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Partnerships As The Innovation Engine

Regis Laban, Burak Diplen, Ilia Prokashev

Innovation is an essential component in enabling firms to stand out from the crowd and to create streamlined & agile organizations. Until recently, firms in the asset and wealth management (AWM) industry tended to rely on the legacy and traditional ways of meeting customer and business needs. However, due to the current shift in consumer behaviours, demand for work-from-home, and upping pressure on margins, AWM firms are forced to break new paths to fulfil ever-evolving needs driven by the current market trends.

In this article, we uncover best practices in creating an innovative enterprise and assist you in understanding overreaching approaches and common pitfalls firms face while driving innovation through partnering.

Benefiting from Partnerships

Establishing partnerships is a preferred approach by AWM players since this results in increasing the chance of actualizing an innovative idea, distributing the cost of burden among parties as well as leveraging on the expertise of each party. Partnerships become strategically important drivers for innovation. In accordance with Alpha’s market observations, there are three main practices deployed by the AWM players within scope of partnerships as follows:

Joint ventures such as horizontal partnerships where firms partner with other asset and wealth managers or service providers to achieve synergies, reduce costs, and facilitate innovation.

Having a full or partial stake in fledging FinTech where the industry players capitalize on the innovation led by a FinTech through ownership and/or vertical partnership. The partnerships that we frequently see in the market relate to DLT, ESG screening, and machine learning.

Partnering with public and governmental institutions, including universities to leverage policy and scientific methods in financial markets business. The most widespread examples are collaborations related to IT Security, digital identity, and predictive analytics modeling.

Approaches to innovation are only not limited to setting up partnerships with FinTechs, universities, public institutions, etc. There are many more approaches in the space of innovation, including driving innovation organically or establishing accelerators and innovation laboratories. In the table below we summarize key approaches to innovation for six well-performing AWM players.

Where Can It Go Wrong?

Such partnerships are observed to be managed via either a formal innovation team or directly linked to C-suites such as CTO (Chief Technology Officer) or CDO (Chief Digital Officer). However, leaders in charge of such positions frequently miss the competencies required for making initiatives work due to a lack of relevant experience.

According to the Alpha’s research, the most prevalent problem is that the global players still find it hard to engage with smaller firms with no track record, well-defined procedures, and infrastructure. It is likely to trigger a clash of culture as the smaller firms tend to be agile while managing companies require scrupulously detailed procedures and approval flows even for minor decisions.

Collaborating with public or governmental institutions also could be challenging due to goal misalignment. Public institutions and universities usually try to advance in public policy or scientific research whereas asset and wealth managers seek alpha. Such misalignment of purpose can lead to a wrong perception of opportunities and discourage partners from collaboration.

All these challenges could lead to value loss. Consequently, the talent and opportunities may become unrealized, and firms may build a negative perception of innovative initiatives.

What Is Best For You?

There is no one-size-fits-all solution, and it is important to select the approach that best serves your organization’s long-term strategic objectives. We have outlined high-level points that you should consider while selecting the best approach towards innovation that serves your organization goals:

  1. Be clear about your innovation goals whether it is about solving a specific problem or a general experimentation with new technology.
  2. Allocate the right resources to research and engage the selected partners.
  3. Define the objectives and time box outcomes. Adopt MVP (Minimal Viable Product) approaches to prove value quickly or exit the arrangement.
  4. See your new venture as an opportunity to work differently. Embrace the approach you learnt, and use it as an example for future projects.
  5. Embrace visibility and transparency. Show progress, promote your small wins, and invite colleagues in to see what’s being developed.

Following these approaches can help you make your innovation efforts successful, attract and retain forward thinkers, as well as enabling your company to access innovative thinking and bring new products to the market quicker.

How Can Alpha Help?

We hope you have enjoyed our article on the current opportunities in innovation. Alpha is passionate about creating positive change in the industry, helping shape future operating models and customer propositions. Please do get in touch with us here if you would like to learn more about how we can support transforming your business.

About the Authors

Regis Laban
Regis Laban
Senior Manager

Regis is acting as the organization optimization and transformation Program leader for various clients in their large-scale innovative transformation programs. Regis supported the largest Asset and Wealth Managers as well as European institutions in Operating Model, Organization, and Information System review. He is leading Digital and Agile Transformation Alpha services in Luxembourg.

Burak Diplen

Burak has sound experiences supporting financial institutions in developing strategies across various innovation management spaces including strategy definition, digital factory setup, agile transformation and process optimization. Recently, Burak supported a GCC based financial institution in conducting a company-wide digital maturity assessment study and developing its digital ecosystem. Burak is based in Luxembourg, and currently part of a product strategy project for a growing financial institution.

Ilia Prokashev

Ilia has diverse expertise supporting investment managers and other financial institutions in adopting emerging technologies and performing complex transformations. He is familiar with intelligent automation, business process mining, and product integration. Over his career, he supported several large financial institutions in the US and EU with various digital initiatives, including automation strategy and PoCs, agile transformation, and integration of digital products. Currently, Ilia is supporting a large financial institution with performing impact analysis around the integration of two fund distribution platforms.