The Innovation Playbook

I got to this playbook using a process of narrative analysis. After lining up 30 financial service outthinkers—from Second Market to BancVue—looked at how they described their strategies, categorizing each element of their strategy into one of 36 generic strategic narratives.

This produced a prioritized list of strategies that are most often cited by the outthinkers. Together they represent a new playbook that is transforming the sector.

Here is the playbook:

1. Trouble the water to catch the fish

The metaphor for this strategy derives from a Chinese saying that if you reach in the water to catch a fish, it will see you coming and swim away, but if you muddy the water around them, they cannot see you, so you can grab the fish easily. The core principle here is to alter the environment of your customer by combining and dis- aggregating things. This complicates others’ efforts to directly compare you to the competition. The boss of a friend of mine at a major bank, for example, was having trouble selling derivative investments. Just hearing the word “derivative” triggers all kinds of unhelpful associations and confusion. So to simplify things, he bundled them into “things” people could understand. A green product (the marketing material literally was green) was filled with derivatives that deliver long-term growth. A “blue” product was for times when you think the market will do well—blue skies, few uncertainties. A “red” product was for managing risk, for hedging against things getting bad.

BlueOrchard Finance is a Swiss social investor that similarly bundles and packages financial products into things people can understand. In this case they collect portfolios of micro-lenders and slice them into three products: top tier (these investors are paid first, so their return is safer but lower), low return/risk (these are paid second, so get higher risk but also higher return) and equity (these are paid last, so have the highest risk but also are the ones to reap the win-fall if the portfolio over-performs).

2. Move the action

This narrative speaks of creating an empty shell and moving the action somewhere else. People think you are in one business, but you actually make your profit somewhere else. TradeStation, for example, was born as a cutting-edge software company that helped serious traders program trading strategies. They sold their software as anyone does, as a license. But one year they decided to switch their model and give their software away for free, providing traders used TradeStation as their online broker. As soon as they adopted this strategy—created an empty shell of their software business while moving their profits into brokerage—their profit growth took off.

3. Take the unorthodox path

The narrative is about noticing when people are fixated on one obvious path, then surprising others by taking another. This is the Dell “go direct” strategy. Mopay, which I’ve covered before, does this by enabling people to pay for goods online without pulling out a credit card. Instead you buy it through your mobile phone service company and the cost is included in your next bill. StockTwits allows investors to share information socially through Twitter. But their real play, in my interpretation, seems to be helping public companies communicate with investors through social media in a way that is regulatory compliant. In both cases what we have is the traditional path (credit cards, investor calls) fixating others away from new pathways.

4. Embrace what others abandon

The idea here is that there are opportunities in resurrecting abandoned ways. In Mexico, for example, a coupon scheme meant to keep customers buying local has turned into a currency—an actual local currency called the Tumin. In Australia, Bendigo Bank has had great success targeting an abandoned customer: rural, poor, unbanked.

5. Be good

Finally we see a lot of financial service innovation being spurred by the desire to do good in the world. Social impact bonds, for example, fund important social projects addressing homelessness, early childhood education, etc., but pay return only if the public project succeeds. Instead of giving money away, the Bill and Melinda Gates Foundation sometimes offers loan guarantees that allow a non-profit to borrow at much lower rates.

There are so many more examples, but these are enough to illustrate the five patterns, the new playbook, that a new breed of outthinkers is using to disrupt the financial service sector.

Kaihan Krippendorf (, a founding Fellow of the Center for Leadership and an adjunct professor in the College of Business, is the author of Hide a Dagger Behind a Smile and The Way of Innovation. This article was originally written as an entry for his blog “The Outthinker: Mavericks that Out Innovate the Competition.” The opinions expressed in this column are the writer’s and do not necessarily reflect the views or opinions of either FIU or the College of Business Administration.

View all articles by Kaihan Krippendorff.


Related posts

Leave a Reply


Please solve the following to prove you are not a bot: * Time limit is exhausted. Please reload CAPTCHA.

This site uses Akismet to reduce spam. Learn how your comment data is processed.