A leading consulting firm’s innovation research found that 49 percent of companies rated business model innovation as a top three priority. Different sectors were driven to urgency by different factors; while energy companies were driven by a green imperative, for software firms, the push came from cloud1. But the conversation around business model innovation is not only different across industries, it keeps changing within them as well. Pandemic impacts, customer expectations and regulatory changes are some of the reasons why the business model innovation scene is so dynamic.
However, one thing dominates business model innovation across sectors, and that is the platform or marketplace model. While many companies have adopted this model successfully, the majority are still finding their way forward. For universal banks, built on a pipeline model, the shift towards a platform model is especially challenging. A key hurdle is that while a few banks may be ready, as a whole, the financial ecosystems in many countries are short of the skills needed for a comprehensive move to platform banking. At the top of the list is digital skills, without which no business model can be effective. Globally, of the more than 200 million graduates minted every year, only 56 million are said to meet industry expectations; even in talent-rich India, not even 5 percent of the 1.5 million engineers graduating in a year are readily employable. At the same time, around the world, there are more than 750 million young people who are of working age but cannot even read and write.
General academic training and education can prepare these people to join the workforce. However, at present, nurturing talent for a career in business model innovation is primarily industry’s responsibility. The problem is that organizational hierarchies are not geared for this. In an average bank for example, by the time an employee gains expertise in a domain, it is time for a promotion. As people climb the corporate ladder, the pressure of managerial responsibilities distances them from domain-related work, such as innovation. As a result, the learning and experience acquired over many years is slowly lost to the organization. Without institutionalizing its knowledge, how can a bank teach new employees to innovate in areas like embedded finance or decentralized finance?
It Takes All
But the skilling-for-innovation problem is not one of industry alone. What’s required is extensive effort from government, academia and industry to build the skills needed for business model innovation at global scale.
As a starting point, they may need a capability gap matrix and a capacity gap matrix to understand the current dimensions of the problem. Talent shortage occurs in two ways – a capability shortage of qualitative elements that create value, and a capacity shortage that is quantitative. For example, the United States has a 30 percent capacity gap because there are only 7 million aspirants for 11 million vacancies. But when you consider how many people have the capabilities required in a post-pandemic digital world, whether it is socioemotional balance, community-building skills, digital knowledge, or ESG expertise, that gap becomes much wider.
Over the years, countries have managed their talent shortages in different ways. A couple of decades ago, when the United States led in manufacturing, hi-tech, and innovation capabilities, but lacked (labor) capacity, they were outsourcing work to capacity-rich countries such as India, the Philippines, and East Europe. Today, Asia is a hub of Fintech-led innovation but lacks the capacity to scale new ideas and business models. So far, only a handful of financial companies from these regions have hit population scale, such as Ant Financial, Alibaba, Paytm, or Zomato.
Multilateral agencies, such as the World Bank, are stepping in with initiatives to develop the all-round capabilities – technical, digital, cognitive, and socioemotional – required for business model innovation and other functions. UNESCO’s Global Skills Academy is working with more than 160 countries through an education coalition that has helped more than 1 million people become more employable and resilient amid uncertainty in 2021 alone.
And It Also Takes More
But that is just a drop in the ocean. Using their reach, these organizations must rally round the stakeholders in every country to quickly develop the skills for business model innovation. In countries with capacity, the goal should be to create an environment where innovating is faster, cheaper, and more accessible; in countries with capability, the need is to democratize business model innovation so it is not monopolized by a few.
Most importantly, innovation skilling must become part of foundational education. Governments, educators, and businesses must develop the vision, strategy frameworks, and structures to make sure students imbibe these skills at a young age. The partnership between academia and industry must start much before the stage of industrial training and internship. There should be a qualitative shift in curriculums to include technical, digital, and socioemotional skills to create future workers who are totally fungible, ready to cross functions, industries, and geographies. This is the way to making the 200 million students graduating every year productive in the workforce, and also to creating a rich talent pool for innovation, going forward.
Sources:
Rajashekara Maiya is responsible for charting Finacle’s product strategy and defining its product roadmap, strategic acquisitions, alliance partnerships, and client engagements. He represents the company while interacting with external stakeholders such as analysts and the media. He is also responsible for the business consulting practice at Finacle, Eco-system innovation Group along with Cloud, Blockchain business. He has played several roles across diverse areas, including product management, solution architecture, implementation, and pre-sales over the last 20 years at Infosys. Maiya has been instrumental in the conceptualization and planning of Finacle Enterprise – the latest addition to the Finacle portfolio designed to deliver simplified transformation and progressive modernization capabilities to global banks. Maiya specializes in core banking, risk management, regulations, and compliance. He has been quoted on these and other topics in reputed publications such as Forbes, The Banker, Banking Technology, The Economist, Business Line, BBC Radio, and the Economic Times. He is on the expert panel of the McKinsey Quarterly; is a member of the XBRL Abstract Modelling Task Force (AMTF) Group, MIT Technology Review Global Panel; and is an Associate member of the Institute of Chartered Accountants of India. Maiya holds several patents and has pending patents in the areas of partner portals, delivery channels, offline banking, and customer experience. Maiya is also a co-author of the book called ‘SMACing the
