The Finnovate Show
The Finnovate Show

Episode · 1 month ago

Allan Schlar: Bringing back excitement about innovation to legacy financial services organizations

ABOUT THIS EPISODE

This week’s episode is a unique opportunity to hear from a seasoned financial services expert. Allan Schlar is a senior marketing executive with decades of experience in the industry. He shares his view on the need for financial services organizations to look at innovation through a different lens, to apply lessons from the past, and use these learnings to solve the problems that really need to be solved.

...as a leader of your company, you muststay up to date with your strategies and execution or risk obsolescence.Welcome to the Fin of a show, financial services innovators bringing you thefuture today and now here's your host, jerry Purcell. It's the fin of eight show brought toyou by Innovation three 60 groups. I'm jerry Purcell. Get ready to think aboutyour biggest challenges and capitalize on your biggest opportunities. Afterthis. Executives depend on external consultants to fill knowledge andexperience gaps or to have an experienced mine audit their thinking.The Innovation 3 60 group brings together a wide range of proven thoughtleadership from around the globe and cost effectively makes it available toyou, get the insights, advice and systems. You need to succeed, learnmore at www dot innovation 3 60 dot com. Our guest today is Alan Sklar Allen isan entrepreneur and a customer focused marketing executive with many years ofexperience in financial services. He's a creative thinker and an early adopterof technology with a focus on the design and delivery of innovativeproducts and solutions. There was an earlier time quite similar to todaywhere innovation was the centerpiece of the financial services environment inits ecosystem today, Alan and I will talk about innovation and financialservices and what we think we can learn from the experience Allen, Welcome tothe show. Thanks jerry. It's a pleasure to be here today to share some of myexperiences. I've always thought that my career was really at theintersection of innovation and...

...disruption really a lot about the powerof combining marketing sales and using technology to enable innovation. Solet's start our conversation by casting our minds back to the olden days. Thatis pre Fintech. What was the lay of the land back then? From your perspective,jerry, I've gotta I've gotta initially laugh at the, at your question. I'mgoing to refer to the olden days or back then as earlier, so we don'teducate ourselves and the currency of our ideas. There's no question that theenvironment that fueled innovation was quite different and I think of itmainly mainly from people a risk and a technology perspective. And I hope toshare some of my opinions as we get deeper into some of these areas in ourconversation, I kind of see a lot of the innovation by legacy institutionsbehind us, At least by one definition of innovation. We look at the productsin the market place today, I see very little new product innovations. So wehave new flavors and mutual funds like ET EFS and we've got thematic investing.We've got S. G. What I really see our product innovations that are mainly reintroductions of old ideas like market linked investments, cash back on creditcards, double up and skip a pay mortgages. All of those were reallytruly innovative at the time. But be honest there behind us and just for our listeners, you know,both al and I have personal experience in the marketplace and for fulldisclosure. We both worked together in the 80s and 90s at Royal Trust inCanada. It was a very very good time and a place for innovation in thefinancial services industry. So Alan...

...tell me about the retail financialservices business in the 80s. Well jerry interestingly again, in myopinion, as I said, much of what we see in terms of innovation from legacyfinancial firms today. I I feel they were largely developed or begun byfirms like Royal Trust, which later went on to be acquired by Royal Bank ofCanada. I think I see Royal Trust and it's local and international affiliateswere really the driving force of that innovation. If I look back at whichCanadian financial firm was first to get into cross border banking andreally recognize that many older Canadians in increasing numbers wouldown property in florida and winter there and therefore would require newand innovative banking products and experiences to capture the U. S.Business. That's just one example from Royal Trust. Others include theownership of real estate arm Royal page to see a home purchase reallytransitioned to a mortgage. The ownership of an A. B. M. Firm fromhardware on first to introduce online branded chats. First to use proprietarypolling to drive pr and thus brand and product awareness. First to have adsthat straddled the 11:00 news and tell a story was never before done. So really in a number of ways. Firmslike Royal Trust were ahead of their time and have thought leaders tosupport the innovation and they have the appetite to accept bigger risk thatwas acceptable with a greater chance of success. And I think all of what Ispoke about was really ingrained in the culture of Royal Trust. So the culture was definitely adifferent place and I looked back...

...finally on my time at Royal Trust. Butwhat else was different about Royal Trust and that drove their innovativesuccesses? Well, the lynched him I'm going to talk about is really, there'sa lot of examples of innovative ideas that were born from some fundamentalphilosophical approaches to business and unique characteristics of RoyalTrust that made it successful. I think the biggest single discovery that I canpoint to that led to a lot of the innovation was the groundbreakingresearch that we did. And it led to a whole new positioning Where AdviceComes 1st. Let me repeat that. Where advice comes first. It was really aheadof its time. And the longevity is evidenced by it being copied in someform of others by probably every financial firm in the market today thatI can think of. It underpins all firms. Can you think of anything that comesclose to approaching that power and that longevity? In fact, it wasinculcated into the minds and throughout all our activities throughto the end client. You know, again, some other thoughts that I wanted toshare with uh with the audience today. Management support was easily obtained. There was a lot of ownership andcollaboration in the systems with a strong client focus. Secondly acommercial and entrepreneurial approach to everything we did and how he did it. There was an amazingly amazingly strongalignment of I. T. Marketing and sales. So we moved from what a developer sawas if you ask them, him or her, what are you working on today? Oh my petproject. We moved to really solving...

...customer needs and what the customerwanted. Yeah I think the other the other thing that strikes me as we werealways ensuring that we had a good appreciation of the balance betweeninnovation and customer readiness. Although we approached it it was alwayssomething in the back of our mind that it was really dangerous to allowcustomers to get ahead of the firm. And that possibility was there especiallyin the early days of the internet. You know the other thing I think aboutis forward looking employees. We're always really quick to identifysticking trends like digital being a new channel that really provided newoptions for clients and the foresight to surround themselves would likeminded individuals which is something I did to advance the journey,interestingly some wealth managers which was the division that I was in.We're really slow to adopt the internet as an example and therefore I alignmyself with like minded people in the retail bank. The wealth managers at thetime believed that their business was just face to face as opposed to anoption for clients to choose a new channel. I think there was moreacceptance of failure, failure with lessons learned was acceptable muchmore so than today. We recognized also data. The adoption of a data driven andbusiness intelligence approach at an early stage we really had pinpointideas about client relationships and data will come back to data laterbecause really I think in terms of a more contemporary definition ofinnovation, it has a really crucial role today. We adopted the concept of asingle system of record, a data...

...warehouse and the marketing databasepinpoint well ahead of other financial institutions and with advanced conceptson things like segmentation, a journey around customer information and howthat really related to marketing and sales. That single system of recordseems to have morphed into something else and not necessarily one System ofTruth. That's especially true for global firms with differentrequirements, different regulations, different needs for granularity of data.And initially, you know the old adage garbage in garbage out. Although Ithink the latter is seeing new investment in technology today thatI'll mention as we look at the future of innovation. The last point I wantedto mention I've got a left brain right brain mindset as did many of mycolleagues at the time I got and continue to get my best ideas whiletaking my dog for a walk. As bizarre as that may sound an example an I. T.Executive and I developed a number of concepts over early morning coffee.Many were implemented. So really what I'm saying is a lot of the innovationhappened outside the formal organization structure I've sometimesbeen accused of let's call it what was called elliptical thinking and reality.That was me listening to what you were saying or an individual is saying andthinking about how that idea where solution could be leveraged and extendit out sort of advantages were innovative and sustainable despitecompetition. Kind of like keep up with the speed of my thinking, would youinnovative ideas were planned to stay at least six months ahead of thecompetition. Yeah it was not always a fun place to to be looking ahead andtrying to keep up keep up the clients...

...keep up to people like you in themarketing space and as the operations guy used to go, oh my God, there he isagain. Um so I mean you talked a little bit about why but why why do you thinkthere was, what sort of differences in terms of approach and stuff did theytake in the Royal Trust environment? You think that made a difference? Wellit's it's a great question. I mean and if I think about it a bit there were anumber of factors that really combined to make a difference. You know, for onewe introduced pilots and testing the speed up the process. It was reallyinnovative. So we designed experiments around customer data that led to modelsthat resulted in significant increases in retention span of control was notonly a throughout trust but in other organizations was a lot larger than itis today. Employees like me had access to a number of levers that in my casecollectively delivered marketing and communication. Pr advertising researchpolls to drive success and it was kind of like knowing which levers to pushand to pull all at the same time in order to optimize the outcome. Ofcourse, people wear much fewer hats today have a much narrower span ofcontrol. So things are different. The industry itself has always been highlyregulated, but I think it's safe to say that we were unencumbered by the degreeof regulation that we see today. one of the other big things I think about isfailure was more acceptable. What do I mean by that? The attitude atthe time was very much try 10 things. Let's get one big home run that bighome run will pay for all of the other less successful outcomes that model, noquestion it's been out of play for...

...years. The other, the other thing Ithink about as being different is the research and time to implement havelong runways and that has much less appeal today and lasting employees,employees were more loyal unlikely to stay with firms longer in past, youknow, retire and so on with the same company has started working for. Sodeveloping I. P. That was retained by legacy firms and is retained by legacyfirms is much much less in place today. The personal risk reward curve today isvery asymmetrical. What do I mean by that? It's much safer for an employeeto stay the course. From a personal perspective with less willingness toinnovate and potentially fail, fail today is unlikely get fired. The world is moving fast. It'sdifficult to keep up your executive team routinely needs new ideas to keepthem ahead of the competition. Imagine having a plan in place in 30 days tofocus your innovation efforts, improve customer experience, accelerate yourmove to digitization or increase speed to market. Our guide to acceleratingyour innovation agenda provides you with insights and time saving resourcesto plan your path forward, contact jerry to book a quick call or for yourcomplimentary copy at www dot linkedin dot com backslash in backslash jerryPurcell, G E R R Y P U R C E L L. Or...

...email jerry at jerry dot Purcell atinnovation 3 60 group dot com. Mm hmm. So I remember back in the day when webought two million card mastercard portfolio from Shell and we had 16weeks to figure out how to integrate it into our existing portfolio of 100,000cards and and figure out how we're going to make payments and how are wegoing to service two million more clients and whatever. And, and uh,thinking about on the fly how to respond to that challenge. And wemanaged to succeed. And I thought we introduce a couple of things that werequite unique at the time. One was real time payment in branch and onlineanother was interbank ft for payments, which I think we got a little bit oftrouble from the, from some of our competitors about. But it was, it was avery interesting time From an innovation perspective, you have anystories of your own. I could probably write a book about some stories, butyou know, the ones that are sort of top of mind if I could turn the clock backsome of the innovative solutions that we brought to market at an early stage,I would probably take the market today in my own firm. For example, we came upwith a concept for what today is robo investing. We had avatars male orfemale and we developed that years before it came to market anotherexample, at the time that mutual funds were displacing low cost core deposits,I was tasked with coming up with an innovative solution that did two thingsallowed us to retain these deposits in more traditional investments and at thesame time, be fair to customers. The solution, a few colleagues and Ideveloped which you were involved in uh was steeped in the concept of volumebuying power and true relationship...

...banking. It rewarded a family by payingeveryone the interest rate on the pool of funds held by the group. I left thatgroup just after it was launched for low cost core deposits. But the wholeidea was to expand the concept to all asset liability products, making theexit barrier extremely costly, but at the same time being fair toincreasingly savvy customers. Yeah, I just think listeners, this is,this is 30 years ago. Almost anyways. And some of the concepts down in thefinancial services world are focused on these portfolio type approaches andlong term outcomes. And you know, so, so it is these are concepts that werereally ahead of their time. So let's fast forward to today, alan, and wheredo you see uh what's going on in today's financial services environment?I think innovation in legacy financial institutions has a bright side and ithas a downside or a dark side. The decrease of traditional legacyfinancial institutions to maintain the pace that we saw and consumer focusedin innovation is in part evidence by a declining share of financial innovationby traditional financial institutions. Some tend to now by promising iP tosome degree, the number of patents being taken out by financialinstitutions. Legacy ones that is has also declined financial institutions inthe past demonstrated significant innovation, especially on consumerfocused product and service innovation. That's the bright side. The downside isinnovation can also lead to crisis like the boom bust and housing. But I thinkthat the innovation that we saw in the past on product is largely over. As Isee it. I see innovation today is...

...shifting Ai and machine based learninghas been adopted in analyzing customer data behavior and what creates bettercustomer service and experience the better craft sales and marketing toreach customers. I mentioned earlier that financialservices is a data rich environment and we discovered the power of data atRoyal Trust very early on and we're eager to discover an adopt innovationto really advanced analytics and innovation. Today budgets and time arebeing invested in labor intensive and manual processes to reduce costs andimprove quality and reduce errors. The other area of innovation on theinvestment side on the asset side is really an algorithmic investing andperformance for customers, lots of opportunities within that part of thefirm to the extent that they are able to spend money, invest money in findingthis innovation. So, you know, it's really becoming, I think it's reallybecoming increasingly difficult to find. Perhaps more so in product innovation,something really breakthrough, you know, chasing the next shiny new marble. As Iprepared for our conversation today, I started to increasingly think even moreabout innovation and the shift to more promising areas, as I mentioned like Aimachine learning Quantum, there's really limited resources. There alwayshave been limited resources and and in my opinion, the current focus and thefuture focus will be increasingly on in the operating space, the front office,the middle office, the back office, um...

...you know, new ideas today cost a lotmore to implement and it puts pressure on our ally, something that has littleappetite today, you know, the global financial crisis that we've seen hasput increasing regulatory pressures in place. Uh and you know, you seetechnology and innovations and technology innovation increasinglybeing used for risk and compliance and less on product innovation. You know,the other the other big thing that I'm seeing uh new discoveries areincreasingly being found and delivered by, you know, for example, Fintech,another non traditional financial institutions. You know, I kind ofsometimes wonder if the changes are big enough or if they can scale and besustainable and I'll have a little bit more to say in my wrap up on on on whatpeople should be thinking about in terms of uh in terms of Fintech and uhinnovating in future? As I mentioned, entrepreneurial employees have muchless loyalty. They're likely to port promising discoveries to firms thatthey start. How do you get people to think about what's best for theseentrepreneurs and innovative thinkers in a more traditional organization? Yeah, I see a lot of financialinstitutions, let's wait until others have made mistakes. So they sort ofweight and bio or partner with something that turns out to besuccessful. Yeah. So those are some of the some ofthe things that I'm seeing and you know are part of the opinions that I have toyou know, so what now? Yeah. So so what now and what shouldthose who are now tasked in financial services organizations to be innovatorsdo and how can they learn from the experience of others and sort of thepast outcomes? Yeah. So I you know, I...

...see evidence that specialist businessunits within legacy firms are being created to make these discoveries andthese these sort of specialist units have ecosystems to make it happen. Theright compensation, the right people, the right mindset and so on. Businessmodels are being transformed in part as I mentioned to reduce costs. Uh there'slots of opportunities and new technologies to replace old legacysystems and tools with new technologies. You can make a very valid argument thatthose legacy systems of sort of rusted out to use a you know, to use a phraseum an innovation through technology has had a paradigm shift, especially wherehumans, I see humans now needing to catch up with technology where it wasprobably the reverse before enter investment high powered technologieslike quantum structures inside that are focused on innovation, moredigitization and work going on in data, new channels really more pushback onnon face to face. You don't have to look much further than the pandemic tosee a lot of events going virtual, you know, which is really a new a newchannel new way of doing business Ai and Quantum. I think thought processesare getting better over time and they're being programmed. I was disappointed and still continuein a way to be disappointed with some of the bots. The box really need tobecome more intelligent. And the other thing is we're seeing you know sort ofthis this sort of cycle or or sort of transformation ofbusiness and that sees a movement of...

...business models from businessintelligence the day to day. I a lot of focus shifting to Fintech now. WhyFintech? Well I believe that the fintech arrival was partly due to thefailure of legacy business and the draining of talent from legacy firms toFrontex and startups. Legacy firms are now seeing those Frontex and startupsas not as competition but really as an opportunity to help them with problems. The innovations are being adopted bylarger existing legacy firms. But in many cases with outside partners, legacy employees. The last point Iwanted to mention and capturing knowledge, they're being redirected toadded value work by some of these changes. So if I summarize some of the thingsthat you've said through the course of our discretion today, just in terms ofthe environment that is conducive to innovation. I wrote three or 4 down. Soowning the problem being I'll use my words for these things. But having truecollaboration being aligned internally about who you are and what what you areas a firm and making sure you're listening to clients and staying aheadof them. That's the second last point. And the fail fast concept really, whichis don't be afraid of making a mistake, you know, just don't make too many bigmistakes but don't be afraid to make a mistake through the process becausethat's how you learn and that's how you iterate on new ideas. What other advicewould you give new executives or new or old executives? I guess in the space aswe close off today. So, you know, I think as we wrap up, you know, I wantedto leave the audience with some things to think about. It's really aboutstarting to have conversations about the problems that really need to besolved. Getting smarter about limited...

...and tough areas and really looking atthe business and innovation through a different lens. Yeah, the business canreally be summed up as being more about being a data and technology business.It's really about taking a more holistic approach to innovation wheretechnology business processes and external partners will work together tooptimize the potential. So they start to think about things like whatecosystem of partners inside or outside lead to the innovation today. I thinkit becomes increasingly important to find firms that can help you withskills you need to take advantage of in terms of the shift and groundbreakingchanges in the focus of innovation and I would look to firms and people thatwant to make an investment of their time and capital in your firm. It'sreally about selecting the right partners and identifying the rightlevel two partner, not starting to low in the organization because up sellingis real tough. You know, a line shared outcomes with reasonable expectationsand lastly build excitement and momentum. I mean, if I think back to,you know, all of the work that I did and you did back at Royal Trust, therewas excitement. There was a momentum. It was a game, you played a game to win,you worked hard, you played hard, you're going to have a budget ofcapability, get some small early success, the right structure in placeand rewards that rewards innovation, success. Innovation really needs tohave a higher place in the organization than just the real 90 day pressuresthat you know, companies face today. I thought of an interesting expression,may you live in interesting times, it's both a blessing and a curse. I thinkthe future lies in regaining this...

...excitement about the possibilities tosolve real problems that goes along with innovation. That's very intriguing conversationallen. I found it thought provoking and and I know that listeners will find itthe same. I really wanted to thank you very much for for spending time with metoday. And that wraps up the episode. So for those listening, as always, Ilook forward to hearing your thoughts on today's show and please keep theconversation going. If you like the show, tell your friends and please takea minute to radar show or post a comment. Go to www dot innovation 360dot com or your favorite podcasts like to find out more and to listen to moreshows. Allen, thank you very much for chatting with me today. Thanks jerry.Stay safe and we'll see you next week. You've been listening to the Fine ofeight show with jerry Purcell. If you like the show, share it on your networkand subscribe on itunes or wherever you listen to podcasts and you can go towww dot innovation 3 60 dot com. To listen to more shows, download thetranscription from today's show or to contact today's guest. This is theinnovate show, Financial services innovators bringing you the futuretoday. Mm mhm.

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