Week 172

Igor is kicking off the Week Note season with a deep dive into a mobile payment lab that we helped start last year.

Some time in early September, we began a conversation about establishing a Mobile Payment Lab of some sort for a client with whom we had an ongoing relationship for roundabout three years now. In fact, we collaborated on the project with our friends from Edenspiekermann, who have been working for the same client since 2009. Our roles on this project have always been complimentary and I can’t imagine a smoother collaboration process with anybody out there.

Scope of the project

The task was both clear and complex: the goal was to provide an external setup for a strategic approach to finding and prototyping ideas for future features and products. The client is a technology company with a banking license and an established contender in the payment-processing field. They have also invested heavily into the field of mobile payment and been enjoying a good run in the market building mostly white-label solutions for various corporations around the globe with a focus on Europe and Asia.

Product development so far has been approached via market demand (i.e. clients asking for specific features) and a management team that has deep understanding of the field. What had been lacking was a comprehensive roadmap for how to explore future developments without waiting to react to an immediate client request. Basically, the goal was to be able to shape the market instead of only being shaped by it.

Labs are rarely successful and can’t operate as startups

People who know me well also know that I’m not necessarily a believer in the Lab idea. Both internal as well as external Labs usually have one major setup problem and that is lacking the ability to appropriately transform their work back into the larger organization. That doesn’t mean that the work in those labs can not be interesting or innovative. They often are. Even if corporations staff labs with internal people. Given the opportunity to break certain habits and working under different (not necessary more relaxed) conditions, people tend to produce very different results and that’s great. But if those results aren’t in any way usable to their colleagues who are busy churning away at the “normal stuff” which is also known as the thing that currently pays the bills, than all of the work that is being produced in a lab is usually fairly pointless.

Another down side of labs is the fact that they are usually handled as some sort of pet project by well funded members of the management board. That is to say that they are not necessarily strategic and often fairly political. By being used politically – labs require people, people equal money, money equals power – they become even less able to transfer their work into the rest of the company, because the kind of rivalry tends to make people less open about adopting the work of “the other guy”.

At the end of the day, the goal for whatever is created inside of those labs is to become a source of revenue for the whole organization. This is crucial. Otherwise the life expectancy of the new structure is minimal.

  • Generating creative ideas and building presentable and maybe even sharable prototypes can be fun. But more often than not it results in services and products that do not resemble in any way something that can be build and maintained by the company itself. The idea and the prototype are about 10, maybe 20 precent of the work.
  • In most corporations, the approach can rarely resemble the one of startups. I know, this is largely different from the advice that most people in my field will give. The real-politics of a modern day corporation will never allow for the kind of flexibility that the VC funded startup ecosystem can provide. I consider advice that ignores that fact as harmful, because it ignores one core principle of how the funding of startups works. While there are certainly exceptional funds that have a better success rate, usually 8 out of 10 startups fail. Meaning that only 20% of extremely well funded and nurtured ideas generate enough return on invest for the investors. It also helps that VCs don’t actually use their own money for taking larger bets. The same is just not possible for a corporation that attempts to find new sources of revenue. To allow 8 out of 10 ideas to fail, they would have to allocate too many resources and thus potentially harming the overall organization. The only way for corporations to part-take in this process is by creating their own fund and hire good talent that will manage the cash allocated to that fund wisely. This is being done by most blue-chip companies, but differs significantly from the lab structure.

The most important piece of the puzzle for setting up a lab is not how many or what resources will be allocated to it, but how the work will be transferred back into the organization. We have spent a significant amount of time on deliberating how to do this right. While I’d like to share more useful advice, this is as far as non-contextual insight will get you, unfortunately. Those kind of projects seem only on paper or in TED-like talks as something that can be adoptable by reading an article or applying one rigid framework. While learning as much as you can helps, this is all about the individuals involved, with whom they talk, who they go to lunch with, who there allies are and who their opponents. It probably helps more to play chess from time to time too.

Our role

Our role was both a strategic one – in which our knowledge of the client and the market came into play – as well as a product-oriented one. Together with the Edenspiekermann Service Design team, we found a way to work that was both feasible for us as well as the client.

We chose a short iteration cycle. We aimed for 4 weeks between new iterations and ended up on a 5 week cycle. One cycle consist of establishing the scope of inquiry aka defining the work. We should have started with a maximum of two different tasks. Instead we had four. Which was definitely a strain for the whole team, because it put us under more pressure than is good for morale and quality of the output. Mostly, it worked out fine, but we definitely are planing to change that piece of the process in the next round. That being said, pulling some longer evenings in which everyone churns away also brought the team closer together. Which is immensely valuable for Labs in general. While those are, as described, not startups, they do work similarly on an interpersonal relationship level.

While having a mainly strategic position, I oscillated between different roles heavily. At certain points, I felt a bit like a Creative Director, other times I was happy about deep dives into research, connecting the dots between previously read articles, designing print prototypes and having the excuse to buy a Little Printer in the process.

It is important to have clear roles in Labs, but it’s equally important for everybody to be part of everything. Small teams and narrowly defined exploratory missions do have the luxury of actually getting everybody’s input. That’s what they can excel at. We, thankfully, managed quite alright from the start.

At some point, I will have to share a few insights about payment and especially mobile payment. After being involved in this topic for almost three years continually, we accumulated a fair share of experience and good judgement about the industry and opportunities in the field. Both locally – Germany is always a special case for that –, but also internationally. As part of the ongoing project, I have been learning everything there is to learn about iBeacon as well as payment solutions in Africa.