Using innovation labs to drive change in manufacturer captives

New case study from BMW Financial Services, presented at the IAFN Spring Conference in London.

It is just a few months ago that it seemed like finance companies would inevitably lose their businesses to technology-savvy new entrants entering our market as disruptors. These new entrants would focus hard on customer needs, understand where the weaknesses are in existing sales models, and use their techy skills to better serve auto finance customers and thereby outcompete the more traditional, slow moving market incumbents.

At this May’s International Auto Finance Network conference in London however, delegates were given a glimpse of a potentially different outcome – one in which tiny fintech start-ups and mighty manufacturer captives could work together to solve problems on the road to a digital auto finance future.

Jonny Combe, Product and Channel Development Manager at BMW Financial Services told delegates how they have teamed up with corporate innovation specialist and investment fund managers, L Marks, to identify early stage growth companies they can bring into innovation labs and accelerators to develop innovative solutions to opportunities and problems the company faces on its journey to digitalization.

Innovation labs would seem to offer a way for fintech and captives to learn from each other, bringing increased diversity and entrepreneurial innovation into the very heart of BMW

At the end of the ten week innovation lab process, the winning start-up will win the opportunity to pilot their solution with BMW, as well as gaining investment from both L Marks and BMW.

It is not hard to see the attraction to fintech entrepreneurs of winning the support of a large organization like BMW - particularly as their world becomes ever more crowded and competition for funding becomes increasingly intense.

What is interesting however, is that BMW see innovation labs as a part of a larger cultural transformation which they (and by extension all captives) need to make in order to dominate digital real estate in tomorrow’s auto finance world.

Employees in large organizations (even ones as innovative as BMW) tend to think alike, and to recruit others with the same characteristics. Combe argues that this leaves the business vulnerable – particularly, it may be supposed, at times like now, when the industry is facing rapid change, and the need to develop new core competencies.

Innovation labs would seem to offer a way for fintech and captives to learn from each other, bringing increased diversity and entrepreneurial innovation into the very heart of BMW – rather than leaving it outside – as one would in a more normal traditional supplier-customer relationship, helping BMW to build solutions faster, and to absorb some of the innovative new skills of their start-up partners.

If successful the results could be very interesting indeed combining as it does, the entrepreneurial flair and techy know-how of fintech start-ups with BMW's financial muscle and dominant market position.

This is an imaginative and interesting solution to a critical industry challenge, and one which, in our opinion, deserves to succeed.