Previously, we talked about that to be innovative, we need to protect embryotic innovations from the corporate immune system that tend to shut down exciting innovations. Let us now open the strategic toolbox and see what practices we can find to help us with this. We're going to start by looking at the concept of dedicated innovation enclaves. These are exactly as the name suggest, organizational entities that are supposed to have a different, more experimental culture and engage in high-risk moonshots. The most famous innovation enclave is probably Google's Project X that now operates as an independent unit called only X within alphabet. Among X's moonshots are products that includes balloon-powered Internet, the self-driving car, Google Glasses and drones for delivery within cities. Inspired by Google X, financial companies have also started to work with special units where innovation means something more than incremental product development. Maybe these innovations are not as radical as Google's product to replace cargo ship with big balloons, but the idea is the same: to find a haven for ideas that need a different environment to thrive. At Danske Bank, there is an organizational unit that is unofficially called Project X as a reference to Google's moonshot factory. If you visit the 160 people working in this unit, the signs on the door says MobileLife and MobilePay. It was with MobilePay it all started, and it is with MobileLife it's supposed to grow. In 2012, Danske Bank was together with other Nordic banks facing the threat of disruption from the smartphone industry, Google and Apple. For Danske Bank, it was not a question if mobile payments would take off, it was a question of when. Danske Bank decided to start the disruption itself, launching MobilePay. Since its start in 2013, MobilePay now have 3.2 million users. This is a very impressive number because there are only about 5.7 million Danish people. This is the third most used app after Facebook and Messenger in Denmark and it's downloaded on nine out of 10 Danish smartphones. It has become so successful that Danske Bank's largest competitors have decided to quit their own attempts to make a similar service and decided to join MobilePay. In retrospection, the success is evident, but betting on MobilePay was actually not a straightforward decision. If Danske Bank would have followed internal product prioritization and governance protocols very strictly, the product would not have been started. There was no reliable business case. MobilePay was very high risk. It was unclear if the technology was mature. And at the start, no one could clearly see how it will generate revenues. MobilePay built an option for the future, but there was no identified return on investment – that had to be worked out later. But eventually, Danske Bank decided that it would, for the first time in its history, jump on a project to which there was no business case. Looking back at the struggle to get MobilePay up and running, Danske Bank decided it needed special units that took the bold and risk innovation. Because of this, Danske Bank established an innovation enclave that was given the name MobileLife. MobileLife is placed in another building and doesn't follow the same governance structure as the main banking unit. It employs 160 people, 50% has a traditional banking background from Danske Bank and the rest comes from various backgrounds. The idea is to focus on the customers' needs to restart up and tell it. There are both similarities and differences between MobileLife and, for example, Google X. The culture is similar in that it should be curious, experimental, and allowing for failure. The way of working with rapid prototyping is also very similar. But X launches moonshots in all directions, Danske Bank's MobileLife has a very distinct focus on key financial events of the customers, for example, buying a new home. To be there for the customer in the major life events is the bank's strategy to be relevant also in the digital age, and therefore, these are the moonshots MobileLife are going after. Distancing MobileLife both physically and organizationally from the modern organization was critical to achieve this, but a disconnect can never be complete because MobileLife is supposed to utilize the advantages of a large company in muscles, brand name, capital and competencies. For example, many of the best IT security experts in the country works with Danske Bank, and MobileLife is not supposed to just take off in a different direction than the rest of Danske Bank. MobileLife is supposed to be the engine that leads the rest of the organization into the digital age. The moonshot should be the ones that are relevant for Danske Bank. So here's the critical challenge of this innovation enclaves. They need to be separate, but also not, its products, separate enough to produce radical innovations, not so separate to disconnect from the mothership. If it works in Danske Bank? Well, time will tell. At the beginning, innovation enclaves are all about creativity and ideas, but over three to five years, they should also produce viable business models that contribute revenue. In Danske Bank, there are some interesting stuff already coming out, indicating that MobileLife work in that way. In 2016, MobileLife launched its first product, Sunday. This is a platform for real estate hunting that gives the customer suggestions on affordable options. Sunday also gives instant mortgage confirmation for the customer that is looking at the specific property. In 2017, a second product called June was launched. This is a financial investment platform that promises to customers to get financial investment advice and set up a personal investment portfolio in just 10 minutes. Everything about these two products is far from conventional banking systems, the functions, the signs, coloring schema, commercials, and feel. They have been generated without Danske Bank having a clear idea of where they are heading from the start. Danske Bank just started from the point that they want to be a relevant part of the customers' life events. To produce this kind of high-risk, uncertain innovations where there is no clear business case from the beginning is why so many financial firms bets on innovation enclaves.
