How innovation labs are helping organisations think like startups

We delve into how Westpac, Commonwealth Bank and others are finding ways to drive innovation across the business, all in the name of the customer

In recent years, there has been a strong focus on organisations embracing ‘innovation’ as a means of gaining competitive advantage. But with the term innovation seemingly resisting definition, it is not surprising the paths organisations are taking to innovate are following a number of routes.

One path prominent among these strategies is the innovation lab. Itself a loosely-defined term, most often an innovation lab will be a physical space, apart from the organisation’s main facilities, and staffed with a small but dedicated team that works with employees across the business to create and develop ideas for new products and services.

At their heart, innovation labs exist to experiment with new ideas in ways their parent organisation can’t, which often means thinking and acting more like a startup. As a result, they borrow the language and processes of startups such as Agile development, design thinking and lean manufacturing principles.

Not all labs have succeeded, however, and some initiatives seem to have been swept aside thanks to poor planning or changing management whims.

Innovation in finance: Westpac’s story

Innovation labs have proven most popular in service-based organisations such as telecommunications and financial services companies. Westpac, for instance, is operating three different models for driving new thinking into what will soon be a 200-year-old organisation.

The first of these, Westpac Reinventure, launched in March 2014 and is a $50 million fund for investing in local startups, including peer-to-peer lending service, SocietyOne.

In June last year, Westpac launched its second innovation initiative, dubbed The Garage, for the rapid development of new ideas. This was followed in September by an additional dedicated space called The Hive, which is designed for hosting innovation activities such as short-term projects and hackathons.

According to director of the Garage, Phil Gray, each of these initiatives grew from (then) financial services head and now CEO, Brian Hartzer’s comments that the bank needed to look and act more like a startup to face the challenges of market disruption.

“One of the things Brian was really keen to do was drive this thing called the service revolution, which is trying to transform the bank from a product-focused organisation to be one of the world’s great service companies,” Gray tells CMO.

The Garage is both a physical space and a small multidisciplinary team led by Gray that serves as an end-to-end delivery shop for projects initiated with the bank, often in partnership with its clients. Gray says the goal is to bring startup-style thinking such as Agile development, human-centred design and lean startup practices into a bank dominated by waterfall-style processes.

“One of the metrics we use for the Garage is how we bypass some of that [traditional] process,” Gray says. “Rather than spending time gathering detailed requirements, we actually look at what the customer problem is, apply the desirable/viable/feasible lens across it, and look at the size of the prize, then rapidly build and test with real customers some kind of a prototype.

”It’s very much an Agile approach. We accomplish in two weeks what would normally take anywhere between two or three months.”

Related: NAB innovation lab chief: Customer centricity is the difference between intent and action

Much of the language of the Garage is borrowed from the world of startups. Project leaders coming from elsewhere in the bank are referred to as founders, and are required to stay with the project until its completion. Gray’s team then performs the role of entrepreneur-in-residence, with the task of challenging and agitating against traditional bank thinking.

The use of startup methodologies also sees teams working in a highly visual manner, with regular standup meetings. It’s a style often referred to as ‘working out loud’.

Although not in itself a marketing initiative, Gray says the Garage is often called in to assist with and support marketing-related projects, including a recent international payments initiative.

“We had a fantastic technological solution that was presented to us and came into the Garage, and we helped to build a marketing story and engage the marketing people around that,” he explains.

Another benefit the Garage brings to Westpac is through having knowledge and linkages across the entire organisation. Gray says staff are welcome to tour the Garage at any time to learn its capabilities and how it works, and are then invited to become Friends of the Garage.

This has help him both develop a strong understanding of different parts of the bank’s operation and how they interact, as well as create a pool of multifunctional talent that he can call on to assist with projects.

“When we get to a point in an initiative where we have reached some kind of sticking point, whether it be legal or technology, we go to the ‘Friends of the Garage wall’ and we call in a favour,” Gray says.

Up next: How Commonwealth Bank is tackling innovation, plus tapping into third-party innovation services

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