Why Tech City Might Help Finance Re-Discover How to Innovate

The news that Eric Van Der Kleij, the outgoing chief executive of the Tech City Investment Organisation (TCIO), has taken up a new role as an advisor to Canary Wharf Group could have massive repercussions for the financial sector.

The news that Eric Van Der Kleij, the outgoing chief executive of the Tech City Investment Organisation (TCIO), has taken up a new role as an advisor to Canary Wharf Group could have massive repercussions for the financial sector.

For financial institutions "innovation" was the buzz word of the year for 2006, and a focal point for every financial institution that wanted to be seen as a dominant player in their marketplace. Yet soon after by 2007 that buzz word was replaced with "sub-prime".

In late 2007, at some point or another, banks and financial institutions had one of the most difficult meetings in the history of their firms; the meeting where they would look through all developing projects and new initiatives from a top high-level - and eventually cut between 85-95% of them, as there was no chance they would be profitable within their first 12 months. Suddenly financial institutions around the world decided to turn their focus from expanding new business, to just repairing and desperately trying to hang on to the existing. With that, it become much hotter to work in Silicon Valley than on Wall Street.

Today, five years later, banks are increasingly starting to look at new, innovative initiatives once again. Most are again ready to talk innovation, yet After five years of imprisonment however, the finance sector are stepping out into a world that has dramatically changed, especially when it comes to innovation.

The biggest firms and budgets does not equal the biggest innovators anymore. The old closed innovation model of running multi-billion dollar research and development labs, funding and patenting new projects on a daily basis, just isn't working anymore. It's too slow, too heavy. Other industries - fashion, music, travel, mobile, social, to name a few - has already realised this, and adapted.

A new model has emerged, one where smaller firms, startups in many cases, test ideas and concepts on-the-fly and swiftly execute these in an environment without internal politics, procedures and concerns about patenting. A world much like the one presented in the Hollywood movie the Social Network, as Mark Zuckerberg's character says famously in the film: "If you had invented facebook, you would have invented facebook."

These firms have great ideas and there is nothing stopping them from developing and marketing them in a matter of weeks, not months or years, and doing so in an agile way that allows them to adjust to an ever-evolving marketplace, without becoming outdated before ever going to market.

Also, the big budgets that the closed innovation model requires got cut when the sub-prime crisis turned into the "financial crisis" and spread beyond the finance industry to every other sector in the world.

As the finance sector once again gets back to a point where it's really ready to focus on innovation, it will have to adjust to this new world. And so the question becomes, how do you teach a big bank to be innovative in a world which is more open, social and collaborative? How do you teach an elephant to dance?

One way of doing it is by bringing the best dancers in the world to their doorstep. NYC did it by establishing what has now become arguably the hottest tech scene environment in the world, only a ten minute cab ride away from Wall Street.

And now London is doing it now by bringing Tech City to Canary Wharf.

This could be the huge boost that the finance industry is looking for in order to get back on track and start innovating around their external products, internal infrastructure and maybe even how they see themselves as a company.

If you can manage to establish a relationship between the bankers and the hip, innovative startup guys, you can benefit immensely on both sides, as you help the finance sector get back to a place where it's more respected, more open and more credible.

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