Innovation: How to get your great ideas approved

CIO strategies: A top down approach to innovation is delivering results for one bank - and can produce big benefits for your business, too.

How to create a successful digital transformation project From building enthusiasm for change to experimenting with innovations, digital leaders explain how to ensure your digitalisation project remains on the right track.

Innovation might be something that all companies claim to aspire to in an age of digital disruption, but that doesn't mean every organisation is taking a strategic approach to creativity.

While most CIOs (59%) say their goal is to have sector-leading innovation capabilities, a quarter admit their organisations' innovation capabilities are non-existent and just 11% rate their current capabilities as excellent, according to research from consultant Deloitte.

Whether they're driving, supporting or enabling innovation, Deloitte says CIOs must help their organisations to build a strong innovation capability. Most crucially of all, this strategic approach to innovation must have sponsorship from the organisation's leadership team.

That focus on boardroom support chimes with Kevin Hanley, head of innovation at the Royal Bank of Scotland (RBS), who says strong leadership is crucial to his firm's success. "The ability to work the innovation approval story top down with sponsorship from the most senior people in the bank is the secret sauce," he says.

"All of the things we're doing at the moment came to fruition top down rather than bottom up. When you speak with other top European CIOs, they say – without exception – that they wish their organisation had the ability to do that."

Hanley and his peers at the wider RBS Group – which includes Royal Bank of Scotland, and also includes NatWest, Ulster Bank and Coutts – claim to be taking a proactive approach to innovation, rather than the reactive response to IT and business change that tends to characterise big-name banks.

SEE MORE: Digital transformation: How one bank is using AI, big data and chatbots to create new services

Historical precedent suggests that a top down approach to innovation can produce big benefits. Harvard Business Review (HBR) tracked the inventing history of 935 CEOs at publicly-listed US high-tech companies and found that one in five of these successful firms has what it refers to as an inventor CEO, who are bosses that have invented at least one patent.

While the research is focused on the high-tech sector, HBR concludes that boards of directors should pay close attention to the inventor credentials of their executive teams. In the case of RBS, Hanley believes the senior team's role is to help point out opportunities and ensure any innovations help the business keep pace with a fast-changing finance market.

"I guess our job is to not only think about the future, but almost work backwards from the future – we need to understand and have a point of view as to how we think the world is changing," says Hanley. "We need to articulate that view to all of our key stakeholders and then make sure we do something about it."

Hanley assumed his position as head of innovation in May 2016. What he's learnt so far is that the "hard bit" of innovation lies not in the what but in the how. Coming up with what you need to do is, in many ways, the easy part of the puzzle; how you get large organisations to be innovative is the much harder question to answer.

"And that's what we're wrestling with. I think the one thing that we've got right in this organisation – and it sounds very dry, but I think is absolutely the most important part – is around the governance of innovation. I think we do a better job than most of our peers," says Hanley, before outlining how his firm's top down approach works in practice.

"What we've managed to do successfully over the last couple of years is put in place separate governance for the approval and funding of all of the innovative things that we want to do. It doesn't solve all the issues completely, but it takes away lots of the noise that often happens around trying to get big organisations to be innovative."

Research evidence suggests a top down approach is likely to reap rewards. McKinsey research suggests organisations are more innovative when their leadership capabilities are rated "strong" or "very strong." McKinsey suggests the way leaders behave sends powerful signals to employees.

SEE: Digital transformation: A CXO's guide (ZDNet special report) | Download the report as a PDF (TechRepublic)

In the case of RBS, Hanley says one of the crucial elements of its top down approach is that the bank has an innovation forum. This forum includes the six most senior executives in the bank. These leaders get together for half a day every month and talk about potential disruptive ideas.

"We talk about our innovation portfolio and all of the projects that we care about and all of the things that we're doing," says Hanley. "New cases are presented for approval. And we have an innovation fund, which means the things that we care about can be automatically funded."

Hanley says the real plus point from all of that is the monthly rhythm – innovations in the bank are never more than four weeks away from funding, as long as you have sponsorship from one of the six senior executives around the boardroom table.

He gives the example of the bank's work with New Zealand-based company Soul Machines, who are developing NatWest's Cora chat bot that answers customers' questions on the bank's online help pages.

Hanley and his colleagues met Soul Machines in Auckland; three and a half weeks later, he attended the innovation forum in the UK and requested a million pounds to run a 12-week proof of concept, which was then established. Hanley says quick turnarounds like this show the benefits of a top down approach in action.

"If you think about larger organisations, they often work bottom up in terms of governance processes; you go through multiple levels of governance to finally get something up to the top of the house and then it may or may not get approved," says Hanley.

"There are no subservient committees in this organisation. When it comes to disruptive things, we have the ability to make decisions top down."