CBA creates 'enterprise startup' to bypass corporate stagnation

Many corporations are too slow to innovate with the agility that a startup has, instead waiting for a "sure thing" and buying it out. But the Commonwealth Bank has tried something different: Rather than waiting for a successful startup to appear, it created its own.
Written by Michael Lee, Contributor

The Commonwealth Bank launched a financial investment platform called MyWealth earlier this month, aimed at do-it-yourself investors. But to get it to market, it dropped the traditional development approaches and went for something different: It created a startup.

The bank brought onboard its now chief innovation officer for Equities & Margin Lending, Lisa Frazier, pulling her from the startup-rich San Francisco Bay Area. Frazier, who has been out of the country for the past 15 years, developed her own startup in Silicon Valley. She headed up a disruptive startup for the Commonwealth Bank, which then developed MyWealth in a different way than software development projects are typically executed by giant corporations.

Being a startup within a corporation has some significant differences to a bank simply deciding to acquire a startup with a product. However, in some ways, Frazier said it was still very similar to the Silicon Valley experience.

One of those aspects is pitching. While not having to live the struggling entrepreneur's life, Frazier and her team still had to pitch to the bank's CEO, Ian Narev, along with every other part of the business that would need to buy in to the idea.

The idea of creating a startup within a corporation was, like many startup ideas, met with excitement, but also some scepticism.

"People didn't think we could do it," Frazier said.

Entrepreneurs are often faced with doubt, but Frazier saw delivering the product, and proving it could work, as being just the same as doing so outside a corporate environment.

"The difference is there is a lot more paperwork," she told us with a laugh. She mentioned that when she needed to follow the bank's procedures to apply for a "special project", MyWealth simply didn't fit into its standard template documents.

While it's obviously different to the rest of the business, Frazier said that she didn't want the startup to become separated from the rest of the bank. She said that it needed to create autonomy, but not be an island; and to build formal processes without losing its agility and culture. Part of this means running typical startup activities like pizza days, even in a comparatively sterile corporate environment. She also advocates getting involved in industry events, like Google Australia's Sudo workshops to help entrepreneurs.

Keeping the startup tied closely to the bank capitalises on the advantage of having the kind of corporate support that many stand-alone startups can only ever hope for. For one, the bank plucked some of its best minds out of its departments that were relevant to MyWealth, and Frazier has less to worry about when it comes to the finer details of compliance and risk. On the other end of the equation, the bank receives the experience and innovation of people like Frazier, bringing in outside hands when needed.

The act of taking the best parts of each business type continued with the choice of software. Frazier's startup sees the full benefits of the bank's recent core systems upgrades, while also rolling out software that's not always seen in national corporations, such as Lithium and Adobe CQ5. Due to corporation-wide licences, these could possibly be used by the bank on its other projects.

A stark difference, however, can be seen in how the bank's startup approaches software development. Frazier said that most corporations go for traditional development models, such as the waterfall or prototyping, with the focus being on creating a final product in one fell swoop. But as a startup, Frazier went for a "minimum viable product" approach, which focuses on getting out to market as quickly as possible, and iterating on the product by looking at the feedback from customers and stakeholders.

This approach has been key to the development of MyWealth from day one. The nine months leading up to its development were used for engaging stakeholders, learning about customer habits, and defining the key features of the product — similar to how entrepreneurs test their market, perform their strengths, weaknesses, opportunities, and threats analyses, and build up their networks.

Iterating through the cycle means continuing this analytical view, much in the way that startups test features, drop them, or build them out according to how their customers respond. It shows in the bank's current product iteration, with customer feedback forums forming an integral part of MyWealth in addition to the usual analytics applications like Omniture.

The bank's first startup appears to have paid off to the point where Narev, who less than a year ago had to be pitched the idea, highlighted it during its interim results briefing to media and analysts on Wednesday. Narev's apparent endorsement of MyWealth shows how it turned from an experiment that few were sure would work into an example of the bank entering a blank market in an innovative way.

Frazier said it is still early days yet, but that the startup approach toward developing ideas into products represented a new direction for the bank, moving forward in how it does business.

"We are having more conversations about starting from scratch," she said, highlighting that the bank may conduct similar exercises on "well thought-out bets" in the future.

While Frazier could only speculate on what this would mean for startups that might see corporate acquisitions as their key exit strategy, she encouraged more startups to be open with their ideas in order to get noticed.

"You have to get them to believe in your idea to understand what doors can be opened," she said, emphasising that although some entrepreneurs view their ideas as their property, no one can help them if they remain closed and secretive.

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