payments, from product development to sales and marketing, and here's what I've discovered. There are many different paths that will take you from point A to point B and from point B to point C and so on, but the key to success is to identify point Z – or what I would call the North Star -- before you start your journey.

I believe this is why fintech has yet to radically transform banking. It certainly isn't for lack of capital. Global fintech investment was more than $17B in 2016. Yet despite the hefty cash infusion, what we've witnessed is a step change rather than a sea change.

So how do we alter the calculus?

We, in banking, have a lot to learn from our Silicon Valley peers, both from their successes and failures. So what do companies like Google, Amazon, Uber, AirBnB, Facebook and PayPal have in common?

First, they aspire to solve a basic human problem by focusing on a single concept like how to search online, buy something with one click, find a ride, rent a place to stay, connect with friends or pay without a credit card.  Then they build a user base. Only later down the road do they determine how to monetize their user base. This is their North Star.

They typically build from the bottom up. So, instead of targeting a consumer segment higher up in the food chain, like we tend to do in banking with our relentless focus on the affluent, they create a basic value-add product or service that's accessible to the largest base of prospective customers.

By contrast, the traditional banking model begins with developing a product idea, constructing a product margin and monetization model, then identifying appropriate customer segments (typically at the upper end) and, lastly, going to market.

Bottom line: Disruptors in other service industries and ours are doing something very different than the rest of us. They're not playing the same game we are. And their game is winning. And even when they fail, they fail fast and start again.

So, whether you're in finance, payments or the larger world of commerce, if you are architecting your innovation journey, before you hit the ground running, I suggest you take a step back and find your North Star.

Then with a little luck and a lot of discipline, you may become one of the creative disruptors who transforms the industry AND lives to tell about it.

John Thomas is Head of US Payments and US Data Strategy at TD Bank

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