“Can you Venmo me, Dad?” This frequent exchange with my son, brief as exchanges between parents and teenagers often are, speaks volumes about the pace and scale of innovation.
Venmo is the classic FinTech success story. Two freshman roommates at the University of Pennsylvania wanted a way to transfer money via mobile phones. They developed an app completely under the radar of traditional financial institutions. By 2012, with just 23 employees, they had caught the attention of Braintree, a fast-growing payments provider that purchased Venmo for $26M. PayPal, in turn, purchased Braintree in 2013 for $800M. Venmo did what FinTech start-ups tend to do well: create a tech-enabled product to solve a specific problem, and deliver it in a customer-first way. The degree to which they have succeeded is perhaps best measured by the growing number of people for whom Venmo is a verb.
This story illustrates how disruptive and pervasive FinTech startups have become. The digitally-savvy consumer’s appetite for new, beautiful, and convenient solutions has caught the attention of major financial services firms as well. In response, many have adopted innovation as a core business strategy, and at the same time have realized the folly of “going it alone.” In fact, 82% of financial services incumbents are planning to increase FinTech partnerships in the next three to five years.
Whether it’s mobile payments in financial services or autonomy in automotive, almost every industry is being radically impacted by digitization and fast-moving innovation. There is simply no way to keep pace without tapping into the ideas developed outside the organization – by start-ups, accelerators, universities and the like.
The center of gravity for innovation is shifting away from Internal R&D to an outside/inside ecosystem model:
These examples represent a structural shift, not a cyclical one. Innovation is a strategic competency, valued by customers, CEO’s, and Wall Street alike. More companies will live or die based upon their ability to quickly evolve to meet ever-changing market dynamics through new products and services.
Companies can better respond to the existential threat of disruptive change by building innovation ecosystems. Doing so gives organizations the ability to tap into new ideas, talents, and technologies with far greater agility. When sourced and managed effectively, ecosystem partnerships can be the fastest, most effective way for a company to accelerate innovation and master its destiny in a rapidly evolving world.