Podcast #107: Fintech Meets IoT

Today I’m pleased to host Maarten Ectors, the Chief Innovation Officer at Legal & General, the UK’s leading financial services group with over £1 trillion in total assets under management globally, including homes, urban regeneration, clean energy, and small business finance. Maarten is a name many will recognize from his pioneering IoT work at Nokia and Canonical, including developing the program at Nokia that launched Cumulocity which exited as Software AG, Yuave, and Cloudstreet. So, welcome Maarten.

Thank you very much for having me.

Oh yes, it’s probably long overdue in that regard. So, let’s start with your professional journey, tell us a bit about your background, and how it has informed your views of digital industry.

Interesting question. So, we’ll go into the deep delves afterwards, but the whole digital innovation for me started at the Nokia time, and then I went free technical for many years, but then I decided what could possibly go wrong if I changed properly and go and try something different. But it’s interesting to see the whole digital from both the business side as well as the technical side, and understand those both sides, because you need to understand to really take advantage of it.

Yeah, I’d say one of the things that truly intrigued me, having known you from your deep technical experience, was the jump that you made into as a Chief Digital Officer, now a Chief Innovation Officer, at what many would consider to be a very conservative industry. Clearly, you’ve been successful for a lot of different reasons, but let’s rewind back. Let’s go back to your time in Nokia in 2010, which as you and I both remember was a truly formative time of what we had just started to call the internet of things. You were the Co-founder of Nokia’s global cloud startups programme, the precursor I’d say to today’s Venture Studio efforts, or some may say accelerators and incubators. What inspired you to create this program, and what were some of your wins at the time?

So, inspiration came from a need, as it always comes. I joined Nokia to do offshoring, which my boss back then thought it was a 3-year program, and then after a year I came back and said, “I’m done, we now have 300 people that are working on this, I don’t think they need me anymore”, and then to my surprise my boss back then said, “Hm, it’s not a good time to have no job, because we’re kind of short on jobs”. So, I said, “Okay, let me think about what I’d like to do, and come back”. Then at that same time 2009, cloud computing was something new and exciting, so I showed in a very famous demo to all executives in Europe how in a couple of minutes with a Twilio type of service, it wasn’t Twilio back then, I could do things in minutes that they needed six-months and six people for in telecom. I suggested, why don’t we do more around cloud computing, and new things around what we could do in telecom.

That’s how Nokia or NSN, startups at NSN back then, Nokia Siemens Networks was born, and what we created was a place to experiment. So, we got 30 people over in Silicon Valley that decided with a lot of input from all the employees, what six areas we wanted to test out, one of them was M2M which was the old name for Internet of Things. At the end we got 36 people from all over the world together, and they were basically divided into six teams they each came up with a very specific solution, of which after a couple of years there were three spin-offs, Cumulocity being the most successful which exited with Software AG and was a cloud IoT platform, Yuave was a telecom solution where you could drag and drop and create telecom solutions from a browser, and Cloud Suite was about connectivity and a marketplace around that.

And Cumulocity we know well, having worked with Bernd Gross early-on, when he was doing a lot of work with Deutsche Telekom at the time. I remember his coverage on a lot of the late M2M and early IoT conferences at the time, especially in Europe, so kudos on building such an interesting company, but also placing in such a good leader in that as well.

At Nokia, I noted you went on to be Head of Cloud & Disruptive Innovation out there, what were some of the early innovations you guys were tracking at the time?

So we did a lot of SaaS marketplace aspect end, it was all about how we can help for instance telecom operators, and there were a couple of big ones in Europe that were doing that to help sell SaaS to their SME customers. So that was one of the things we looked at, like how can we generate new revenue special also with the data that telecom operators had. Unfortunately, back then, we’re taking 2012-2013 timeframe, Nokia wasn’t doing that great and unfortunately Oracle unit got severely cut, and that was what stopped this from growing further.

Well, I guess in some sense the misfortune for Nokia became the fortune for you, in the sense that that move culminated you playing the leading role in 2013, for an early industry innovator Canonical, which many people know as the creator of the Ubuntu Linux Operating System, now as I understand the world’s most popular enterprise Linux from cloud to edge. This is where many of us, and me personally got to meet you, given your prolific thought leadership, but also your almost omnipresence in conferences at the time. What were some of your key learnings developing Canonicals’ IoT business?

Yes, so we were at the cutting edge, we were always looking at what’s the next thing, what our impact and expression was, “What are the cool kids doing?”. So, one of the things that a lot of business leaders don’t grasp is why new technology moves so quickly, and all of a sudden it comes out of nowhere. Well, most of the time it doesn’t come out of nowhere, it’s doing things at the edges for many years, but it’s at places where people don’t go and look.

So, it was interesting at that point to go and see industry becoming disruptive, before people saw that it was going to have such a big impact. I started there as a cloud strategist, and the person doing strategy before me invented the value chain map, or it’s also called the Wardley map because it was Simon Wardley, and he came up with the whole mapping of the future of technology. Basically, he mapped in 2008 how cloud would go about and develop itself, and we used that type of technique to also look at other areas, and this is where IoT came up; so, how can you go and play a major role in the nascent IoT business.

What we tried back then was to commoditize app stores on devices, because anything from a robot vending machine, a mobile base station, anything, you couldn’t come up with an idea, a fountain or whatever, or we had put an app store on some time event and showed how it could become a revenue generator. So, it was a really interesting time to see where technology was going, how it grew from nothing into industry changing.

And speaking of changing industries, in 2017 you made what I would consider a giant leap at least from a technology leader perspective, so moving from deep tech as you called it earlier, to what I’ll generally call fintech and insurance tech, but truly at the forefront of an industry leader in the form of Legal & General. So, first I understand you were Chief Digital Officer for their insurance business, and then later-on became as you are now, Chief Innovation Officer with the entire group. What was it that attracted you to this opportunity, the company, and the sector?

So, the first thing is, in high-tech you have a million solutions for five paying customer problems. That is often the biggest problem, you have a solution looking for problems, so I wanted to see if I would go to an industry where there were a million paying customer problems, what could I do if I would bring that cutting edge technology, and try to solve those problems in new ways. So, I was given the opportunity to do exactly that, the CEO of the insurance business needed some new blood, an innovator with a fresh mind, so I was brought in. I started with a copy of start-ups at NSN, in which we asked different problems, and then created small teams to solve them.

One of the biggest problems back then was insurance claims, so if you have a home and the television falls off the wall, you want to claim, and the way the insurance works is very simple. If everybody only claims for rightful things, then for the people who have a claim we will pay it because that’s exactly how it should work. And the people who don’t have a claim shouldn’t claim, you should only claim for what you can actually claim, and then insurance works brilliantly, it’s cheap for everybody. If you’re unfortunate, you get your claims paid, but the unfortunate thing is something called fraud, and that’s what disadvantages the honest customers. So, we looked at what we could do so the honest customers can have their claim paid very quickly and easily, and the dishonest customers walk away and don’t complain.

That’s where our first innovation came out which is Smart Claim. It allows that in minutes you could claim, and we saw that customers went from hating to claim to give it the highest NVS score that any of the services back then had, and that’s why it also won the Award for Best Claim Technology of 2018.

You know, in looking at your profile for setting up the questions around here, I loved a question you asked, and it says, “Can a +180-year old company, be a fast innovator”, and your term here the answer here is, yes, I think you’ve actually clearly demonstrated this with a string of wins, including Smart Claim you mentioned a moment ago. SGRE in 2019 the world’s first pension blockchain solution in production, and UNO in 2020 – a transformative mobile app platform that enabled your company to win the Pensions Technology firm of the year award. To what do you owe your string of successes?

The way I go around the business is quite different than others before me. So, I tend to go around and I say, “What’s your Harry Potter problem?” “And what’s your Harry Potter problem?” and initially people looked at me like, who’s the crazy person asking about Harry Potter problems, until I start to explain what a Harry Potter problem is. A Harry Potter problem is something very easy, there’s two types of critical business problems; one, with money and time you can buy yourself a solution, and for those types of problems you go to the digital teams, the IT and change teams, or whomever you want to work with. You give them the money; you wait long enough and get the solution.

But then there’s another set of business problems, where even money and time can’t buy you a solution, you’ve tried many times and you’ve failed every time, or you don’t even know where to start. Then you’ve a Harry Potter problem, because a Harry Potter problem is very easy, you can only get a solution from an innovator with a magic wand, and that’s where we want to come in and say “Do we have a magic wand, can we find innovators that can solve your problem?”

So, this is where we got all these problems as I’ve said, for Smart Claim it was making it easy for customers that are honest, and harder for customers that are dishonest, S3 afterwards was a problem for our Bermuda Reinsurer. And if you know that there are 64,000 people living in Bermuda, it’s hard for you can go hire a lot of people if you want to scale that business. So, they wanted to have a reinsurance business that wasn’t limited by the amount of people they could hire, so we came up with Smart Contracts that could automate the growing of the business, and they won the biggest customer contract because of that.

And then you knew is about a mobile app for something you do once a year which is your pension, you don’t normally want to download an app, basically you want to just get the problem solved and get on. So, what we looked for is like can we have many-many of those once a year problems all combined, so that you opened them every day, or your mobile is a solution for every problem we have, and that has also enabled them to bring lots of customer wins. So, to make a long story short, go and start with those vertical problems and find a Harry Potter solution for them, and that will help you a lot.

I guess anybody who knows your deep tech background probably wouldn’t be surprised that you can wheel technology into a company and create potential catalytic change. But as any Chief Digital Officer will let people know immediately, it’s much more around culture change. So, in the same profile I was referring to earlier, you mentioned that innovation is an attitude that you can easily teach and use to create new business, which I found to be a fascinating topic. So, whilst it sounds simple in concept in terms of your phrase there, the landscape is littered with innovation programs, startup’s, scouting centers, venture studios, many run by your peer companies, all of which is demonstrated that there are real challenges to this. Who do you see as best in class in innovation management across your space, and generally in the industry?

I look at startups that really do it very-very well, so in insurance for instance Lemonade is a very good example, I don’t know if you’re familiar with Lemonade, but they do home insurance and pet insurance now as well, and they just changed the game on insurance, they basically said, “There’s a really loose relationship between the customer and an insurer, why don’t we bring in a third-party so that there’s no longer a very loose relationship? Why don’t we make it like a claim gets paid in three seconds? Why don’t we make it super-easy for you to walk away from us? Why don’t we make it super-easy for you to read a contract, and make sure you don’t need a lawyer, and let’s open source a contract and get other people to help us simplify it”.

So, those type of things are really-really interesting. Also, here in Europe, there’s a lot of neo banks that are innovating a lot of investment management innovation happening, so there’s all these startups that do all these innovations. And then strangely I also look at China a lot, there’s a lot of apps there that are really totally encompassing people’s lives, and deal with all your finances and so-on in ways that in Europe and the US we haven’t seen yet.

So, those would be where I get my inspiration from.

Who amongst your peer companies, insurance companies, and financial companies, who do you see as potentially the leaders out there, beyond yourself of course.

To put it very bluntly, I’m not focused on the current competitors, there’s thousands of others who are worrying about that, I’m worried about the competitor we didn’t know existed. So, if everybody around you is trying to do business in the same way, then today you might win and tomorrow you lose, and the day after you win again and so on, so that’s not a big problem. I’m more worried about the ones that come in and make the industry relevant. So, if for instance you look at SpaceX, if you are in telecom why would you care about a company shooting satellites in space, unless all of a sudden they shoot 12,000 of them in a couple of years, and do broadband in rural places where you cannot complete with them. So, it’s that type of competitors that I’m really worried about, because there’s enough other people in the company looking at the usual suspects, and what they’re doing, and making sure that we respond to those competitive pressures.

Well said Maarten, and that’s why I wanted to ask the question that way. I had a feeling that you might say that, and that tells a lot about what it means to be a Chief innovation Officer, versus a Chief Customer Officer per se, right, although there’s certainly some overlap.

We can’t go too far today without talking about the impact of COVID-19, and as we’ve mentioned in prior podcasts, I like the term the World Economic Forum used to term this as ‘The Great Reset’, when referring to the long-term impact of COVID-19. What do you see as the impact of this “Reset” on your financial services space?

So, I would say, what did financial services look like before? It was an analogue world where you’d go to an office, sending letters, call the call center and so on. Then everybody was on this intention to go to digital self-service, but all of a sudden, this COVID lockdown came, and now it was absolutely mandatory that you could offer digital self-service. That’s what has changed the most, an event that changes everything, and there’s a before and an after. And as somebody that looked at disruptive innovation, it’s something that you always want to explain to people, “Look, you are in danger that a big change happens” and so-on, but people go, “Yeah, next year I’ll take a look at that”, but now with COVID it really has come to the forefront that you need to be ready, that you need to be able to interact digitally.

For me it’s just another step towards the next thing which is computing and completely autonomous, so we will go from an analogue world, to digital self-service world, to a world where a lot of financial services things can be done fully automated. That will be even more disruptive I think in the future, because if you think about it, if as we’ve seen some years ago with ICO’s where small companies launched their own initial coin offerings and so on, that whole world hasn’t stopped, the UK now sees that these things are evolving, and eventually trade and so-on. So, for a company that doesn’t invest in management, not needing stock markets and having these all automated will be a big impact, and that’s just one of the areas that financial services will be impacted with this hyper-innovation cycle that we are currently in.

We’ve gone so far as to refer to this as the, Great Digital Accelerator, which is the title of a webinar that we’re getting ready to do, because we’ve seen across the border, peer companies, our investment portfolio, and large corporations like yourself, that these last 6 or 7 months have just been a rapid jump in anything digital, especially those around remote asset managements that we like to say. I’ve just returned from a trip in London a couple of weeks ago, and I was surprised by the number of places that will not take cash currency, because of the fear of course in touching the bills. So, I have to imagine there’s going to be a long-term reset with that as well.

So, as digital industry investors we always like to ask you a recommendation in interesting start-ups. You mentioned Lemonade earlier is one, who are your ones to watch?

So I think the Chinese coming here, the Lemonade’s, anybody that is actually building platforms in financial services are the ones to watch. So, we come from a pipeline business model whereby you’ve created a product, you’ve got some middleman to get it through to the final client, and then money was flowing back, but you had to leave a lot of that commission in the process. Whereas now with platforms, you just have a platform player that takes a minority percentage, and you can now reach global customers. So, I’m really interested to see where that is going to go, and who is going to play out in that space. I’m still watching the tokenization start-ups and others that could come up as really interesting models there.

Excellent. So, in closing, can you provide any recommendations of books, and/or resources that inspire you?

So, anything related to disruptive innovation and all the theories from Clayton, all the platform books, the exponential organizations, how Silicon Valley got you hooked on apps. All these types of things are really golden nuggets to read and ‘Crossing the Chasm’ classics and so on. But the real-real thing is about trying yourself, coming up with new businesses, and trying to write the next book, that’s what you really should be focusing on. Yes, you can learn a lot from books but there’s nothing like trying it in practice, because you’ll find out that your biggest challenges aren’t the shiny things but could be very- very boring problems that are looking for an innovative solution.

Excellent. Well, Maarten thank you for this insightful interview.

Thank you for having me.

Absolutely. So, this has been Maarten Ectors, Chief Innovation Officer at Legal & General, our long-term digital industry leader, and one of the cool kids now.

Thank you for listening, and please join us next week for the next episode of our digital industry leadership podcast series, produced by, for, and about digital industry leaders.

Thank you and have a great day.

[End]