Why should financial service providers cooperate with universities?
Most financial service companies do research in the sense that they survey market developments, competitors and technology. They also collect data on customer transactions, customer reactions to marketing and customer interfaces. And most companies work with consultancies and other knowledge partners for access to new trends and tendencies.
Yet very few organizations have their own research departments. Certainly, the research contributions we see in industries such as biotechnology, medicine and so on are not reflected in financial services.
“Who cares?”, you might ask.
Well, If you are a financial service provider or successful fintech I will respond with the words of a friend and highly esteemed and passionate leader of industry-related computer science research initiatives:
YOU DO!!
Because working with the best and most recent knowledge is key to managing in the competitive and fast changing environment of today.
So why work with universities? Isn’t research something very long term and far from critical daily business decisions, like developing the next version of a payment app?
I don’t think so–for a number of reasons (supported by examples from my own career):
First, building on academic research isn’t meant to replace existing market research and development. Rather, it provides knowledge that is both broader and deeper. This kind of knowledge can’t be judged solely on what return it delivered for a specific project. Instead, it has a habit of disseminating into several different areas, creating solutions in surprising ways.
Second, since there is no strong industry research tradition in financial services you have a good chance of achieving a competitive advantage simply by being better and faster at implementing existing knowledge–whether in finance, economics, money theory, computer science, innovation, organization, design or another area.
I did my own industrial PhD in collaborative innovation using social network theory and theory of open innovation to understand how competitors in finance—who were each too small to build their own IT platforms—could collaborate to build IT to support future business. Even before my PhD defence, the insights created along the way were implemented in the company’s strategic understanding of new business models.
Third, research is important–not only in the long run, but also for zero-day innovation, when conditions are suddenly right and your organization needs to implement new knowledge fast. In this respect it is a sort of future preparedness. AI is probably a good example. Financial organizations that have worked closely with researchers on building an understanding of the potential of AI in the industry have been able to turn out their first solutions quite quickly.
Fourth, there is great potential in working with some of the brightest minds in strategic or applied research, possibly starting with an industry challenge. Combining an industry issue of how to create customer-centric innovation in a digital age with strong theoretical skills in mathematics, computer science or behavioural finance could create new cross-disciplinary knowledge, and at the same time build your competitive edge.
I once worked with an investment bank that employed a brilliant researcher to analyse dealer decision processes. The bank was worried that trading floor dealers were not adequately trained to cope with crises. The researcher studied the connection between market developments and signs of stress. His academically-recognized research helped the bank make better decisions on who to put in charge during high-pressure situations—and for how long. It also helped build better training sessions.
Fifth, academically-trained researchers can often direct your organization to ask the most relevant questions and help you take the next step towards excellence. Years ago a brilliant mathematician made the point that pension calculations needed an update to take into account that people’s health patterns are changing. Whereas before you might become ill and benefit from invalid support until your death, now you may more often be ill for a period and get well again.
In the case of my own PhD research, the companies I worked with were torn between the cost- driven need to collaborate and their wish to compete on innovative solutions. My research project opened up a way to use the collective knowledge we produced to build IT infrastructure that supported innovation and which could be implemented differently in each competing company. This meant that the companies could both collaborate and compete simultaneously—a win-win situation.
How can you start?
A natural place to start is to develop an open and efficient company knowledge culture, bringing together existing research initiatives and mapping existing contacts with collaboration.
One simple initiative would be to identify what kinds of collaborations and relations already exist between universities and company departments. Very often leaders or executives have stayed in contact with the university they graduated from through personal contacts. They may already be working with students writing theses or cooperating in other ways.
And there is great potential to reach out to the many new cross-disciplinary research initiatives started by universities around the world, either as pure academic initiatives or in collaboration with industry partners. Good examples of collaboration could be:
Matchmaking events combining relevant presentations from university and industry experts with the possibility for students and companies to speed date and discuss topics or issues that could be relevant for collaboration
ummer schools like the annual initiative from the European Blockchain Centre in 2016-2019
Inviting students to write their bachelor or postgraduate theses on industry problems, doing their research in your organization
Making more use of industrial PhD programs and industrial postdoc programs, where the university-enrolled researcher is employed in a company while they working on a relevant research project
Running industry challenges in collaboration with academics who can write research papers on industry problems (as done for instance by the SWIFT Institute)
So really, there is no excuse not to get started.
