Most entrepreneurial companies are constantly trying to disrupt, throwing out the old and rushing towards the new. There is a general culture push to chastise "Luddites" for not keeping up with the times. Everything old doesn't automatically have to be considered obsolete. New is not always better. There's plenty of good in the existing that likely outperforms the latest trend.
YPO member Josh Siegel has proved that old and new together can spell success. He blended the oldest and stodgiest industry - banking - with just the right amount of new technology. His companies, StoneCastle and Cambr, help banks and other companies save costs on financial services while exceeding client expectations.
Siegel shares his approach to blending the best of the old and new to achieve success.
1. Master the Basics First
Siegel starts with the fundamentals. "If you don't know how it really works, what problem isn't being solved, who are the givers and who are the takers, how can you create the solution?" he asks. Before you even begin, he says, "You need to be observant, ask tons of questions, be an active listener, and identify what isn't working and why. Only then can you improve or redesign the product." This was exactly the process he used to start StoneCastle. He explains, "This solution wouldn't have been possible if not for mastering the basics. Businesses need to understand and prove what they are fundamentally good at. It's the surest way to organically reveal the next innovation and understand how it can be properly applied and lead to new thinking." So before you jump into the "next greatest solution," make sure you really understand what the problem is in the first place. You might find that your new solution is no solution at all.
2. Tightly Define the Problem
Once you've mastered the basics of the industry, Siegel says the next step is to understand the exact nature of the problem. "Ask why someone would want the solution," he says. "It needs to be easier, cheaper, or materially better at something. Otherwise it's hard to get people to switch." This proved especially true as Siegel challenged the banking industry. "When you look at banking, it has some of the worst customer satisfaction ratings. But people still tend to stay with their bank rather than switching. There needs to be a compelling reason to move." Make your solution so elegant, so simple, or so inexpensive it cannot be ignored. When you really understand the problem, your solution will discard the bad while keeping what's good.
3. Ask What the Solution Should Be
Siegel advises working backwards. "Start by envisioning what the solution should be and how it should work. Then work backwards to determine what tools, processes, and resources are needed to achieve it." This can require some creative problem solving, but don't let that scare you off. "Don't be afraid to create new tools if they don't exist. That's why we created Cambr. Sometimes a small discovery creates an entirely new industry by enabling the final piece to change everything," he says. Use your imagination. Don't be limited by what the industry currently limits itself to. Take the old and make it new and better for everyone!
4. Challenge Assumptions
Siegel emphasizes the process involved in innovation. "Whether you are challenging engineering, physics, product, market, or sociology assumptions, the key is to revisit everything believed to be 'fact.' Too often, these 'facts' are just assumptions that everyone simply accepted without thought," he argues. StoneCastle faced this exact type of thinking in the banking industry. "The payments business has long been a 'that's just the way things work' kind of business. It was means to facilitate a transaction and nothing more," he says. "By twisting the prism of how we look at the 'lazy cash' that fuels this business, it quickly reveals that cash can work not only harder, but also infinitely smarter." To help you through, Siegel suggests an exercise asking at least 5 levels of "why." For example, he explains, "Why do we buy food at a store? Because that's where food is for sale. Why? Because it's easier to find everything in one store. Why?...Just keep asking." Don't be limited by the way things have always been. Remember what making assumptions makes of you and me.
5. Create A Nash Equilibrium
"It's actually a simple concept," promises Siegel. "In a Nash Equilibrium, each party is satisfied with their choice given what the others have chosen. When they observe the outcome of everyone else, no one wishes they had made a different choice." In other words, you've created the win-win situation that benefits everyone. For Siegel, this meant wins for the community banks, their customers, and StoneCastle. He says, "We all know what the other parties earn, and still everyone chooses to stay involved. When you create that win-win-win where everyone feels they are getting a good deal, everyone will want to keep transacting." Instead of a status quo that only helps a few, create a new solution that helps everyone - but make sure you keep happy those who were happy all along.
6. Establish Constant Feedback Loops
"Innovation skills are learned," asserts Siegel. This means we need to constantly expose our minds to new things. He suggests, "A simple exercise is to buy a magazine on a topic you would never care to read. Read it cover to cover with a cup of coffee or tea. You will be shocked how half way through, your mind starts drifting to new ideas, fueled by exposure to completely new materials, stimulating new parts of your brain that are not usually triggered." Siegel also reminds us that "great ideas don't knock on your office door. They're out there, so you need to go out there to find them." But learning innovation skills also requires you to be a good listener. "Listen to the naysayers, and ask them questions to understand what is driving their concern. Listen and learn to avoid pitfalls and take criticism constructively - but don't lose your focus and resolve unless you uncover a critical flaw." When you constantly expose yourself to new, different, contrary ideas, it helps refine your own ideas so your solutions are as effective as possible. Then you can polish what's already good and implement the new where you need.
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