Choosing innovation hubs wisely
Published 18 April 2018, Mike O’Keeffe, General manager of Corlytics Solutions
Whilst accelerator schemes are nothing new, 2017 saw a number of major announcements from corporates looking to launch new programmes. Many organisations started to invest in innovation hubs, offering technology-focused start-ups the space, resources and support they need to grow into a flourishing, sustainable business.
Though the numbers of such programmes are growing, they remain increasingly competitive and put a lot of pressure on applicants during the evaluation process. As this is the case, start-up firms must in turn evaluate innovation hubs in the same way that innovation hubs evaluate them.
A WORTHWHILE APPROACH?
The global regtech industry continues to grow, with over $500m invested in the sector in Q1 2018 alone, according to Fintech Global. But new entrants often find it hard to make that first big deal. Many regtech firms are therefore applying to innovation hubs, hoping for the chance to work with a large financial institution or a FTSE 100 company. However, there are pitfalls to this. Massive time and energy go into providing a solution for a single institution, rather than building a solution for an entire industry. Start-ups often find they don’t have defined, achievable success criteria with executive sponsorship, which means that getting a deal at the end can be difficult.
The best innovation hubs are those that have a defined outcome for both the programme and the vendor. Examples of this include firms like ING and Commonwealth Bank of Australia (CBA) who run defined programmes with measurable outcomes, as with the recent Ascent RegTech announcement. The innovation teams at CBA and ING in association with the business discuss real problems facing the bank, and they then look for vendors who may be able to help solve that issue. This guarantees executive sponsorship before the programme even begins.
The start-up and the innovation teams then jointly define success criteria and execute the pilot. Upon successful completion, the start-up has a defined business case with executive sponsorship to move towards a program of work with the firm. It is defined a process that can lead to a decision to buy a solution that can solve real problems that the business faces.
ING/CBA even go one step further and run their innovation programmes as a utility. This helps them to share both the costs and the results. This is more effective for the start-up who then only needs to run one pilot for input from two organisations. Even if the pilot is not successful, the start-up gets feedback from two separate institutions for one effort.
Innovation hubs really work when an institution can combine forces with a start-up in order to go to market with a joint proposition. Allen and Overy’s (A&O) Fuse programme is a prime example.
A&O partners select vendors, following a vigilant selection process, that they think they can work with in the future. This allows the institution and the start-up to work together to create joint offerings to market. For the start-up, this means an extra layer of IP support added to the solution which can potentially mean joint revenue streams. As well as the obvious benefits of getting access to a large list of A&O clients and the beneficial associations with the brand.
EVALUATING THE PROGRAMMES
Given the time and effort involved in participating in innovation hubs, regtechs need to evaluate the programmes that can bring most benefit to the business, given the often limited resources of a start-up. Being as smart in their selection process as the teams who are evaluating them.
Corlytics has been privileged to work with organisations who really understand what innovation means for their business and how this can also work for the benefit of the vendor. Both in terms of market feedback and – the holy grail – winning a deal. We will continue to seek out and work with like-minded organisations and Innovation Hubs in this way, collaborating for the wider mutual benefits.