Talk Is Cheap: Redefining Innovation in Payments

We are about two weeks away from opening the voting on the 2012 PYMNTS.com Innovator Awards. The field that we have sent to the judges is nothing short of awesome. Some 150 companies took a lot of time to prepare and submit their nominations. What was particularly inspiring was the spectrum of innovation that these submissions covered in size, scope and sector. Stay tuned for details on the Awards ceremony that will be held in NY in mid-August.

Reading thru these submissions though reminded me of what both Bill Taylor (he is the co-founder of Fast Company) and the Wall Street Journal have written recently on the topic of innovation. In case you might have missed it, the WSJ published an article recently about how innovation has outlived its usefulness today. The gist of the piece was that when it comes to innovation, talk is cheap. It went on to report that most companies use the word to describe themselves, create new departments and new titles pegged to the word but don’t actually deliver anything all that innovative. The result is an endless watering-down of the term.

Taylor’s piece took the Journal’s indictment one step further and described how some of the most innovative companies around manage to produce innovation in the absence of formal titles or departments pegged to that descriptor. He says that innovative companies are innovative not because they set themselves out to “be the most innovative company ever,” but to be something else entirely. In the case of Southwest Airlines, that was to democratize the skies; in the case of Zappos, that was to deliver the best consumer brand around and happiness to its customers; in the case of Cirque de Soleil that was to deliver a completely new category of entertainment.

Up to this point in the article, I was nodding my head in agreement. It does seem a little bit true that the whole word is “innovating” now and that everyone is an innovator. It sort of reminds me of the “quality” movement back in the mid-1990s when Jack Welch and GE embraced the Six Sigma concept. When that happened, almost immediately every company large or small began to adopt “quality” as its mantra. Just about every marketing piece, proposal, and company description touted quality as a defining attribute and key differentiator. After all, who wanted to be the company that didn’t call out quality as an attribute when that was what buyers were looking for? Of course, the more companies that claimed quality as a differentiator, the less differentiating it became! Over time though, the market actually separated those who walked the quality walk from those who just did the talking. But ultimately, quality became part of an enterprise’s corporate hygiene and it moved from marketing buzzword to corporate table stakes embedded into a company’s DNA. Quality departments became less about being responsible for delivering quality to helping to organize and manage a process that had become everyone’s responsibility.

I think that this is how innovation will evolve in payments, too. I don’t really fault large companies for having “innovation departments” or appointing innovation czars to help drive it forward in an organization. Big organizations are sometimes hard to turn on a dime and change their operating models to embrace new things, especially if they are publicly traded and are doing it in the glare of the Wall Street spotlight. Having an “innovation” chief or department can sometimes help large companies accelerate that process, not to mention inspire the troops. When you are a cog in the wheel of a massive and global organization, sometimes it helps to know that there is someone paying attention to the fact that new thinking and new ideas are essential to compete. It also helps to have someone with the corporate remit to break down silos and work across the organization to unleash innovation. Where things often fall short though is when that person (or group) is little more than window dressing and lacks the real responsibility and authority to make innovation really happen.

But just like quality, I think that innovation will shortly become woven into the fabric of the organizations that will survive and prosper in the wake of the disruption that is taking place in payments today. Frankly, it will have to be that way for companies to survive. But, that doesn’t mean that companies have to produce flashy and whiz-bangey things to prove they are doing their job as innovators – this is where I think I take a bit of an exception to what both the WSJ and Taylor have written. Sometimes, the small, incremental and simple-sounding improvements at the margin make the biggest impact. Sure, Apple’s iPhone and iPad are sexy, cool, and innovative, and as consumer-facing products get a lot of attention and buzz for setting the innovation bar high. But so was Western Union’s innovation that established a worldwide physical remittances network that today enables hundreds of millions of people to send and receive money all over the world. So was giving consumers a simple online tool to help them aggregate all of their accounts like Mint did. Maybe these aren’t very sexy by iPhone standards, but they are enormously transforming in their respective fields. Sometimes innovation is in the eye of the beholder – or most appropriately, the end user who really benefits.

Taylor’s piece also quoted a pundit in the tech world, Tim O’Reilley, whose belief is that innovation starts with fun, not entrepreneurs (or intrapreneurs) beavering away at doing stuff to change the world. O’Reilley suggests that the Wright Brothers invented flying because they thought it would be fun to fly like a bird, snowboarders invented snowboarding because they thought it would be fun to surf on the snow, email was invented because it was thought to be fun to send a note to someone halfway around the world.

Okay…this is where I think that the article really went a little bit off the reservation since it ended with Taylor challenging companies to think about fun first and then let innovation follow.

Think for a minute about the some of the innovative things that are talked a lot about in payments and that actually are getting traction. Did PayPal invent its payment system because it thought it would be fun for people to pay online? Did Square create Pay with Square because they thought it would be fun for people to use their phones as point of sale terminals? Did Acculynk create online PIN-based debit because it would be fun for people to use their debit cards to shop on line? Did Ingenico create EMV terminals more than a decade ago because they envisioned that consumers and businesses would have more fun using chip and PIN cards to pay at merchants?

I don’t really think so. What each of these companies did was to look for a problem that needed to be solved or a white space in the market where they could create a competitive advantage and then they got busy creating a solution that would help them satisfy that opportunity and deliver results for their stakeholders. Hopefully, they had some fun along the way too, but that wasn’t the primary motivator or company mission statement. O’Reilley’s and Taylor’s advice to party like it’s 1999 strikes me as, well a little too much 1999 at a point in time where innovation cycles are moving very quickly and investor patience is shrinking.

What struck me most about the PYMNTS.com Innovator submissions that we’ve received is just how serious each company is about what they are doing and how focused they are on the problem set or opportunity window they have chosen to pursue. When we open up the voting to you in about two weeks from now, you’ll see just what we mean. More than anything else, this program has shown all of us at PYMNTS.com just how committed players large and small in this industry are to what they are doing. They know that the stakes are high and they are rising to the occasion. And, yes, hopefully, they are having some fun along the way too.

So, until you get a peek at the finalists, I’d love to know your overall views on innovation and what defines it. Let me know what you think – I look forward to continuing the discussion!