Expert analysis from Aileen O’Toole, Chartered Director and a Digital Strategist.
A new relationship with the word failure is needed on the part of many business leaders – one that recognises its importance in creating the type of corporate culture necessary to remain relevant and competitive in the digital economy.
In sectors such as financial services, risk aversion and tight controls are inevitable, given regulatory compliance, legacy IT systems and traditional processes. This can result in delays in identifying and responding to customer needs and increasingly cedes ground to new digital competitors which have a relentless focus on what the customer wants.
Need a hassle-free way to split a bill electronically with friends on a night out? Want a more intuitive, cost effective way to manage your finances through your smartphone? Seeking a simpler way to integrate online payments into your website?
These and other customer needs have been identified and are being met by digital businesses such as Revolut, N26, Stripe and countless others. The culture of these businesses set them apart from their legacy competitors – their customer-first mindset, their obsession with speed to market, their non-hierarchical and collaborative styles of working and also their test-and-learn practices.
Failure does not have the negative connotations it so often has in traditional businesses – instead it fuels the culture of experimentation. Using failure as a learning opportunity is one of the components of agile, the iterative project methodology. Agile teams, typically small and multi-disciplinary, are tasked with developing a solution, or a component of a solution, to launch or help improve a product, service or indeed a business model.
They understand the customer requirement or pain point and decide on priorities. Then through slim or non-existent project documentation, rapid prototyping and a tight feedback loop they launch a limited product or service and conduct some real testing with customers to see if it works. If it doesn’t, the solution may be refined and relaunched – or even totally abandoned.
Agile, along with the leadership styles evident in digital start-ups, appeals to leaders in traditional businesses who can be frustrated at the slow pace of change and how high ticket IT projects sometimes don’t deliver on objectives.
We’ve seen banks and other financial institutions either buying or partnering with fintech businesses, as much to seek an injection of fresh thinking and innovation as to access the technologies they’re developing. Such acquisitions or partnerships don’t always work – and the evidence suggests that clashes in corporate culture are often responsible.
Nowhere is that more evident than when it comes to their attitudes to failure. Few traditional businesses are likely to have the same type of risk appetite as a start-up, but I would argue that the leaders in such businesses can still learn from the disruptors in their approach to failure.
They can help create the type of culture which encourages their teams to experiment within certain boundaries, without fear of failure. They can involve risk and compliance departments early in the innovation process. And also they can make earlier decisions about jettisoning IT and other investments that aren’t delivering the expected results. That doesn’t always need to be interpreted as a painful write-off.
GE is being transformed from a conglomerate to a technology-driven company. Its former CEO and chairman Jeffrey R. Immelt wrote in the Harvard Business Review that energy storage and solar technologies are critical to GE’s future. “Pursuing them hasn’t been easy. In the past five years we have written off more than $300 million of our investments in battery and thin-film solar technology. This is not failure; it has made us smarter.”
Aileen O’Toole is a Chartered Director and a Digital Strategist. She can be reached through www.aileenotoole.ie.