A Recap of Celent’s Recent Innovation Form on Innovation and Digital Strategies in Tokyo, Part 2: Panel Discussion
This is the second and final installment recapping the Celent Innovation Forum in Tokyo held on October 17.
In the panel discussion following the keynote address, titled “Digital Strategies in Financial Services: Challenges and the Future Landscape," three expert panelists from the financial and IT sectors enthusiastically shared their thoughts on innovation initiatives, their implementation, and the outlook for the future. Although focused on banking services and retail payment services, the impassioned discussion drew on their respective expertise in mobile banking, M-POS (mobile point of sale), and cloud services, reflecting their enthusiasm for innovation and progressive initiatives.
After providing a brief overview of their companies and business operations, discussion turned to topics including digital banking payment services as well as factors accelerating and hindering the adoption of digital services. Below are some of the many noteworthy panelist comments.
“The more innovative services are the more prone they are to trigger friction with existing values. Overcoming the resulting this conflict and unease is a very important element. Innovative services with a capacity to disrupt are to be offered after the communication and similar efforts necessary have been taken to resolve these.”
“There are limitless ideas and hints that can be found, but often the biggest obstacle to achievement is inside your own company or yourself. The key to success is how organizational leadership and individual passion can be sustained to achieve specific goals.”
“The position of banks gets increasingly challenging as diversification continues in the payments business. Banks need to take into consideration the entire ecosystem and consider group partnerships and synergies in light of their roles and strengths. The yardstick for making decisions should be whether taking an action will create added value for customers.”
“A company’s business domain is the key to success. The refrain ‘make commerce easy’ means enhancing the all-around efficiency of a customer's business by increasing the time spent discussing products and communication with customers—two factors traditionally at the core of doing business. Moreover, as new services are designed one after another, companies should ensure that they do not stray from their area of business.”
“Our company is a technology company and we design payment services rooted in innovative technology. The spread of advanced technology to all corners of the industry will make it possible to offer services to everyone. That is the vision of our company.”
“The keys to success will be the pursuit of convenience, security, and superior design. Toward that end, you need to look at things from the simplest perspective and build services from scratch. In financial services, people tend to think that if an approach differs from historical ways of doing things, then it is inherently dangerous. That is a mistake. Why assume that existing methods are safe?”
“Cloud services have the potential to dramatically impact the world—dramatic in the sense of fundamentally changing the people’s lives and making them wonder how they ever lived without them. We can learn about these possibilities from other industries.”
“Companies that move from the theoretical and the drawing board to implementation are the companies that will succeed. In that process, companies can confirm the core value and effectiveness of their business. In today's world, a company can't maintain competitiveness without technology driving the business.”
“The cloud is an avenue for initiatives to tackle current-day business challenges, such as tackling unforecasted surges in traffic and global expansion in addition to the initial core-value focus, in particular from the perspective of mitigating failure costs.”
“Apple Pay will be embraced as a payment service that has sought to provide added value. At the same time, it is fair to expect that it will also highlight differences between social and commercial practices internationally and in Japan.”
“The establishment and destruction of ecosystems are key. Apple is always undertaking new challenges. Disruptive innovation in the music industry has changed more than the structure of the industry—it has also fundamentally altered the lifestyles of consumers. What is going to happen when it comes to retail payments?”
Celent believes that the three panelists embody the spirit of what it means to be an innovator in that they do not rest on their laurels or grow complacent after success, instead looking ahead in pursuit of the next project, heightened improvements, or further growth. The panelists were visibly united in their passion for innovation. Moreover, the panelists’ shared enthusiasm for implementing innovation and leading their teams to innovate helped to shed light on the essence or the “DNA” of what it means to be an innovator. Innovation is people-driven evolution. The event proceedings all served to reinforce anew that skillfully harnessing digital technology and developing digital services innovation are people-driven endeavors and that the “expectations and ambitions” of people are of the utmost importance.
Finally, we would like to express our deepest gratitude to everyone who participated in the event and particularly the panelists who took time to share their opinions and expertise. Celent hopes that this event was both educational and inspiring, and that it will prove a catalyst to further innovation.
The discussion in Tokyo was carried over to innovation roundtables in Singapore and Australia. Celent will continue to work with leaders in financial innovation in Japan and in Asia to discover and illuminate cutting-edge thinking in the industry.
A Recap of Celent’s Recent Innovation Form on Innovation and Digital Strategies in Tokyo, Part 1: Presentations
On October 17, Celent hosted the Celent Innovation Forum in Tokyo. We will be posting a two-part recap that covers the key points of the event.
Keynote Presentation 1
The core message of this address was that the current ecosystem is changing and market players need to respond. The business environment is fueling change against a backdrop in which external pressures and factors such as consumer experience and expectations, economic deterioration or improvement, regulation and drastic changes to the competitive environment amplify existing pressures—such as pressures to grow revenue and cut costs. As such, players in the banking and financial industries need to modify their business models through changes in channels and architecture as well as innovation.
At the event, Celent introduced relevant cases from around the world addressing the below three themes in the context of digital and omnichannel frameworks and banking technology—two themes that Celent has consistently advocated.
- Digital and omnichannel
- Innovation and emerging technology
- Legacy and ecosystem migration
After touching on the latest technology trends, including Apple Pay and Bitcoin, the presentation addressed the importance of innovation in the context of Celent’s conceptual framework of creative destruction.
Fig 1 Digital and Omnichannel Framework
Keynote Presentation 2
This presentation examined innovation initiatives in Japan’s financial services industry focusing on the below four retail payment areas.
- Traditional payment methods including cash, credit cards, and debit cards
- Second-generation payment methods such as electronic money and prepaid cards
- The most successful e-commerce payment services
- Omnichannel initiatives that cuts across the above three categories
What emerged as common to these four areas was that the key to success in innovation is the proliferation and use of digital technology, ecosystem creation, and the advancement of open innovation. In particular, the below five points were presented as areas that should we receive prompt attention.
- Card payment information multiview and control
- Value-added offerings that leverage card payment services
- Real-time transaction alerts
- Advisory services based on transaction data analytics
- Social media integration
Fig 2 Japan’s Financial Services Industry focusing on four Retail Payment Areas
セレントは、2月の「ラウンドテーブル：Making Innovation Happen」、6月の「イノベーション＆インサイト・デー」に引き続き、10月17日、「イノベーションフォーラム」を開催した。
「事業ドメインが大切。“Make commerce easy”とは、お客様のビジネスを全方位で効率化し、本来の商取引の根幹である、お客様との会話や商品についてのコミュニケーション時間を増やすこと。次々と開発される新サービスも、この事業ドメインから決してぶれない。」
図 3 音楽産業における、ディスラプティブ・イノベーション
出典：Henry Chesbrough, Open services innovation, セレント
セレントは、2月の「ラウンドテーブル：Making Innovation Happen」、6月の「イノベーション＆インサイト・デー」に引き続き、10月17日、「イノベーションフォーラム」を開催した。
図 1 デジタル / オムニチャネルのフレームワーク
図 2 日本のリテールペイメント市場における主要決済手段の区分
Celent hosted Innovation & Insight Day Tokyo on June 5. Following the event presentation titled "Digital Financial Services and New Innovation Initiatives," which focused on Celent's innovation survey results, a panel discussion was held.
This is the second in a two-part report providing an overview of event proceedings.
Five leading experts in Japan's financial industry joined the event as panelists. Celent would like to offer a heartfelt thank-you to these individuals for taking part despite the pressure and the presence of competition and many disclaimers. The panelists’ wealth of experience and sheer passion for innovation was palpable and the content thought provoking. Above all, the impassioned and experience-informed comments of panelists displayed the confidence of Japan's financial industry. Below are some of the more salient comments that demonstrate the spirit and mindset of innovators in Japan.
What motivates your firm to innovate?
- "Responding to customer expectations."
- "A backdrop of growing user needs and the proliferation of technology and the environment to meet these needs."
- "Our objective is to remove all inconvenience from the customer experience."
- "We aspire to offer financial services that achieve exactly what people feel they need and consumers think they want."
- "Innovation is the lifeblood and fate of a corporation."
What drives innovation at your firm?
- "Aligning innovation objectives and technology employed."
- "Integrating technology and compliance is important."
- "Amplifying the motivation and drive of each employee to take action."
- "Reflecting the intentions of management."
- “Resisting the temptation to seek short-term growth.”
- "Supporting management philosophies that bet on uniqueness."
The threat and opportunity of disruptive innovation
During the proceedings there were questions and opinions from participants exchanged with the moderator:
- "There is no special opportunity for innovation. It is important to reflect innovation in daily management. That is something that we have done since we started our business and something that we will continue to do. Innovation is simply naturally part of what we do.”
- "We do not see disruptive innovation as a threat. Rather, for the development of the industry as a whole, the kind of shakeout such innovation entails is necessary. We will undergo challenges and survive—and look to take on more such challenges.”
Celent concluded the event with the below message.
Managers: Have faith and confidence in innovation
The importance of leadership and management responsibility in innovation is self-evident. At the same time, innovation is a mid-to-long-term journey—more a marathon, than a sprint. Failure is sometimes to be allowed. In addition, it is not uncommon to destroy a corporate culture that has been fostered over many years. An intense commitment to innovation on the part of management itself is required. Technological drivers continue to advance and case studies of successes only increase. Mangers: Be confident.
Distinguish between disruptive innovation and kaizen (improvement), and the need to tackle the former
The greatest factors hampering the progress of disruptive innovation are not to be found outside a company but within it. Especially within large corporations, where tendencies such as the below are seen; conversely, these tends to derail innovation. These tendencies include the following.
- Compared with start-ups and small or medium enterprises, large firms boast a wealth of capital and business resources.
- In particular, these resources include human resources and technology, which can be channeled to R&D.
- These companies often have business operations that require 360-degree management and much competition
- Such firms are often home to isolated “black sheep” employees that seek to innovate.
If you neglect innovation, cannibalization can be expected to take place not only in your core business areas but in new businesses as well. To keep innovators from being ostracized as black sheep, it is important to clearly distinguish between the accumulation of kaizen (improvement) on a daily basis in core operations and disruptive innovation, and, in particular, it is important to direct management and initiative toward the latter.
Initiatives and leadership that are not negative contribute to positive value standards
Of course, trusting in your management resources, in particular in your personnel and technology, and putting effort into your business battles over “invisible continents,” “immeasurable risk” and “non-consuming consumers” is important. However, in such challenges when results do not appear with time, then you should not underestimate the power of disruptive innovation. Furthermore, it is key “to always be positive.” Leadership and initiatives that acknowledge and embrace diversity and difference and that do not deny any possibility are needed.
Today no industry or industrial structure is immune to change and, like plate tectonics, the ground around us is always shifting. Digital technology is doing more than changing products, services, consumer experiences, and expectations; it is also radically changing value chains and business models.
Until now, Japan’s financial industry has developed by virtue of outstanding leadership and the agile introduction of technology. Celent would like to emphasize anew the importance of innovation to Japan’s financial industry, buttressed as it is by people and technology. The results of Celent’s recent innovation survey hinted at further reform to come in Japan’s financial industry. When it comes to innovation, now is an opportune time for commitments from top management and fresh initiatives from technology vendors.
Undertaking this innovation conference was a major challenge for Celent Tokyo. However, any undue anxiety completely vanished amidst the enthusiasm of survey and event participants. The Japanese financial industry is extremely positive and enthusiastic when it comes to innovation. Celent would like to express its deep gratitude to the professionals in the financial industry who took time to participate in this event in various capacities, and we hope that it will prove in some way useful to your continued success.
Fig. 2 Structures to Support Innovation: Financial Services Institution / Vendor Comparison
Source: Celent Innovation Survey 2013/2014
On June 5, nearly 120 individuals from Japan's financial sector and the financial technology sector gathered to participate in our Innovation & Insight Day Tokyo 2014. This is the first of a two-part recap providing an event overview and recounting event highlights.
The first keynote address compared the May 2014 Japan Financial Industry Innovation Survey with a similar global Celent survey conducted last October. This comparison pointed to two existing gaps.
Gap Number One: A Leadership Gap
1. Perception of the importance of innovation
"The next few years innovation will be extremely important. Customer expectations are changing very rapidly and it is crucial to act so as not to fall behind." The ratio of respondents who agreed with this statement was similar in Japan and globally as shown below.
- Global: 79%, Japan: 81%
—Conclusion: There can be no doubting the importance of innovation.
2. Leadership and innovation initiatives
"Our firm has an individual in charge of innovation (a chief innovation officer)."
- Global: 11%, Japan: 7%
"We have an organization in charge of innovation (center of excellence)."
- Global: 27%, Japan: 7%
"Innovation-related leadership relies on proponents at the CEO level."
- Global: 62%, Japan: 85%
—Conclusion: There was a clear lack of leadership among top management when it comes to innovation initiatives.
3. Three significant impediments
Global: 1) Daily work operation routines, 2) Internal habits and practices, 3) Inadequate support system.
Japan: 1) Internal habits and practices, 2) Lack of senior management support, 3) Daily work operation routines.
—Conclusion: Both globally and in Japan, in contrast to the high levels of awareness of the importance of innovation, at financial institutions there was a distinct lack of leadership.
Gap Number Two: Gap Between Financial Institutions and Vendors
The Japan survey asked both financial institutions and financial solution vendors about innovation-related initiatives. Responses indicated another gap here between financial institutions and these vendors.
1. Years promoting innovation
There was no significant difference between financial institutions and vendors, with both recording similar figures:
- Three years or less: 54%, Five years or more: 30%
—Conclusion: Financial institutions seem to interpret the fact that technology-supplying vendors possess approximately the same level of experience as themselves as meaning that innovative initiatives cannot benefit from sufficient experience.
2. Organizational and structural
"A chief innovation officer has been appointed"
- Vendors: 24%, Financial institutions: 7%
“Have established a center of excellence”
- Vendors: 14%, Financial institutions: 7%
"CEO-level proponents of innovation are relied upon for leadership"
- Vendors: 67%, Financial institutions: 85%
—Conclusion: With a slightly lower degree of reliance on upper level management for innovation leadership, vendors are slightly superior.
3. Departments that lead innovation
- Business departments lead: 30%, IT departments lead: 11%
Vendor innovation proposals:
- Directed to business departments: 14%, Directed to IT departments: 17%
Undertaking initiatives in both business and IT areas:
- Financial institutions: 59%, Vendors: 69%
—Conclusion: There is a visible gap between financial institution innovation IT initiatives and vendor business sector initiatives.
4. Digital financial services initiatives
There was also a visible gap when it came to the priority level of digital financial services (innovative financial services that harness digital technology) as advocated by Celent.
- Financial institution priority areas: Process improvements, transaction feature enhancements, product and service customization
- Vendor initiative areas: Three sectors were overwhelmingly dominant: big data, mobile two-way communication, omnichannel
—Conclusion: Survey results indicated a general tendency for financial institutions to be more conservative and vendor proposals to be more aggressive.
What exactly is this gap and what does it signify? This gap is between the proposals of vendors that feature the newest or hottest technology and the initiatives of financial institutions, which have yet to recognize the advantages of or are still evaluating such technology or technological initiatives. At the very least, currently it is easy to see that, unfortunately, vendors and financial institutions are not yet on the same page when in comes to what they are looking for in initiatives. Moreover, it could be that even if new technology is applied incrementally (to drive improvement) it could also prove to be a driver of disruptive innovation.
In addition to responses that can be numerically tabulated and analyzed, the survey also allowed participants to articulate freely their own invaluable opinions. A more detailed analysis of this survey and examination of innovation in the financial industry in Japan will be available in the upcoming Celent report "Innovation in the Japanese Financial Services Industry: The Gap between Management and Initiatives." Please be on the lookout for it.
Fig. 1 Comparison with Other Industries: Global / Japan Comparison
Compared with other industries, financial services firms (e.g., banks, insurers, asset managers) innovate…
Source: Celent Innovation Survey 2013/2014