How do Europe’s Biggest Banks Achieve Successful Innovation? – An Interview with HSBC and Deutsche Bank
Successful innovation is rarely easy, and it’s even more challenging when you factor in the added complexity of operating in a highly regulated environment.
So as a financial services company, how do you foster an innovative culture and cultivate the right mindset, and what is the best organizational structure to help innovation flourish?
To answer these questions, Moritz Spangenberg, Client Partner at Netguru, sat down with innovation experts from two of Europe’s largest banks.
Steve Suarez is Global Head of Innovation, Finance & Risk & Compliance at HSBC.
Nataly Nieves Reyes is Innovation Specialist at Deutsche Bank Innovation Labs.
Between them, our two specialists have years of experience in senior strategic and business advisory roles and are currently engaged in progressing innovation at their respective organizations.
Moritz: I’d like to start by talking about the role of culture in innovation. Steve, at HSBC, you’re tasked with infusing innovation into a workforce of around 14,000 people. In your view, what role do culture and mindset play in achieving that?
Steve: A lot of the people I work with are excellent professionals in risk management and financial management. But if you think about innovation and what needs to happen, it is a different thing. In risk management, you want to eliminate failure. With innovation, you actually want to promote failure – you want to learn fast and learn from your failures.
If you're not failing enough, or you're not failing at all, you're not being innovative.
For some people, it's a very uncomfortable situation to be out there in the unknown. And that's why mindset is such a key thing, because you need to get people to not only embrace the mindset, but to be comfortable with that.
Moritz: That makes a lot of sense. So if you think about teaching innovation to people who aren’t used to taking risks, how do we teach them to fail if they’re normally used to winning?
Steve: You have to create the environment for innovation. We do our experiments in sandboxes, so at no point will we ever risk anything to a point where it could impact anybody. We give people the environment to bring in their data, try out their experiment, and see if it works to figure out if we can do something better. So I think it is risky, but it's a kind of protective bunker if you will.
The important part is that only once we’ve validated that something works, and we want to scale it and roll it out, that's when we ensure that we have all of the protection and all the regulations in place that my colleagues have to deal with to go out there.
Moritz: And Nataly, at Deutsche Bank Innovation Labs, how do you handle making failure part of an innovative culture?
Nataly: I think it comes down to how you define failure. In general terms, failure has a negative resonance. But, in reality, for everyone that works with innovation, failure is just part of your day job.
And similar to Steve, we do things in a phased approach. We start small before we scale, so if phase one fails, we may change the strategy or the way we do things before the next level. We look at the roots of those failures and the risks, and how we can avoid that in the future. But as long as you learn something from those failures, it’s something really well-embraced, accepted, and normal within an innovation function.
Moritz: Make failure cheap and fast; that makes sense. So moving onto organizational structures – Nataly, Deutsche Bank Innovation Labs has a regional structure with hubs around the world. Why did it choose this setup?
Nataly: I think the starting point here is really what our mandate is, and we are here to accelerate the pace of innovation within Deutsche Bank. We treat our colleagues from Deutsche Bank as our clients or main stakeholders.
At the moment, we have five different hubs around the globe – in London, New York, Germany, Frankfurt, and Berlin, and then we have one covering the APAC region based in Singapore. That allows us to stay close to the businesses where Deutsche Bank has the most important regional impact.
Innovation is really about bringing people into a different environment, to think differently, to run workshops, to co-design with clients, and to bring them in for user research, interviews, or exercises.
That's why we needed that physical presence in those locations, basically to be close to our Deutsche Bank offices and colleagues, but subsequently also to the regional clients that we really work for in the end.
Moritz: And Steve, would it be fair to say that HSBC is focusing on more of a centralized setup? And if so, why did you choose such a setup?
Steve: I think there's a lot of similarity to what Nataly just talked about. We do have innovation labs – in Singapore, we've got our hub that focuses on digital, our retail bank closer to home here in the UK, and our security stuff is coming out of Israel. So we look at where the pockets of expertise are and how we can leverage those ecosystems to make sure we're getting the best from them.
But instead of just innovation labs and the people doing it, we're trying to decentralize innovation, so it's not one group's responsibility, but the entire department's.
Our job is to create that foundation to help them through it, but it's their job to execute it.
And rather than being secretive or done behind closed doors, it's completely open innovation – we bring in as much collaboration and diversity of thought as we can. And even going a step further to design thinking, we bring in our customers and get them involved in the innovation agenda versus it just being inward-looking.