Saturday, 27 December 2014
Innovation, leadership and management
Quite some time ago I attended a "town hall" meeting for the IT staff for a large financial services company. One of the subjects that was discussed was innovation. Memory fades but one exchange between the CTO and a project manager (not me!) went something like this:
PM: In your earlier speech you said that as a group we need to innovate...
CTO (interrupts): Yes, it's core to our value proposition to the businesses we serve, we have to innovate to offer best in class technology solutions around our core competencies.
PM: Right, so surely this needs to be acknowledged in the compensation plan?
PM: What I mean is, our bonus structure is based upon delivery of projects to the business, on-time, on-budget and on-scope. So there is nowhere in the incentive scheme to actually enforce this behaviour is there?
PM: If I innovate and succeed in a project I gain no more than if I use tried and tested tools and methodologies, so why innovate? And in fact, if we try to use new technologies we have to pass group architecture review, the group security board, enterprise risk, procurement, legal and compliance. So that will take up so much resource that it actually puts innovation in a bad light - it's safer to stick with tried and trusted isn't it?
CTO: I don't think you are understanding the paradigm in which we operate.
CTO: I expect excellence and innovation and it's your job to deliver that.
Now, this was maybe ten years ago so maybe that firm has changed (although conversations with former colleagues suggest not) but the actual important part of the message is still valid. So many firms in financial services treat innovation as "it's your job to deliver that" but don't really have a well considered intellectual underpinning and rationale to empower people to do the hard yards of innovation.
If you look at technology as being an enabling foundation for a line-of-business, it's clear that it's not always practical or cost-effective to be at the bleeding edge of technological innovation for many businesses. If you are a five person garden design consultancy, do you need a 40GigE network, Mellanox network cards and an instance of MongoDB running within Docker in a bare metal hypervisor server running Linux? Maybe not, but if your business is running a low latency trading platform then these tools may be within the sensible range of options.
But let's look at this from another perspective....
Take a financial services firm as, in part, a portfolio of technologies used. So a mixture of operating systems, networking technologies, hardware, server side applications, client side applications, firewalls, routers, switches and so on.
When building an investment portfolio, there is usually a requirement for diversification of assets - don't put all your eggs in one basket. Yet technologists working in finance often push for a monoculture within each silo - so one database in use, one operating system and so on. If only technologists could spend some time with the portfolio constructors in a buy-side or risk management folks in a sell-side and try and understand constrained optimisation of a portfolio I expect the outcomes from IT portfolio decisions would be drastically improved.
When speaking with IT risk management folks over the years the conversations have only ever looked at "what horrible catastrophe could befall this firm if we use this new and unusual technology?". Moving beyond that to "what horrible catastrophe could befall this firm if we do not use this new and unusual technology?" is in many cases a bridge too far.
So how does this relate to the title? Making innovation happen is a function of leadership allowing management to give technologists space and time to actually work on innovation. In many cases technologists would love to use new and interesting tools but face a wall of corporate bureaucracy to actually get anything done. The observation I have made has been this:
In many cases large banks use small vendors to perform innovation since small vendors have a vastly reduced level of bureaucracy and naysayers compared to a bank. Feel free to replace bank with asset manager or insurer.