Business leaders see innovation as a 'must': Microsoft study

Singapore

CRISIS spurs innovation, as the management adage goes. Exhibit A - the Covid-19 pandemic.

Over the past year, the public health crisis has driven organisations to think harder about how to better serve their customers amidst strict movement restrictions, with many taking to digitally overhauling their processes.

A Microsoft study across 15 markets in the Asia-Pacific has found that about three in four (74 per cent) business decision makers now recognise innovation as a "must", not just a "good to have", recognising the ability to innovate as vital to performance and resilience.

The study, which looked at 3,312 business decision makers and 3,496 employees from December 2019 to July this year, found that organisations in the region have matured in their culture of innovation by 11 per cent, an indication of an increased ability to innovate.

Commenting on the findings, Microsoft Asia's president Ahmed Mazhari noted that businesses have had to adapt quickly to ensure business continuity and future relevance.

"As the saying goes, necessity is the mother of invention. We have witnessed first-hand how the wave of transformative change has swept across the region. This is no easy feat. Organisations have challenges to overcome and innovation is no longer a luxury - it has to form the core part of their DNA."

Within the financial services sector, the study found that seven in 10 financial institutions recognise innovation as a "must" - a lower proportion than that across all organisations studied. That said, the pandemic has notably increased the pace of transformation in the industry, with the proportion of organisations that the study deems "mature" in building a culture of innovation increasing by more than 40 per cent over the study period.

Customer-centric mission

Adopting a customer-centric mission and a healthy risk appetite are among the key ingredients to innovating well, said Connie Leung, Microsoft Asia's regional business lead of financial services.

"You don't change for the sake of changing. There has to be a reason why you implement the change... Perhaps something is missing or you received some feedback from the customers, or there is a new entrant disrupting the market," Ms Leung said. She pointed out that data analytics and artificial intelligence can help accelerate customer-centric innovation, such as by identifying efficiency gaps and where the bottlenecks are.

Ms Leung noted that financial institutions are typically risk averse, but innovation often calls for a paradigm shift.

"You have to ask yourself, 'Are you open to change? Are you celebrating failure, rather than just success?' The day you celebrate failure, you are a very successful innovation organisation," she said.

Regulatory sandboxes that policymakers around the world have been creating to foster innovation in the financial sector have facilitated what she calls a "fail fast, learn fast" mindset.

And the pandemic spurred it further.

"Covid-19 compelled everyone to accept change. You are locked down, you can't do insurance selling at a Starbucks. You have to accept the status quo. So what do you do now? I think that helped change mindsets very much, big time," she said.

Ms Leung cited Standard Chartered Bank's cloud-first strategy as a demonstration of a culture of innovation.

The bank, which recently inked a three-year partnership with Microsoft, plans to move all significant applications, including its core banking and trading systems, as well as virtual banking, onto the cloud by 2025.

It will adopt Microsoft Azure as its preferred cloud platform, and also use the software's AI and data analytics capabilities to automate banking processes.

Microsoft is also working with the National Bank of Australia to develop a multi-cloud ecosystem that will host 1,000 of the bank's applications on Microsoft Azure. Microsoft will also train technologists at the bank to equip them with relevant skills to operate the system.

In India, Microsoft has partnered with Yes Bank to develop an AI-powered chatbot, in an effort to reduce service times and personalise interactions with customers. Launched in December 2018, the YES ROBOT recorded over 8.3 million customer interactions in less than a year, with more than 90 per cent accuracy.

Within Microsoft, the organisation fosters a culture of innovation by regularly engaging with customers and regulators. For instance, Ms Leung leads the annual Asia Cloud Council where stakeholders across the financial services industry will come together to discuss common challenges they face.

The organisation also holds closed-door regulators' summits, to better understand the authorities' concerns while sharing the voice of the market.