Nimble giant Thorburn teaches NAB to dance
Everyone’s talking innovation, but how does a CEO drive change? NAB’s Andrew Thorburn has an ambitious program to make his bank more agile
Big organisations need to be ambitious when it comes to innovation, but ready to dump the innovation quickly if it doesn’t stack up, says Andrew Thorburn.
“It’s about failing fast,” says the National Australia Bank CEO. “If we have an idea that doesn’t work we can park it, learn from it what we need to do to and move on to the next one.”
But that’s not easy for a banking sector where the culture is traditionally more conservative, where it’s good to be risk-averse and not good to fail. Executives trying to drive innovative change in a big organisation like NAB, with 35,000 employees, must accept that not all ideas will succeed, says Thorburn.
“It’s challenging for a bank but you need to be prepared to allow things to fail,” he tells The Deal. “You want to bring in ideas and you want people to try them but if it doesn’t work, it’s OK … that’s the real change in the culture that we are trying to bring in.”
He quotes Peter Fuda, an Australian expert on business transformation, who talks about having a “burning platform”.
“The idea is that as a company if you don’t change you will die,” says Thorburn. “But Fuda also talks about the need to have a burning ambition. You have to create a burning ambition for change. But to do that you have to think about why are you changing and what you want to be.”
Thorburn knew NAB needed a shakeup when he took over as chief executive almost two years ago. He had plans to sell off the troubled British business but wanted a more fundamental cultural change to restore the bank’s former reputation as the best business bank in Australia.
“When I grew up in Melbourne, NAB was a fantastic bank and it was a particularly fantastic business bank,” he says. “When I took over I wanted to have that as a goal for us: to be a great business bank which enables and equips our clients to grow their businesses and create more jobs and wealth.”
A career banker, he looked around the world for ideas on how to re-engineer the bank at a time when the sector was challenged by fintech players. His goal was to introduce a “startup” culture within a big organisation spread across the country.
He looked at an innovation lab operated by Visa in San Francisco and visited IBM’s Watson Lab in New York. He checked out Spanish and Canadian banks.
He examined the work of American Larry Keeley, author of the book Ten Types of Innovation: the discipline of building
breakthroughs. A director and co-founder of Doblin, an innovation practice inside Deloitte Consulting, Keeley studied more than 2000 innovations – from the Model-T Ford to the early IBM Mainframes and Amazon.com – to define 10 key “moves” a company can use to transform its business.
Thorburn realised NAB needed a scaleable system. “You can’t just tell people to go and innovate,” he says. “You need a system in the company to handle it. That why we have established NAB Labs as a sort of centre of excellence around innovation.”
NAB Labs was set up early last year at the bank’s offices at 700 Bourke Street in Melbourne’s Docklands area, situated between its old head office in 500 Bourke and its new office at 800 Bourke. It’s a hub charged with designing new products quickly; partnering with other organisations and potential investments in innovation; and developing a scaleable innovation system at the heart of the bank.
“We didn’t make it a special-purpose unit, we put it at the centre of the bank,” Thorburn says.
He chose his head of products and markets, Antony Cahill, to oversee the hub as part of his portfolio and one of his executives, Jonathan Davey, to run the lab. NAB Labs has a dedicated team of around 35 people but the numbers can surge to 60 or 70 as bank staff move in and out for specific projects.
The goal is to design a new product in 12 weeks and test it on the run, says Thorburn: “Before, if we wanted to come up with a new product, we would set up a committee and people would sit down and think about something for 18 months or two years and then they’d implement it.” It involves bringing customers into the lab and working with them to design new products.
NAB also has a strategic alliance with the University of Melbourne and its top ranking Melbourne Business School where MBA students spend six weeks at the lab as part of an “experiment team” receiving a credit for their work. NAB Labs will also work with the university and its business school to analyse challenges and share insights on topics such as blockchain, customer behaviour and data analytics.
NAB is a partner with Sydney start-up workspace Fishburners, which is also supported by Optus, Google, BigAir, Dropbox Business and News Corp, publishers of The Australian. It has held three “hackathons” at Fishburners, with NAB staff working with young entrepreneurs to come up with new ideas to feed into the NAB Lab process. There are cash prizes for the entrepreneurs, who retain the intellectual property in their idea and pursue a potential partnership if NAB Labs turns it into a product.
The lab has teamed up with accounting firm PwC to develop Airtax, a digital platform aimed at helping the self-employed and microbusiness customers to manage their GST-processing requirements by using a linked NAB Visa debit card.
NAB has also set up NAB Ventures with the goal of investing up to $50 million in fintech start-ups. It is led by former entrepreneur and digital media executive Todd Forest. Melissa Widner, one of the most senior women in venture capital in Australia, joined this year as general partner.
The goal is to take minority stakes in small fintech companies that have ideas and processes that can be integrated into the bank. It will look for small companies involved in areas including payments by mobile phone, data and analytics.
“We are going to be investing in small companies and we want to learn from them quickly,” says Thorburn.
NAB Ventures made its first investment last month when it joined with Qantas Loyalty and Westpac to invest $10.5 million in the development and overseas expansion of the data exchange company Data Republic. Founded by Paul McCarney and Danny Gilligan, the firm provides its businesses with enhanced data about its customers, drawing on information from a wide range of data sources.
Thorburn says the cross-fertilisation of talent is important: “We want our team to be among the best global thinkers in the innovation space and give our customers access to the best innovative thought – and we recognise that it won’t necessarily come from inside NAB.” His personal challenge is to “keep learning”. “I keep talking to people,” he says. “I talk to [Telstra CEO] Andy Penn about what he’s doing – we’re going to work with them. You have to constantly be challenged about how to go faster and how to do things better.”
But there’s a limit to how quickly you can make the elephant dance. “We have been working at this pretty hard for a year at least but it is going to take at least three years before it’s deeply ingrained in our culture,” says Thorburn.