Innovation and the business professional and financial services (BPFS) sector is a different beast to other sectors such as aerospace, manufacturing and construction, to name but a few. In particular, there’s an absence of supply chain and hierarchy of businesses through which innovation can permeate at a sector level and create market drivers/ incentives that are aligned. That said, ask any leading professional advisory firm about their differentiators and innovation is either explicitly or implicitly on the list. After all, this sector is in the business of solving client problems which come in all shapes and sizes and navigating clients to the best outcome is part and parcel of the job which often requires some novel thinking or application.
But thinking about how the firm itself is innovative, and extrapolating that beyond the offer, the services provided into the business model and configuration of firm to develop new value creation or resource allocation, is neither comfortable nor frequented territory for the majority. Add into this the complexity of regional context, that is, driving innovation capacity within the West Midlands, and you quickly start to question the art of the possible most days! Let’s start with why it matters…
Contrary to perception, the BPFS sector is the largest sector in the region and when the regional economy is equivalent in size to that of some European countries, the scale of the effect of the sector’s performance is significant, whether examining by employment, number of firms or contribution (GVA). Over the past 30 years or so, the BPFS sector has enjoyed rapid and accelerating growth from being an emerging cluster of potential to being a globally relevant full service offering that contributes in its own right as per the economic metrics above, but also for the enabling functions in supporting the growth of other sector businesses through access to advice and finance.
Over the same period, technological developments have advanced and whilst were historically disconnected with the way BPFS services were delivered, this is no longer the case. As Ron Kalifa OBE stated last year, in his HM Treasury appointed position to review the UK fintech sector, FinTech is no longer a sub-sector, but an intrinsic part of the way that financial services are delivered. The drive for more frictionless, always-on, client empowered services throughout citizens lives cannot be divorced from expectations on service delivery from professions be that in a consumer or B2B context. And where financial services is a forerunner, others like legal services, insurance, real estate, are sure to follow. The need to keep up and ideally ahead is an imperative for any UK based BPFS firm, particularly to maintain the UK’s international reputation as a sound place to do business, hence this presents both an opportunity and a threat and when roughly a third of the regional economy depends on this, that is why innovation capacity matters in the West Midlands.
As ever though, it’s easier said than done, even when the motivation and rationale is compelling. Key challenges to overcome in progressing this agenda include:
- Absence of a burning platform in the here and now – many BPFS firms continue to be profitable and are not short of work. Key constraints continue to be more about access to talent to be able to deliver the work that is available. However, there is a clear shift in the types of talent being sought and that is clearly linked to the above trends to a more technology enabled service provision, be that internally or externally. That Goldman Sachs invested in Birmingham is testament to the talent pool here, but that a bank has an “engineering division” and it is specifically that team which is establishing Birmingham as its home is a clear demonstrator of the shift in the sector.
- Inward investment is part of the picture to future growth and supporting such moves through providing access to opportunities for our super-diverse and youthful population of the West Midlands which are a key attractor in the first place is critical. In fact, workforce diversity is often intrinsically linked to stimulating innovation culture within BPFS firms.
- Growing our own ‘proftechs’, meaning the fintechs, insurtechs, proptechs, lawtechs and all the other labels that are common parlance for these new services within the BPFS sector sphere. Creating a vibrant start-up ecosystem is essential to address sobering facts like the average age of a fintech founder being 48 in the region, which mirrors the national picture. More sobering is that the typical fintech founder is white, male and middle class and when there is no evidence base for demographics and good business ideas, there is a clear need to be addressed here.
- Leveraging the regional key assets such as the strength of the existing BPFS cluster and the universities specialisms such as the Gilmore Centre for Financial Technology at Warwick Business School and the Sustainable Financial Innovation Centre at University of Birmingham. R&D activity is much more established culture and practice in other sectors and there is very low level of uptake of offers to work with higher education in the region from the BPFS sector for lots of good reasons, but at a fundamental level it is new for both sides of the fence. Engaging with universities is prevalent on a talent acquisition side, but very low on the innovation and research side both within the regional ecosystem and participation in national initiatives along the same lines (e.g. UKRI’s Nex Generation Services Fund)
SuperTech is grappling with all of the above and making some progress, particularly on the ‘growing our own’ agenda with the SuperTech Seeds programme that is harnessing the power of no-code development technologies to lower barriers to entry for early-stage start-ups at MVP stage in the development cycle. On the others, its early stages for all parties and the Virtual Innovation Team is a valuable forum for enabling the cross sectoral knowledge exchange to advance these and position the West Midlands as the global centre of next generation professional services.
Author, Hilary Smyth-Allen
Virtual Innovation Team Lead, Modern Services; BPFS Sector & Modern Services Lead, GBLSEP; Executive Lead, SuperTech WM