Introduction

This book investigates the financial service industry, which is currently in radical transformation triggered through a number of developments in markets, economics, demographics, customers, technology and policy, and regulations. In particular, regulators have placed added pressure on banks to manage the various categories of risk as a consequence of the global financial crisis. Banks around the globe have become subject of stringent monitoring with respect to capital adequacy, corporate governance, and transparency. What began in summer 2007 in the United States with the subprime mortgage market has impacted the global economy severely and revealed how interwoven-free financial markets are. Although many financial service firms have unveiled a staggering swath of losses, this book does not focus on the recent turbulences. In fact, we extrapolated a number of long-term trends into the future and found what strategies, structures, and capabilities firms may exhibit in response to developments in the business environment. Traditional approaches to strategy are proving to be inadequate to deal with these changes. Those firms that want to survive and succeed in a hypercompetitive global environment need business leaders with more dynamic, innovative, and interdisciplinary and systemic approaches to strategic management.

We identified the shift from a closed to an open innovation paradigm as one major consequence of the analyzed trends. In a closed innovation paradigm, traditional company policies prevented them to review, accept, fund, or distribute any innovation from outside the organization. Where such isolated firms focus on own resources, open and flexible organizations focus on collaborative innovation to grow. During the last years, many firms have recognized the need for open innovation not only to increase competitiveness but also to survive. Open innovation is not merely a new business model to acquire intellectual property, it is a mindset characterized by openness, flexibility, and customer integration. The open model of innovation is the best way of creating value and required for operational excellence and profitable growth. However, it has wide-ranging implications for management. A number of actual case studies and examples of global financial institutes illustrate how senior executives approach the transition to open innovation. In particular, we discuss how banks adapt open innovation concepts from manufacturing as these strategic approaches and tools for innovation capabilities are advanced. Implementation can only be done upon the development of a set of new dynamic management practices. To gain a better understanding of the phenomenon, we suggest a framework based on interrelated capabilities, namely ambidextrous thinking, intrapreneurial attitude, and a systemic and holistic view on the firm. We would like to emphasize that the transition to new ways of organizing in the open innovation paradigm is based upon an open innovation culture that cultivates social capital as a set of resources embedded into relationships into which other resources can be invested. This is crucial, as delivering innovation successfully to the market calls for trusted relationships with diverse sets of people and institutions.