(typically an initial desktop exercise to form a shortlist and then more detailed interaction with the remaining parties).
Engage. Initial experimentation with the potential partner to test the target partnership solution is being developed or is underway.
Advance. Deployment of the partnership is planned at scale, including a final partnership structure.
Breaking down these processes into these stages enabled them both to build up a cross‐group pipeline view and would provide a way to structure potential solutions to the gaps they had identified.
As with many innovation processes, they understood that for each successful partnership reaching the advance stages, many more would need to have been explored and ruled out earlier in the process. Therefore, it was critical that they sourced adequate opportunities from across the bank.
The first step would be to create business‐sponsored innovation working groups for their main transformation lines: Retail, Insurance, Commercial and Enterprise (RICE). Each working group would consist of product‐level representation, typically from business development, strategy or innovation roles. The working group would become a route through which to disseminate best‐practice in terms of fintech scanning, selection and partnering. In addition, additional tooling would be made available to the groups to enable them to execute these activities. For example, access to a central fintech hub was distributed as a way to identify and monitor relevant fintechs across the group, while also providing divisional and group‐level data to support decision‐making. The working group approach would also provide a way to identify gaps in activity relative to a designated baseline.
Another part of the solution would be to develop a collective understanding of the characteristics of a robust innovation partnership. This would centre on being able to prioritise business needs for which a fintech partner solution had the potential to add the most value relative to a build solution. This would begin by leveraging their initial analysis, but would quickly become enhanced by evidence and experience. At the same time, before selection opportunities to prioritise, they would also need to consider the expected complexity of pursuing them. The netting out of these two characteristics would help to determine which opportunities would be prioritised.
Importantly, they recognised that the complexity of partnering was not a fixed thing. Rather it was something they could aim to improve over time and thereby potentially increase their opportunity space. As such, they would continue to investigate technological and non‐technological opportunities to make partnerships easier to deliver, whilst still achieving appropriate levels of safety and security.
At the advance end of the process, they would utilise their pathfinder opportunity alongside non‐fintech partnership experience to inform their approach to partnership structuring. A key element of this was consideration of equity investments. Where there was an opportunity to invest, they decided on two core principles that would need to be met. Firstly, they would only consider investing in companies with whom they expected to form a commercial agreement or had done so already. Secondly, there would need to be a very clearly defined strategic benefit of taking equity, relative to what was achievable through a commercial contract. Their initial appetite was also focused on minority investment stakes only, due to the additional consolidation considerations typically associated with larger positions. It was at this point in the process that they would utilise their pathfinder opportunity to begin building some of the specific capabilities required for fintech investing.
In order to oversee the implementation of all these steps and to provide additional senior stakeholder sponsorship, they would create a Corporate Venture Panel (CVP). These sponsors included a senior colleague from each of the RICE areas, along with senior colleagues from enabling areas such as Group Legal and the Chief Technology Office. The panel would initially meet on a quarterly basis to oversee the pan‐Group activity, review partnering decisioning and consider investment rationale.
Delivery
‘We are not an asset manager, not here to choose the next Klarna, we invest in partners that can help transform our business. When you have an equity stake sponsored by a business unit, rather than a separate investment vehicle, the synergies become more entrenched.’
Carla Antunes da Silva, Group Strategy Director
The mobilisation of the innovation working groups provided a more accurate view of the existing activity levels in each part of the organisation. They found that each area had different strengths and gaps relative to the planned baseline. For example, in some areas they were conducting a lot of market scanning but they were struggling to get momentum behind proper engagements; other areas had excellent momentum behind a limited number of high‐profile opportunities, but without the depth of opportunity to ensure sustainable delivery. A tailored development plan was therefore put in place for each area and the central team's support focus was also phased.
Notably, in some areas, the initial market assessments raised more fundamental questions about their innovation priorities. It also took some time to embed the target partner decision framework into the bottom‐up work to ensure that the highest potential opportunities were being surfaced. There was also a broader task around building awareness of the partnering opportunity across relevant product and transformation teams. As such, while the opportunity engine had been switching on, there was some lag before it started to generate the desired level of pipeline activity.
The second thing that became apparent is that the friction involved in partner engagement and experiments was creating a bottleneck in the pipeline. Whilst some drop‐off was expected between the identify/assess and engage stage, the actual conversion level was below expectations. Qualitative feedback from colleagues also highlighted the time and complexity involved in delivering at this stage. It was also recognised that excessive friction at this point in the process also has the potential to negatively impact the experience for the fintech, for example, by adding additional cost to their side of the partnering activity. The central fintech team has taken ownership of driving forward improvements in this journey by working with relevant process owners to right‐size or simplify processes. In addition, they believe that the group's existing technology transformation journey will support a growing number of partnerships over the next one to two years, for example, by improving the availability of APIs to support integration.
Nonetheless, they were able to leverage the early successes to maintain momentum and visibility. For example, case studies and articles were written up and shared with all colleagues via the group's main interchange site. Similarly, the senior sponsorship from the CVP helped to maintain the focus and drive.
As they built up their experience and pooled the learnings across the group, they were able to sharpen their priority spaces and their supporting frameworks. For example, they saw two clusters begin to show the most potential. The first of these was centred on partnering to accelerate or enhance their capabilities in strategically important emerging technologies. The second cluster centred on partnerships that would allow them to extend their customer offering into relevant adjacencies where partnering provided an advantage to developing the adjacent capabilities internally, for example, due to economies of scale or required speed‐to‐market.
Crucially, their early pathfinder opportunities allowed them to socialise at Executive and Board level as well as via their Corporate Venture Panel. This enabled them to begin to hone their approach to partnership structuring. They had already established that they only planned to make investments where they were confident of a long‐term partnering relationship with the fintech. Their intention was then to understand the incremental benefit of pairing the commercial partnering relationship with strategic equity investment.
One of their pathfinder projects in this space was their relationship with Thought Machine.
Since
