By Kam Chana, Head of Innovation, Temenos
There is no shortage of great ideas, blue-sky thinking and moonshots—just of the will, drive and patience to deliver them. The banking industry sees this over and over again. Hackathon events are full of great ideas, dynamic teams and optimistic product managers, and yet time and time again, something important fizzles out in the delivery.
Generating a new idea is by no means the same as creating one that has the potential to become a commercial reality and then successfully bringing it to market. Finding the sweet spot in consumer desirability, business viability and technical feasibility is an art form.
The failure of an idea to become a reality is usually because of common problems with innovation: an idea that does not solve a genuine problem, a concept that has not taken into consideration a wide range of viewpoints, a failure to consult customers throughout the process, a lack of a business case—and the list goes on.
An effective innovation approach, therefore, is essential to designing and developing a new concept that actually makes it to market with success.
Canadian Western Bank (CWB) has launched a new product, the Temenos Virtual COO (chief operating officer), developed in partnership with Temenos. The genesis of this product demonstrates how we believe banks, and other companies, should approach innovation.
Start with the problem, not the solution
All too often, we see what could be termed as a hammer in search of a nail—a new technology, such as blockchain or artificial intelligence, looking for a problem to solve. This is not an effective way to innovate. Innovation must always begin with the human problem; therefore, at Temenos, we employ a human-led approach rather than a technology-led approach.
The concept of the Temenos Virtual COO was born from conducting upwards of 300 qualitative interviews with business owners of small and medium-sized enterprises (SMEs). Together with CWB, we sat with them, looked them in the eye and empathized with the highs and lows of running their own businesses.
To understand where the opportunities lie for banks, we wanted to know the problems SME owners faced. What was hampering their growth? What outside help did they need to enable them to succeed? We spoke with SMEs not just at the outset of this project but throughout it, constantly checking that our understanding of their issues was accurate and validating proposed solutions with them.
Our findings were revealing. Despite SMEs being the lifeblood of our economy, representing 90 percent of businesses around the world, they have long been underserved and misunderstood by banks. Often seen as high risk and low value until the point at which they become visibly profitable, banks have typically had a reactive and arm’s-length relationship with them due to this perceived risk.
SMEs invariably feel that banks neither understand nor care about their needs. They need and deserve more than just basic banking, but their greatest challenges are having the time and expertise to continue to grow. Many said the administrative burden of running the business had stifled their ambitions, turning them into low-growth organizations. None of them became entrepreneurs to become bureaucrats—this was a commonly heard complaint.
These twin challenges became the driving forces behind what would eventually become the Temenos Virtual COO.
Pioneering with the industry
The next phase of our innovation process involved bringing our community of pioneering banks and partners together at our two-day design sprint and hackathon, SME Digital Think Space. We invited a range of mainstream banks, challenger banks, big techs, fintech (financial technology) companies, consultancies, technology providers and SMEs into the same room to work on the same problems together. This is what we term open innovation: bringing competitors and users together to innovate collaboratively. An industry can’t innovate effectively in siloes.
Bankers were put in an environment in which they could empathise with SMEs—gaining a first-hand understanding of the challenges they faced—and unearth their true problems and find potentially viable ideas to unlock value for both the SMEs and the banks serving them.
The Think Space event ended with six or seven potentially viable ideas. Within two days of its completion, CWB and Temenos decided to take the winning idea and evolve it together, partnering on a 12-week innovation proof of concept.
The key to the success of this design project was creating cross-functional teams that all developed empathy matching the need. We trained everyone in design thinking and lean and agile methodologies. We sought regular feedback from SMEs throughout the process to validate our thinking or redirect us. From this, the Temenos Virtual COO idea was born.
Technology itself didn’t come into play until much later in the 12-week project. First, we focused on ensuring the concept could generate new revenue for the bank, so a commercial go-to-market strategy was developed with Deloitte.
Only then did we turn our attention to the tech, both to ideate potential solutions as well as check the feasibility of the tech delivering the solution. The result involved orchestrating multiple technologies, including Temenos solutions and those provided by fintech banks through the Temenos MarketPlace.
The birth of a new product
What could have been the Virtual CFO became the Virtual COO (VCOO)—taking the solution beyond banking. For SME owners, this innovation gives them a COO in their pockets, a virtual advisor—assisting them in running their businesses, freeing up time and providing actionable intelligence that helps them grow. Using advanced analytics and Explainable AI (XAI)-driven modelling, the VCOO drives action and execution of insights. It can simulate different scenarios and provide transparency to AI decisions and recommendations so that owners can change their behaviours to generate better outcomes. This functionality is underpinned by aggregated financial and business data to provide an advanced open-banking, real-time view of the SME’s financial health.
For the bank, this real-time view of an SME’s financial health enables them to unlock new value from the SME market that was previously considered too high risk. It empowers the bank to become a trusted partner from an earlier stage in the SME’s journey, enabling a new, bolder, proactive business model to identify potential funding needs before an SME even approaches them.
We are hugely excited about the potential of this solution, which brings technology and humans together to collaborate and create genuine value for SMEs. We at Temenos and CWB have collectively transformed how innovation can deliver value for everyone involved, be that the SME, bank or vendor. And we have proven that collaborative innovation with a focus on the problem can bring new value to an industry seeking disruption.