Large financial institutions can unlock innovation by embracing lessons from startups. Discover how agile project management, lean development, and cross-functional collaboration can transform traditional institutions into innovation powerhouses.

As organisations grow, they get encumbered: bureaucracy takes hold, processes strangle progress, urgency is lost. This happens so often it feels like the natural state of being. Innovation, which is key to a companies survival in the long term, struggles under these conditions and barely survives let alone thrives.

Startups are of course incredible innovators - it's all they are focused on. They have the benefit of being small, not having as many expectations (less revenue to lose) and having flexibility (less customers to satisfy).

There is some middle ground where a startup approach can slot into a corporate, moving the needle on not only how innovation works internally but also the impact of the work.

The Startup Advantage

Startups move quickly. This is easier to do when you're smaller and can switch your focus on a dime, and this is often the key aspect that keeps a startup alive. The ability to pivot quickly before time and money runs out is a startup's key survival mechanism. The need for this ability doesn't stop, it just lessens over time. You still need to be able to switch focus, try something new in the market and get the feedback you need - all as quick as possible.

Innovation in large companies often looks like 12 months to market, in a startup it looks like days.

Startups can move quickly for a few reasons. First, they are generally cared about less. There are no masses of people watching them move in the public markets, waiting for a sign of weakness to short the stock. Second, they are less tied down by customers. Even if a startup has already gone to market and has some paying customers, they can sunset their product if they decide to do a hard pivot. This is a lot harder to do when you're 100x the size. Third, risk is a startups friend. When you're in the early stages of a company you need to embrace risk in order to survive, and as you grow your appetite to risk shifts.

Startups are also cost-constrained and have to be scrappy. This restriction is a huge advantage because it forces the feedback mechanisms to be as fast as possible. There is zero chance that an idea would be worked on for 12 or more months by a team of 10 people without any market validation, feedback or questions about budget. This happens surprisingly often in larger companies. These constraints also force efficiency, so startups will get to the same outcome for less money in less time. A lot of innovation happens for this very reason.

Closely tied to risk is the attitude of embracing failure. Startups view failure as a key feedback mechanism, getting information from the market as to what works and what doesn't. The more times you iterate through failure, the closer you get to product-market fit.

Strategies for Adopting Startup-like Methodologies

The most important aspect for getting the startup mentality into large financial institutions is to encourage a culture of innovation. This should also be true innovation, not "innovation theatre" where it's more lip service with no actual link to the real world. Companies need to inculcate a culture where people are free to throw ideas around with judgement on the idea, not on the person. Closely tied to this is when an idea fails. Failure should be embraced both by the company and the employees. However, failure within innovation looks very different to failure outside of it. These failures should have the downside be explicitly limited which is generally done by limiting the potential impact on the company (features, brand, marketing, etc). With a small scope and impact, ideas can be iterated on until something is found that works.

Having this limited scope is something a lot of large companies, and specifically people within these companies, struggle with. They view projects as needing a lot of process with supporting mechanisms to move through the stages and get delivered. The lightest possible approach while getting to test what you need to test is the gold standard. You want to do a complete redesign of your website? Get one designer to do a single page in a few days and get one engineer to build it in a few days, and then get feedback.

Companies need to be set up for this type of work where quick iteration is key and the best way we have found to get this delivered is through Agile project management. Small, incremental changes delivered by cross-functional teams reduces the time to market and shortens the feedback cycle. The sooner you get feedback, the more you can do small adjustments to your course and ensure you end up in the right place. If you try to do big bang deliveries, you often end up way off course and then need to either spend significant time and effort getting closer to where you need to be, or you just start again.

There will no doubt be some changes required to get this style of work done well. Starting with a small team and project is ideal, where you can see which processes need to be be changed or have waivers put in place. It's common to have a given requirement, let's say from Security, reduced significantly for Innovation projects due to the reduced scope and impact. Training and support not only for the team delivering, but also for the other internal stakeholders, will be necessary. A part of this will be getting across clear roles and responsibilities and establishing clear lines of communication. When new teams are brought together, especially from different departments, boundaries need to be set while silos are broken down.

Overcoming Challenges in Adopting Startup-like Methodologies

Implementing this new way of working in a large corporate in financial services - centred on Innovation, embracing failure, fast iteration, cross functional teams - can be challenging, which I am sure comes as no huge surprise.

The first key aspect to get right is buy in from the business. There need to be senior stakeholders who want to see this happen and are willing to stand in your corner to get this done. They should make sure that processes are adjusted to support Innovation and clearly communicate expectations up the chain. This way of working will look very different to the normal way of working, so proactively getting this across will do wonders. The team should also be prepared to navigate the bureaucracy with their startup hat on: "How do we make this work? No is not an answer". This is a very different attitude, and through taking a sense of accountability and ownership you'll find that there are ways around red tape. This can be frustrating, but it is infinitely rewarding.

Innovation should have a staged approach. When a project starts it will have the least potential impact and thus the least risk. Remove most processes and requirements. The project will mature and first by used the team, then by a small internal group, then throughout the company, then by friends and family and eventually to limited and full public release. Each one of these points should have incrementally stricter requirements, ensuring that the risk is adequately managed and that the product is ready for market when the launch day arrives.

Finally, communication is critical at every stage and at every level. The team needs to communicate clearly between one another; having a cross-functional team means all being on the same page and moving in the same direction. Any requirements need to be clearly communicated down into the team and discussed with them. Expectations around a given product delivery needs to be clearly communicated up to relevant stakeholders. All of these communications should happen all the time - these need to be constant and throughout the life of the project. Generally, a good cadence is reached depending on how close you are to the project: daily feedback within the team, weekly feedback to the business or product, and bi-weekly or monthly feedback to stakeholders. These can be async as well as formalised meetings.

Conclusion

Unlocking innovation in large financial institutions requires a shift in mindset and the strategic adoption of startup-like methodologies. We've explored the key differences between startups and large financial institutions in terms of innovation and agility, and highlighted the importance of taking key learnings to drive change.

Adopting agile project management, lean development, and cross-functional collaboration can help large financial institutions become more nimble, adaptive, and innovative. By fostering a culture of innovation and risk-taking, these organisations can overcome bureaucratic hurdles and build a more efficient and forward-thinking environment.

While this is a journey, the benefits are well worth it, including increased competitiveness, improved customer experience, and ultimately, stronger growth. By taking action and implementing the suggested strategies, large financial institutions can not only learn from the success of startups but also pave the way for a new era of innovation within their own organizations.