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How banks should think about technology and innovation

In a recent speech at the Financial Services Club, JP Rangaswami talked about “How banks should think about technology and innovation”. 

JP Rangaswami is Chief Scientist at Salesforce.com, author of Confused of Calcutta, and one of the most innovative technologists around (full bio at end of blog).

It proved to be an incredibly popular session, with over eighty attendees …


… it also attracted several members to provide input afterwards of their thoughts and views so here’s a summary of his speech as provided by club supporters Aden Davies, Graham Jarvis and our new Head of Business Development, Kamila Nosarzewska:

JP began by saying that: “people have the lowest expectation of valuable output in innovation terms from the banking industry”.

In other words, no-one really expects banks to be innovative and he was very sympathetic to the bankers plight, saying that the “conditions inside the financial industry are very adverse”.

This tone continued as he discussed Clay Shirky's thinking around the collapse of civilised societies and the causes of their collapse.

Typically, societies end due to one of four major events:

  • An Act of God, such as Pompeii;
  • Overfarming the environment such that you strip it of all the natural resources;
  • Ecological imbalances, such as the introduction of a new species which makes another extinct; and
  • Collapse due to the society becoming so complex that it can no longer function.

The last one is the one that is most likely to happen to today's society.

We have such complexity in everything from our social interactions to our working ethos that people have already begun to react against this.

They want to return to simplicity and escape the complexity.

JP summarised this trend with a great quote from Clay Shirky:

“When society’s elite members add one layer of bureaucracy or demand one tribute too many, they end up extracting all the value from their environment it is possible to extract and then some.”

His presentation then explored three themes in more depth which can roughly be broken down into: disruption, communication and design.

Incumbents versus Disruptors

Our world is changing and is more complex due to communications disruptions.

An example of such disruption is when ISPs began causing AT&T a major problem in the United States, when they started charging $20 a month for access to the Internet.


The dominant market player.

The one with unrivalled scale.

Owner of the majority of the actual network infrastructure.


AT&T found their actual cost to provide internet access was $28 dollars a month, and that was without any margin.

The question they asked is that if it cost them $28 a month, how could ISPs offer a service so cheap?

The answer relates back to Clayton Christensen's work on incumbents, specifically his study on the the fixed disk drive market. A classic case of a technology that the incumbents wanted to make cheaper, better, faster. A technology the disruptors wanted to in some ways destroy.

Incumbents are at a disadvantage in as many ways as they are at an advantage.

With AT&T, it was the layers and layers of business process and infrastructure that they had built up over time meant that they had no way of reducing the margins.

With the disk industry it was clinging onto a dying technology or sacred tenet. 

Disruptors may have high innovation levels with low performance, take-up and scale, but must still be seen as a danger as hanging on to dying business models is just dumb.

But how many organisations are smart enough to see they are dying, let alone that they should not be so sacred and are willing to kill them off before someone else does?

To truly innovate you have to challenge those sacred things.

In big organisations this is near to impossible, especially in banks.

For example, when JP worked for a bank he was told to “innovate over there, in that area we don't care about”.

This was to avoid changing the core business.

Communication Evolution

The way we communicate has changed.

For example, social media message volumes such as Facebook status updates, overtook emails in September 2009.

His youngest child has owned a Blackberry for two years but does not subscribe to any email provider on the device.  It is for communication with the internet.

The Blackberry that most bankers carry and believe is almost singularly for the purpose of corporate email, is being used by many other different groups in a completely different way.  For his daughter it was all about group broadcast and presence provided by the Blackberry Messenger Service.

Half way through next year, sales of smartphones and tablets will outsell both desktop and laptop PCs combined.

Facebook continues to grow at a never before seen rate, and only a fool would think it will not overtake the population of China (1.3 Billion) by 2020.

How long have smartphones been on sale vs PCs?

These forms of communication are growing at a rapid rate, and they are changing how we communicate and the language we use.

How long did it take to stop using “thee” and “thou” and revert to “you”?

How long to switch from “you” to “U”?

The iPad is just over a year old, the iPhone four years old and a “two or three year old child now touches a TV screen, not to put their sticky paw prints on it but because they expect some feedback and interaction.”  

The physical household is no longer four or five people gathered around a TV.

It is more like six or eight communities.

The average household has six TVs, three PCs and four smartphones.

These are each communities of communication.

As technology becomes more advanced and available to ever greater numbers of people, it becomes a means of speeding up evolution and with the continued compression of analogue tools into smaller digital form factors, such as the iPhone with its ever growing Swiss army knife of uses.

The fact these devices are getting ever cheaper helps to accelerate the growth of innovation due to the nature of a reduced cost of entry.

“Technology allows you to have claws or armour before you have evolved to have them yourself.”

Designing for the loss of control

JP has many posts on this subject, and designing for the loss of control is not easy.

It means that you are giving away your designs for others to improve.

This is especially difficult for organisations locked down to the nth degree such as banks.

These organisation are locked into things like the corporate desktop, which JP likened to being stuck with a Bakelite rotary dial telephone.  

“God help you if you have to deliver to or from a locked desktop.”

JP gave a stark contrast between such corporate mentality and a recent visit he made to Salesforce's new acquisition, Heroku.

The office environment was not your traditional one.

“There were no desks, so how do you design for a workplace with no desks or no fixed wires?”

Do these locked down restrictive environments of banks lead to locked down and restrictive solutions being developed inside them?

“If you design things that work only in a narrow alleyway, then customers won't go there” or they will hate you if you make them go there.

Maybe this is why, inside the banking world, there are so many conversations around innovation.

Meeting after meeting on innovation.

Outside the traditional banking world, innovation is just happening as people are just building, building, building.

They don't have the layers of process and bureaucracy. 

They also don't have the other intrusions that bankers face such as the regular question posed: “have you thought of the compliance implications?”

If you are innovator, this is not relevant.

“No I have not thought about them at all…what do you take me for?”

This was a familiar story from JP's time at Dresdner.

To truly innovate you need to challenge these rules, barriers and constraints, because innovation happens outside them.  

You will have failures, and you need to store those failures and use again in the future.

Without failure you cannot innovate, but “that's not the way it works at our bank.”

The thing is that when banks ask JP about innovation, if they cannot work this way, then he wishes them “good luck”.

Oh, and he then says that he looks forward to “seeing you in ten years when your bank fails.”


About JP Rangaswami

JP Rangaswami is Chief Scientist for Salesforce.com and a Venture Partner at Anthemis Group.

Before joining Salesforce.com at the end of last year, JP was Chief Scientist for BT Group. Prior to joining BT in 2006, he was Global CIO at Dresdner Kleinwort Wasserstein.

Originally an economist and financial journalist, he has worked with technology in finance since 1980 with a number of large multinationals.

He was named CIO of the Year by Waters Magazine in 2003, and CIO Innovator of the Year by the European Technology Forum in 2004.

In 2007 & 2008, JP was selected as one of technology's 50 most influential individuals in the silicon.com Agenda Setters poll.

JP is a Fellow of both the Royal Society of Arts and the British Computer Society, and keeps an entertaining blog: Confused of Calcutta (in homage to his birthplace).



About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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