The Finnovate Show
The Finnovate Show

Episode · 7 months 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 must stay up to date with your strategies and execution or risk obsolescence. Welcome to the Fin of a show, financial services innovators bringing you the future today and now here's your host, jerry Purcell. It's the fin of eight show brought to you by Innovation three 60 groups. I'm jerry Purcell. Get ready to think about your biggest challenges and capitalize on your biggest opportunities. After this. Executives depend on external consultants to fill knowledge and experience gaps or to have an experienced mine audit their thinking. The Innovation 3 60 group brings together a wide range of proven thought leadership from around the globe and cost effectively makes it available to you, get the insights, advice and systems. You need to succeed, learn more at www dot innovation 3 60 dot com. Our guest today is Alan Sklar Allen is an entrepreneur and a customer focused marketing executive with many years of experience in financial services. He's a creative thinker and an early adopter of technology with a focus on the design and delivery of innovative products and solutions. There was an earlier time quite similar to today where innovation was the centerpiece of the financial services environment in its ecosystem today, Alan and I will talk about innovation and financial services and what we think we can learn from the experience Allen, Welcome to the show. Thanks jerry. It's a pleasure to be here today to share some of my experiences. I've always thought that my career was really at the intersection of innovation and...

...disruption really a lot about the power of combining marketing sales and using technology to enable innovation. So let's start our conversation by casting our minds back to the olden days. That is 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'm going to refer to the olden days or back then as earlier, so we don't educate ourselves and the currency of our ideas. There's no question that the environment that fueled innovation was quite different and I think of it mainly mainly from people a risk and a technology perspective. And I hope to share some of my opinions as we get deeper into some of these areas in our conversation, I kind of see a lot of the innovation by legacy institutions behind us, At least by one definition of innovation. We look at the products in the market place today, I see very little new product innovations. So we have 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 re introductions of old ideas like market linked investments, cash back on credit cards, double up and skip a pay mortgages. All of those were really truly 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 full disclosure. We both worked together in the 80s and 90s at Royal Trust in Canada. It was a very very good time and a place for innovation in the financial services industry. So Alan...

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

...finally on my time at Royal Trust. But what else was different about Royal Trust and that drove their innovative successes? Well, the lynched him I'm going to talk about is really, there's a lot of examples of innovative ideas that were born from some fundamental philosophical approaches to business and unique characteristics of Royal Trust that made it successful. I think the biggest single discovery that I can point to that led to a lot of the innovation was the groundbreaking research that we did. And it led to a whole new positioning Where Advice Comes 1st. Let me repeat that. Where advice comes first. It was really ahead of its time. And the longevity is evidenced by it being copied in some form of others by probably every financial firm in the market today that I can think of. It underpins all firms. Can you think of anything that comes close to approaching that power and that longevity? In fact, it was inculcated into the minds and throughout all our activities through to the end client. You know, again, some other thoughts that I wanted to share with uh with the audience today. Management support was easily obtained. There was a lot of ownership and collaboration in the systems with a strong client focus. Secondly a commercial and entrepreneurial approach to everything we did and how he did it. There was an amazingly amazingly strong alignment of I. T. Marketing and sales. So we moved from what a developer saw as if you ask them, him or her, what are you working on today? Oh my pet project. We moved to really solving...

...customer needs and what the customer wanted. Yeah I think the other the other thing that strikes me as we were always ensuring that we had a good appreciation of the balance between innovation and customer readiness. Although we approached it it was always something in the back of our mind that it was really dangerous to allow customers to get ahead of the firm. And that possibility was there especially in the early days of the internet. You know the other thing I think about is forward looking employees. We're always really quick to identify sticking trends like digital being a new channel that really provided new options for clients and the foresight to surround themselves would like minded 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 align myself with like minded people in the retail bank. The wealth managers at the time believed that their business was just face to face as opposed to an option for clients to choose a new channel. I think there was more acceptance of failure, failure with lessons learned was acceptable much more so than today. We recognized also data. The adoption of a data driven and business intelligence approach at an early stage we really had pinpoint ideas about client relationships and data will come back to data later because really I think in terms of a more contemporary definition of innovation, it has a really crucial role today. We adopted the concept of a single system of record, a data...

...warehouse and the marketing database pinpoint well ahead of other financial institutions and with advanced concepts on things like segmentation, a journey around customer information and how that really related to marketing and sales. That single system of record seems to have morphed into something else and not necessarily one System of Truth. That's especially true for global firms with different requirements, different regulations, different needs for granularity of data. And initially, you know the old adage garbage in garbage out. Although I think the latter is seeing new investment in technology today that I'll mention as we look at the future of innovation. The last point I wanted to mention I've got a left brain right brain mindset as did many of my colleagues at the time I got and continue to get my best ideas while taking 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 innovation happened outside the formal organization structure I've sometimes been 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 and thinking about how that idea where solution could be leveraged and extend it out sort of advantages were innovative and sustainable despite competition. Kind of like keep up with the speed of my thinking, would you innovative ideas were planned to stay at least six months ahead of the competition. Yeah it was not always a fun place to to be looking ahead and trying to keep up keep up the clients...

...keep up to people like you in the marketing space and as the operations guy used to go, oh my God, there he is again. Um so I mean you talked a little bit about why but why why do you think there was, what sort of differences in terms of approach and stuff did they take in the Royal Trust environment? You think that made a difference? Well it's it's a great question. I mean and if I think about it a bit there were a number of factors that really combined to make a difference. You know, for one we introduced pilots and testing the speed up the process. It was really innovative. So we designed experiments around customer data that led to models that resulted in significant increases in retention span of control was not only a throughout trust but in other organizations was a lot larger than it is today. Employees like me had access to a number of levers that in my case collectively delivered marketing and communication. Pr advertising research polls to drive success and it was kind of like knowing which levers to push and to pull all at the same time in order to optimize the outcome. Of course, people wear much fewer hats today have a much narrower span of control. So things are different. The industry itself has always been highly regulated, but I think it's safe to say that we were unencumbered by the degree of regulation that we see today. one of the other big things I think about is failure was more acceptable. What do I mean by that? The attitude at the time was very much try 10 things. Let's get one big home run that big home run will pay for all of the other less successful outcomes that model, no question it's been out of play for...

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

...email jerry at jerry dot Purcell at innovation 3 60 group dot com. Mm hmm. So I remember back in the day when we bought two million card mastercard portfolio from Shell and we had 16 weeks to figure out how to integrate it into our existing portfolio of 100,000 cards and and figure out how we're going to make payments and how are we going to service two million more clients and whatever. And, and uh, thinking about on the fly how to respond to that challenge. And we managed to succeed. And I thought we introduce a couple of things that were quite unique at the time. One was real time payment in branch and online another was interbank ft for payments, which I think we got a little bit of trouble from the, from some of our competitors about. But it was, it was a very interesting time From an innovation perspective, you have any stories of your own. I could probably write a book about some stories, but you know, the ones that are sort of top of mind if I could turn the clock back some 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 up with a concept for what today is robo investing. We had avatars male or female and we developed that years before it came to market another example, 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 things allowed us to retain these deposits in more traditional investments and at the same time, be fair to customers. The solution, a few colleagues and I developed which you were involved in uh was steeped in the concept of volume buying power and true relationship...

...banking. It rewarded a family by paying everyone the interest rate on the pool of funds held by the group. I left that group just after it was launched for low cost core deposits. But the whole idea was to expand the concept to all asset liability products, making the exit barrier extremely costly, but at the same time being fair to increasingly savvy customers. Yeah, I just think listeners, this is, this is 30 years ago. Almost anyways. And some of the concepts down in the financial services world are focused on these portfolio type approaches and long term outcomes. And you know, so, so it is these are concepts that were really ahead of their time. So let's fast forward to today, alan, and where do 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 it has a downside or a dark side. The decrease of traditional legacy financial institutions to maintain the pace that we saw and consumer focused in innovation is in part evidence by a declining share of financial innovation by traditional financial institutions. Some tend to now by promising iP to some degree, the number of patents being taken out by financial institutions. Legacy ones that is has also declined financial institutions in the past demonstrated significant innovation, especially on consumer focused product and service innovation. That's the bright side. The downside is innovation can also lead to crisis like the boom bust and housing. But I think that the innovation that we saw in the past on product is largely over. As I see it. I see innovation today is...

...shifting Ai and machine based learning has been adopted in analyzing customer data behavior and what creates better customer service and experience the better craft sales and marketing to reach customers. I mentioned earlier that financial services is a data rich environment and we discovered the power of data at Royal Trust very early on and we're eager to discover an adopt innovation to really advanced analytics and innovation. Today budgets and time are being invested in labor intensive and manual processes to reduce costs and improve quality and reduce errors. The other area of innovation on the investment side on the asset side is really an algorithmic investing and performance for customers, lots of opportunities within that part of the firm to the extent that they are able to spend money, invest money in finding this innovation. So, you know, it's really becoming, I think it's really becoming increasingly difficult to find. Perhaps more so in product innovation, something really breakthrough, you know, chasing the next shiny new marble. As I prepared for our conversation today, I started to increasingly think even more about innovation and the shift to more promising areas, as I mentioned like Ai machine learning Quantum, there's really limited resources. There always have been limited resources and and in my opinion, the current focus and the future 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 lot more to implement and it puts pressure on our ally, something that has little appetite today, you know, the global financial crisis that we've seen has put increasing regulatory pressures in place. Uh and you know, you see technology and innovations and technology innovation increasingly being 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 are increasingly being found and delivered by, you know, for example, Fintech, another non traditional financial institutions. You know, I kind of sometimes wonder if the changes are big enough or if they can scale and be sustainable and I'll have a little bit more to say in my wrap up on on on what people should be thinking about in terms of uh in terms of Fintech and uh innovating in future? As I mentioned, entrepreneurial employees have much less loyalty. They're likely to port promising discoveries to firms that they start. How do you get people to think about what's best for these entrepreneurs and innovative thinkers in a more traditional organization? Yeah, I see a lot of financial institutions, let's wait until others have made mistakes. So they sort of weight and bio or partner with something that turns out to be successful. Yeah. So those are some of the some of the things that I'm seeing and you know are part of the opinions that I have to you know, so what now? Yeah. So so what now and what should those who are now tasked in financial services organizations to be innovators do and how can they learn from the experience of others and sort of the past outcomes? Yeah. So I you know, I...

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

...business models from business intelligence the day to day. I a lot of focus shifting to Fintech now. Why Fintech? Well I believe that the fintech arrival was partly due to the failure of legacy business and the draining of talent from legacy firms to Frontex and startups. Legacy firms are now seeing those Frontex and startups as not as competition but really as an opportunity to help them with problems. The innovations are being adopted by larger existing legacy firms. But in many cases with outside partners, legacy employees. The last point I wanted to mention and capturing knowledge, they're being redirected to added value work by some of these changes. So if I summarize some of the things that you've said through the course of our discretion today, just in terms of the environment that is conducive to innovation. I wrote three or 4 down. So owning the problem being I'll use my words for these things. But having true collaboration being aligned internally about who you are and what what you are as a firm and making sure you're listening to clients and staying ahead of them. That's the second last point. And the fail fast concept really, which is don't be afraid of making a mistake, you know, just don't make too many big mistakes but don't be afraid to make a mistake through the process because that's how you learn and that's how you iterate on new ideas. What other advice would you give new executives or new or old executives? I guess in the space as we close off today. So, you know, I think as we wrap up, you know, I wanted to leave the audience with some things to think about. It's really about starting to have conversations about the problems that really need to be solved. Getting smarter about limited...

...and tough areas and really looking at the business and innovation through a different lens. Yeah, the business can really be summed up as being more about being a data and technology business. It's really about taking a more holistic approach to innovation where technology business processes and external partners will work together to optimize the potential. So they start to think about things like what ecosystem of partners inside or outside lead to the innovation today. I think it becomes increasingly important to find firms that can help you with skills you need to take advantage of in terms of the shift and groundbreaking changes in the focus of innovation and I would look to firms and people that want to make an investment of their time and capital in your firm. It's really about selecting the right partners and identifying the right level two partner, not starting to low in the organization because up selling is real tough. You know, a line shared outcomes with reasonable expectations and 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, there was 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 of capability, get some small early success, the right structure in place and rewards that rewards innovation, success. Innovation really needs to have a higher place in the organization than just the real 90 day pressures that 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 think the future lies in regaining this...

...excitement about the possibilities to solve real problems that goes along with innovation. That's very intriguing conversation allen. I found it thought provoking and and I know that listeners will find it the same. I really wanted to thank you very much for for spending time with me today. And that wraps up the episode. So for those listening, as always, I look forward to hearing your thoughts on today's show and please keep the conversation going. If you like the show, tell your friends and please take a minute to radar show or post a comment. Go to www dot innovation 360 dot com or your favorite podcasts like to find out more and to listen to more shows. 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 of eight show with jerry Purcell. If you like the show, share it on your network and subscribe on itunes or wherever you listen to podcasts and you can go to www dot innovation 3 60 dot com. To listen to more shows, download the transcription from today's show or to contact today's guest. This is the innovate show, Financial services innovators bringing you the future today. Mm mhm.

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