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​Businesses could risk falling victim to ‘the competency trap’ if they fail to adapt fast enough when their environment changes. While it is important to excel at your core offerings, ideally it should go hand-in-hand with a fresh look at the commercial potential of tapping into the community surrounding it. Smart Payments, Nets’ innovation business, is an example of how nurturing innovation and co-creation with other players in the ecosystem adds to the company’s strong core.

"You don't have to blow out the other fellow's light to let your own shine," Wall Street legend Bernard Baruch once said, proving he was a man well ahead of his time.


Businesses that are successful in their contemporary context often fail to adapt fast enough when markets change. This paradox is commonly explained as the 'competency trap' in which myopic businesses fail to take a holistic view of their surroundings and the opportunities within it.


Legacy of the industrial era

The industrial revolution led to fierce competition between both countries and companies. Focus was on outmanoeuvring the competition, and any self-respecting business leader would have 'Competitive Strategy' (1980) and 'Competitive Advantage' (1985) by Michael E. Porter sitting on their mahogany shelves - books that undoubtedly shaped the corner office view of the world for many years in terms of strategy. Many thought it unwise to pursue differentiation and low-cost at the same time, yet as competition grew fiercer, it became clear to most that it would take something more than business as usual to survive.


This forced strategists to shift from an inside-out focus (how to position the company) to an outside-in perspective (learning from the market), which for most turned out to be a difficult transition. Only gradually did companies begin to bring their customers and other external factors into the equation. And only very few successfully brought new inventions to the markets – research suggests success rates below ten percent when pursuing commercialisation of inventions.  


Stuck in the past

This raises the question why so little innovation has been successful, especially as revenue generated from innovation often contributes significantly to topline growth. Clearly, there has been a misalignment between company-driven and market-driven forces – partly because some companies were stuck in the strategic logic of the past. With decision-makers busy fighting off the competition, many missed the bigger picture where businesses of all sizes could benefit from a peripheral vision, listening to the market, and working more closely together:


"While they may have perfected their core deliveries, which is a strong advantage, many large organisations have trouble adapting, co-creating and innovating due to an ingrained mentality of 'not invented here'. This way, corporate culture risks becoming an excuse for inaction, and the organisation could become unable to think outside its current strategic logic," says Simon Buchwaldt-Nissen, Director, Corporate Strategy at Nets.


In contrast, many small companies have trouble focusing their efforts, limiting their scope, and scaling their innovations due to a lack of resources:


"It becomes clear that instead of going it alone, these companies, big and small, have the potential to grow stronger together - and in many instances, could balance imperfections in their own business model by joining forces with a different company in their ecosystem," says Simon Buchwaldt-Nissen.


He suggests fintechs and large businesses are likely to experience a positive sum game if they were to collaborate, harnessing the innovation power and fresh thinking of the fintech and the process efficiency and reach of the enterprise.


No business is an island

In his view, changing the way people in an organisation think about the things they do, rather than changing what they do, is key. By working closely together with others in the ecosystem, it is possible to lower R&D spend, while at the same time tapping into a larger knowledge pool, and maybe even growing one's revenue from new activities, spin-offs and royalties:


"Things are developing at a rapid pace today, and no business is an island. An open business model allows companies to capture more market potential than it would have been possible to do in isolation, and bring innovations to the market shaped by competencies of the many, often based on insights into what customers want. In many ways, an open approach 'expands the pie' as new application areas and segments are addressed – and everyone will gain from each another's collaborative efforts," says Simon Buchwaldt-Nissen.


In his view, it makes commercial sense to pursue an open business model if it allows for complex and diversified products and solutions. Open platforms allow focus on short-term revenue-generating activities, while balancing sustainability by prioritising innovation for tomorrow.


In recent years, innovation has been one of the key elements in Nets' strategic thinking along with a persistent focus on making it easy for their customers to do business based on connectivity and unrivalled security and stability. The company has taken an active role in driving business value from emerging technologies by setting up its innovation business, Smart Payments, in 2017, and by entering into strategic partnerships with players such as the global innovation platform Plug and Play Tech Center in Silicon Valley, USA, and Paris, France; SingularityU in Denmark, Copenhagen FinTech Lab, and The Factory, Oslo, Norway, covering both the Nordic and the global Fintech scenes.


Co-creation opens new markets

Since opening its corporate garage, the Digital Lab, in 2016, which later matured into Smart Payments, Nets and partners have co-created and developed 40+ proofs of concept. Some solutions are maturing with a potential for commercial launch.

Today, most readers consume news on their smartphones, and although media houses have experimented with paywalls for online content, including pay-per-view, subscription or sponsored content, they find themselves in uneven competition with large platforms that expertly convert high volumes of clicks and users into ad revenue.


To address this, a proof of concept named Epsilon could allow media outlets to sell online content piecemeal and process transactions at a competitive stand-alone rate. The technology platform enables transactions for virtually all types of media, potentially including the streaming of music, videos, in addition to e.g.  machine-to-machine communication and IoT down the line.


"The system is a test of blockchain in real life. At Smart Payments, we strongly believe that the Internet of Things (IoT) is going to change our world, with machines being able to handle payments among themselves. In the future, we'll be paying for even smaller units – in a shared car we'll pay per minute, in rented accommodation we'll pay by the kilowatt-hour and when streaming a movie, it'll be per minute. Paying such small amounts outside a subscription hasn't been possible up till now," says Susanne Brønnum, CEO for Smart Payments.


Blockchain-based Epsilon would make it easy for consumers to browse and buy content online, and could be scaled to most geographies and is thus a good example of how co-creation can open new markets and customer segments for both fintechs and large businesses.



​"While they may have perfected their core deliveries, which is a strong advantage, many large organisations have trouble adapting, co-creating and innovating due to an ingrained mentality of ‘not invented here’. This way, corporate culture risks becoming an excuse for inaction, and the organisation could become unable to think outside its current strategic logic,” says Simon Buchwaldt-Nissen, Director, Corporate Strategy at Nets.