It's easy to think that we are living in the age of the start-ups.
Even in sectors like Financial Services, we are seeing CEOs sit up and take notice of the very real challenges that new companies and technologies pose. In fact, 70 per cent of Financial Services CEOs are concerned with the pace of technological change, according to our 2016 Financial Services CEO Survey.
We all seem to take this narrative for granted; that larger companies find it hard to innovate. But let's take a step back and ask why established kiwi companies have seen mixed results in the past, and what they could do differently to be more innovative in the future.
When bigger isn't better
Organisational transformation is notoriously hard to do in large corporates. The sheer weight of business-as-usual challenges, established processes, organisational hierarchies and siloed departments often hold businesses back from becoming more innovative.
However, the problem can also be cultural. Big companies are used to doing it all and doing it in-house. This DIY mentality can hold many back from becoming more agile and open the door for highly targeted start-ups.
Turning disruption into an innovation ecosystem
We've already seen that start-ups have clear strengths when it comes to innovation. However established corporates can also become just as innovative, and even take a leadership role in making New Zealand more innovation-driven. This starts by toning down the DIY mentality and acknowledging they are just one part of an innovation ecosystem.
So what does an innovation ecosystem look like? Well just like an ecosystem in nature, it's a series of relationships between different organisms (or in our case, companies) of different sizes that rely on each other to live. Importantly, each company in the innovation ecosystem occupies its own niche of services that makes them unique.
Moving to an ecosystem mind-set means big businesses should get focused on what they can do better than start-ups. FinTechs might be able to offer a single service that is better than a big bank, but that doesn't mean they aspire to become a big bank themselves.
A multifaceted organisation will also have different areas that are at greater risk than others. In our 2016 Global FinTech report, we found that some areas like consumer banking were at a higher risk of disruption from FinTechs than others. In fact, 80 per cent of respondents feel consumer banking will be disrupted by 2020, compared to investment banking which is down in the single digits.
As soon as we acknowledge that many start-ups will complement, rather than replace, larger competitors, then the landscape changes. Suddenly larger businesses can work with start-ups to create an ecosystem where they work alongside one-another and focus their innovation efforts on their respective strengths.
Making innovation happen
Clearly becoming a more innovative big business requires a shift in internal culture. However, once we've shifted to an ecosystem mindset, larger companies have to ask: what's next?
We are already seeing examples of how organisations can take those next steps. Many larger businesses are setting up venturing teams and internal innovation hubs - teams that are free from those legacy barriers to innovation. When these hubs are laser focused on innovating with an ecosystem mind-set, and have the partnering skills required to leverage start-ups, we are really cooking with gas.
Innovation hubs are not mandatory, they work for some and are just one part of enabling this culture shift. New Zealand businesses have to become more nimble and willing to try new things - to fail fast and then move on to a new idea until they find something that sticks.
Finally, executives have to invest time into understanding the state of innovation, thinking about how the business fits into this ecosystem and then developing an environment internally that empowers employees and builds the disciplines and capabilities required to become more innovative.
There's no silver bullet to driving more innovation in New Zealand, especially when you have such a wide disparity between the cultures of ambitious, niche and risk-tolerant start-ups and established players. Both larger companies and start-ups have to develop this ecosystem mind-set to bridge this gap. Only then can they become more innovative and harness the power of New Zealand's innovation culture.