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Orchestrating a future-ready buy side through innovation

Jochen Müller
Chief Commercial Officer, SimCorp

Hans Brown
Head of Enterprise Innovation, BNY Mellon

Read the article to learn about:

  • The perceived obstacles to industry innovation
  • How buy-side expectations have shaped innovation programs
  • Leveraging innovation to achieve business outcomes
  • The role of human emotion and change in addressing innovation

In this latest Journal Q&A, SimCorp’s Chief Commercial Officer, Jochen Müller talks to BNY Mellon’s Hans Brown, who joined the bank in 2020 as Head of Enterprise Innovation. The interview uncovers some of the obstacles buy-side firms face in prioritizing innovation on their firms’ agenda, sharing best practice approaches to innovation, unearthing how industry expectations have evolved, and revealing the significance of human emotion and change, in achieving innovation. 

Jochen Müller: Thank you for joining me Hans. Since you arrived at BNY Mellon, you’ve taken on an interesting role as Head of Enterprise Innovation. Can you tell us about this role? 

Hans Brown: The role is about helping to accelerate our culture and process of innovating and delivering excellence in everything we do for the enterprise. In other words accelerating an ‘innovation everywhere’ construct. Not only today but with an eye toward the future, to ensure we continue to be there for our clients today. 

My goal is to provide the frameworks and environment that foster this “innovation everywhere” construct, both from a cultural perspective, as well as from a technology perspective. And part of the way that happens is to encourage disciplined, rapid execution and hypothesis validation in all that we do. At least to the extent of the known unknowns, and making sure that the proposed change/product or service hypothesis is both desired, relevant and can be consumed by the market. 

Innovation needs to happen everywhere and on all levels, to be consumable and adopted at scale. This happens when the physical environment and the technology ecosystem and product leadership all co-exist and collaborate at speed. We’re constantly obsessed with making every process, product, and interaction free of friction for the client and our operations team as well. This involves collaborating extensively with our clients, leveraging techniques such as client journey mapping, design thinking, human centered design among many others, in order to do this at scale and at speed. 

Our digital services and solutions across the enterprise are geared to address pain points and opportunity areas, as well as market expansion. We therefore think of innovation as rubber hitting the road; you know you’ve done well when a client can get their articulated (and sometimes unarticulated) outcomes in a manner that is relevant to them and in the in the most efficient, frictionless way possible. Innovation done right enables client outcomes and feels natural.

Jochen Müller: You mention collaboration with the client, that’s an important element in driving innovation that matters. The dilemma that we know our clients face, especially larger ones, is that they are confronted by multiple priorities, whether it is capital preservation, operational resilience, transparency or governance, to name a few. While innovation has grown to become far more than just a buzz word, in a recent client poll we saw that over 30% cited competing resources as a challenge to adopting innovation. 

With internal competition for budget and resources, how should firms approach innovation and ensure it is top of their firm’s agenda?

For too long there was this widely accepted notion that you either had innovation at the expense of resiliency, reliability and efficiency or vice versa. In my opinion this is patently false and wrong for any organization – you need and should have both.

Hans Brown, Head of Enterprise Innovation, BNY Mellon

Our clients and the industry demand it and I have the pleasure of working directly for two leaders at BNY Mellon who focus on innovation, resiliency, reliability and efficiency all day, every day. This is what enables our business to move forward, delivering growth and providing exceptional client service. 

For me, at its essence, banking facilitates getting capital from where it exists to where it generates a return or does the most good. And a great bank should do this in a way that removes friction, cost and waste, so that that real benefits and real returns, enable growth. 

How you do that, whether you’re leveraging AI, machine learning or distributed ledger, you are revolutionizing the 'how' and in some instances the 'what' a bank does to enable outcomes. When I think of innovation, it's not about trendy projects that come at the expense of capital preservation and creation, it's about doing real things that affect real people and enable real beneficial outcomes in the here and now. It also excites your workforce to keep pushing the boundaries and exploring the art of the possible, and ensures you have a culture that continually thinks of how you can be there to support the future challenges, and accelerate the opportunities your clients will face.

Jochen Müller: That is a good point and the view we take when we speak to clients. Innovation shouldn’t be seen as a competing priority but the means by which clients can achieve their business outcomes. As a result we’ve centered our open platform strategy around the creation of a strong industry network, to drive additional value in the investment chain and support the buy side to achieve desired business outcomes.

Given this shared perspective, I’m interested to know whether you think firms have different expectations on innovation from a FinTech, compared to a large enterprise like BNY Mellon?

Hans Brown: 
You are absolutely right, an open-architecture approach is best. If we look at the difference between a FinTech vs. a larger enterprise, the FinTech will almost always concentrate on solving specific pain points or investment challenges, most often as a standalone solution. On the other hand, as a larger enterprise with our reach and scale, we have to think about how we can help our clients across the entire investment lifecycle. That’s why we launched BNY Mellon OMNISM; a data-centric platform that opens solutions for clients across the investment lifecycle. With a platform like this, we essentially bring together, not only our suite of solutions and robust data management capabilities, but also the option to integrate with the third-party systems and providers our clients chose to work with. 

What I like about this approach is that it provides clients with a comprehensive set of capabilities, enabled by one provider. Everything is delivered in an open format enabling easier integration. As a result, we aim to collaborate with anyone who shares our vision to make better client experiences. For example, by joining forces with SimCorp, we’re delivering optimized data integration and transparency through open architecture. And the optimal way of doing this is to embrace open ecosystems, where we provide the environment to co-create and incubate new products and services, in conjunction with our clients, as well as BigTech and FinTech contributors. 

Our fundamental view is that an open ecosystem encourages everyone to work together. We’ve shifted the company culture so we can be more agile and innovative. An open ecosystem also celebrates the diversity of experience. There is no one organization that knows everything fully. When everybody brings a different skill, a different capability to the table, innovation flourishes. 

Jochen Müller: Diversity of experience is a significant benefit. I agree that combining expertise and know-how with one or several entities can enrich the innovation delivered. And while the industry had been closed for many years, I’m pleased that the notion of working together for the good of the end-client is becoming widely accepted. It is the reason we see so many industry collaborations today, including the one between SimCorp and BNY Mellon, and the many partnerships we have fostered elsewhere. 

We have heard about the ways in which BNY Mellon is delivering innovation. I’m keen to know of an industry example you feel has added real value to the investment process?  

Hans Brown:
 Investing in cloud technology is a key priority for BNY Mellon, and it has been at the centre of many of our developments within the last year. For me, it has been interesting to watch the gradual shift from an almost cloud-negative industry, where hardware was seen as a necessity, and the debate was shrouded in security and trust concerns, to one that is now openly adopting not private but actually public cloud. As with everything, the industry just needed time to understand the fundamentals of a new way of operating. Like with innovation, change also has a cultural and technology impact. 

Microsoft played a significant role in responding to both culture and technology. They worked with industry stakeholders to debunk the concerns and perceived threats, and facilitate knowledge that helped the mindset challenge. They also invested on the security front, so that public cloud is now an accepted standard for buy-side operations. This opens the door to standardization but also coming back to innovation, it becomes the foundation for developing and delivering solutions with far more scale and speed, to support clients’ business outcomes. 

We proactively formed a strategic alliance with Microsoft recently, among other key players, to help build cloud-based solutions and to take them to market with leading asset managers and owners around the world. Our goal is to combine a cloud operating model together with disruptive technologies like machine learning within an open ecosystem, to create a future-fit operating strategy. One area where we see positive client impact is in the use of machine learning, to identify patterns in large data sets. Here we can make valuable forecasts like end-of-day balances or security lending fee movements. There is also a computer vision-enabled patent pending solution in the works, to further automate signature authentication. Ultimately, the aim is to simplify processes and proactively deliver additional insights to clients.

Jochen Müller: The connection between change and innovation runs deep. It is actually one of the reasons why we’ve moved to an outcome-based delivery model to demonstrate how positive change can support business goals. In your example of the cloud, fear of the unknown, or having to start from scratch can be a threat to innovation. What role do you think human emotion plays in how we approach innovation? And how can firms abandon fear and embrace the art of the possible?  

Hans Brown:
 You can do amazing things with the right mindset. That starts by abandoning the fear of setting goals that are multiples greater than what you’ve ever done before. Moving to an effective, transparent risk assessment and management culture, that allows you to think boldly and open you to the art of the possible. From time immemorial human beings have been assessing risks. To make the leaps they had to get really comfortable with being uncomfortable. 

The longer we as an industry do things, the more comfortable we get in doing them a certain way. Being out of our comfort zone helps to become obsessed with not only what but how an innovation is going to be used and why it is needed, because developing something that's great, yet nobody will use, doesn’t help the overall innovation agenda or move the industry or our clients forward.

We were founded by an innovator in 1784 and have been at this for the last 237 years, so we stand on the shoulders of the innovators that have preceded us. Our approach has been to engage the entire employee population around the world to transform each process, client interaction and product. For those firms starting out on their innovation journey, our advice is for any digital transformation to deliver the best client experience and embed it into everything you do. 

Hans Brown: But that’s our experience. SimCorp is celebrating its 50th anniversary this year and that is a remarkable achievement. Congratulations! In light of this, I’m interested to learn what SimCorp views as core to embracing innovation and change, and what impact has it had on the organization over the decades?

Jochen Müller: 
Thank you Hans. That is a great question and something we have been thinking about as we approach this milestone. Innovation has been integral to our success. Since the creation of SimCorp Dimension and we have continually delivered new functionality, with at least two releases per year and now quarterly.

People and culture have played a significant role in embracing innovation and change. Achieving this would simply not be possible without first building and supporting an internal mindset, where our employees are encouraged to be curious, to take courage in challenging the status quo and collaborate both inside and outside of the organization. By doing so, we have found new business lines and new ways to add value and improve solutions and services, ultimately making them faster, better, and more efficient for the client.

Jochen Müller, Chief Commercial Officer, SimCorp

Our early clients have benefited from significant innovation, as we advanced SimCorp Dimension and this is something we have facilitated over decades. More recent examples of innovation include our private markets offering, Datacare; one of the first Data as a Service offerings in the market, SimCorp Coric; our digital client engagement and self-service portal and our cloud transformation with Microsoft Azure. 

Our passion to evolve has also grown beyond our internal innovation and extends to an open ecosystem where we collaborate with fintechs, asset servicers and custodians such as BNY Mellon, to deliver smoother, transparent investment operations. In short, innovation has been integral to our success these first 50 years and I cannot imagine a stronger foundation for the next 50. 

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