Welcome to “Continuous Improvement,” the podcast where we explore strategies and methodologies for driving innovation and growth in the fintech industry. I’m your host, Victor, and in today’s episode, we’ll be diving into the innovation strategy of one of the leading fintech companies, Thought Machine.

But before we begin, let’s take a moment to understand the background of Thought Machine. Founded in 2014 by former Google employee Paul Taylor, Thought Machine aims to revolutionize core banking and payments through cloud-native technology. Their mission is to eliminate legacy technology from banks worldwide and rebuild the fundamental technologies of banking.

As Thought Machine experiences rapid growth and expands its global reach, innovation becomes a crucial element in staying ahead of the competition and expanding into new markets. Today, we’ll discuss their innovative initiatives and how design thinking principles play a pivotal role in driving sustainable growth and disruption in the banking sector.

First and foremost, the key to successful innovation is understanding the needs and desires of banking customers. Thought Machine employs user interviews and observations to identify pain points and shatter preconceptions. By conducting user research, they found that banks’ true pain point is the inability to provide new services due to the complexity of legacy technology.

Armed with this understanding, Thought Machine embraces divergent thinking and employs design thinking principles for ideation, prototyping, and testing. The goal is to get code into the hands of banking users as quickly as possible, gathering feedback to enhance the solution. This iterative approach allows them to develop innovative banking products and services that meet customer needs and disrupt the market.

Thought Machine’s innovation strategy focuses on three core objectives: developing new core banking product features and functionality, exploring new use cases to remain competitive, and improving operational efficiency. By reducing cloud hosting costs and CPU resources, they can achieve operational efficiency while capturing a larger market share in the APAC region.

To foster a culture of innovation, the management team must encourage experimentation and empower employees to take risks and think creatively. Collaboration with partners in the fintech ecosystem is also key to creating innovative solutions that meet banking customers’ needs.

Measuring the success of innovation efforts is crucial. Thought Machine tracks key performance indicators such as customer satisfaction ratings, adoption rates, and cost-to-income ratios. By aligning the innovation strategy with the company’s overall goals, celebrating successes, and investing in the human aspect of innovation, they can drive growth and maintain a competitive edge.

However, implementing an innovation strategy comes with its own challenges and risks. Employee resistance to change, resource constraints, and conflicts between innovation initiatives and ongoing operations are some of the hurdles to overcome. It’s essential to communicate the benefits of innovation, select the right individuals, address conflicts, and build partnerships to navigate these challenges effectively.

To manage these challenges, Thought Machine proposes establishing an innovation team, dedicated to experimenting with new ideas and testing new products and services. This cross-functional team will conduct user research, develop prototypes, and collaborate closely with banking clients.

The proposed action plan includes four phases: defining the scope and problem statement, conducting proof of concept, building a minimum viable product, and piloting the new features with a select group of clients. Each phase is designed to gather insights, validate ideas, and refine the solutions to meet customer needs effectively.

By leveraging existing technical capabilities,