Companies Need Transaction Design for Faster Technology Returns

Many profitable, hard working businesses find themselves burdened over time by their own tools and processes. Maybe a tool like Excel or Quickbooks was the right tool for the job, once upon a time, but now the organization has grown to keep up with customer demand and you find it hard to manage as those tools are now a burden.  Or perhaps your company is competing in a crowded market and you feel a pressure to continually invest in technology to compete. This makes sense, given how companies like Amazon and Shopify have dramatically shifted retail models with their technology-first approach to customer frustrations like shipping, returns, and check out. 

There are usually only two ways that leadership approaches these problems. First invest into optimizing current and known bottlenecks, and this is a sound approach. By and large it's a great approach because you can identify clear metrics and double down on improving the numbers. This is winning. The second is that you invest into novel experiments - new flavors, new materials, or new customer experiences such as a digitized checkout lane or AI voice assistance in the changing room. These projects are expensive, so are limited to small-scale pilots, and performance impact can take a bit of effort to measure. 

I've found that a third model also exists. This model only exists "sometimes, is fleeting, and requires an anthropological rigor to identify. I call this kind of work Transaction Design, when you are able to thoughtfully craft a new kind of financial transaction, often by using a simple technology. For example,  Plaid was created by a startup as an API solution to streamline transactions for investment tools like Robinhood, so individuals can make small investments with lower fees, and do this quickly. Another examples include Sophi's use of housing equity to offset student loans, enabling millennials to buy a home and pay their loans; or the notion that security deposits for apartments can be outsourced as insurance, so that millennials do not need to save 3X the rent, while reducing overhead compliance challenges for landlords.Here is the thing - any time a technology enables a capital transaction that could not previously exist,  it becomes a repeatable model. 

Transaction design can be implemented with speed and low-costs, unlike and expensive tech-heavy pilot of novel gimmicks, and creates new kind of customer insights with less investment. In fact, transaction design can generate rapid returns on existing tools, and give insight into how to design a tech roadmap for future capability needs, not just to amend current gaps. After all, isn't the biggest waste of money to only exist in meeting current market conditions, when those conditions are certain to change? No one wants that - especially share holders. 

How do you conduct Transaction Design in your company? You should not just run out and start trying to slam them into your current enterprise - that's for sure.  Also brainstorming exercises are never the best place to start.  Rather, you need to find the right expert, someone who understands the breadth of conversion models out there and has the means to understand your organization through its data, it's structural design, processes, and people. At the end of the day, it's always about the right people, because that part never changes.

Hire the Right Innovation Executive (CXO, CIO, CTO, CINO).

Executive recruitment is not easy. Hiring great people is always a challenge, but leadership recruitment is a high risk, and potentially costly endeavor.  If you bring on the wrong person for the job,  it can cost the company millions of dollars.

In recent years, corporations have sought to in inject innovation into their operations. Around 2012, companies like Target invested millions of dollars into creating model stores to test ideas, gas spectrometers to streamline produce supply chains, and hired a slew of people trained in design thinking. It also spun up "Project Goldfish," a secret effort to create the store of the future. By 2017 Target shut down many of these projects, as the abstract futuristic research conflicted with the reality poor revenue.

Today,  innovation is at the heart of growth for Target, but not the same 'version' of innovation that was pursued in 2013. The approach today is about solving real problems and making real impact on the bottom line. Today, target utilizes near term and long term methods, and has grown it's data science capabilities to coordinate with design-driven methods.

We can learn many things from this example, but the central narrative is that "research," is not the driver for corporate innovation. "Development" is the engine.  While all the development should be supported by a culture and sound methods in experimentation, exploration, and at the end of the day - you gotta make the thing, keep making the thing, and get results.

The most critical marker to identify the best hire is simple: How does this person drive results in the real world by introducing radical insights with effective action?

By and large, innovation executives focus on the things of technology, data, or the customer experience, or they focus on the how, agile development, user research, and experimentation methods. A good innovation executive will succeed in building these things and processes - yet a better one is far more focused on the what and the why, what will these things do in the world and why does it matter?

Innovation leadership demands the ability to create compelling visions of the future that are connected to existing evidence, but about 3 deviations removed into the realm of possibility. Leadership is the translation of that vision into processes and artifacts through others, to make that vision tangible. If this leader is truly great, then unexpected and unknown obstacles will become assets and new discoveries will further realize the vision, not undermine it. Sometimes this means the first steps are "less innovative," because a particular company weakness needs to be resolved, or because the workforce isn't mobilized.  Yet every every step of the way, this person can translate the profound into the ordinary.