When people think of innovation in the business world, startups–specifically technology companies–probably come to mind. This makes sense, as these businesses often use cutting edge technology and innovative business practices to disrupt the status quo.
In contrast, large enterprise businesses are typically viewed as slowly moving incumbents that are lagging behind on the innovation front. Bogged down by legacy infrastructure, mired in organizational red tape, and burdened by a general aversion to change, enterprise companies are slow to keep up. However, that’s not always the case.
In fact, the past several months have demonstrated that some major companies are able to respond dynamically to the broad challenges posed by COVID-19. This has been especially true in the fintech industry, where fintechs have delivered a series of innovations to help merchants and consumers navigate the pandemic.
To learn more about how large companies can innovate and respond to a rapidly changing world, PaymentsJournal sat down with Arnold Goldberg, Chief Product Architect and Senior Technologist at PayPal, and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.
Enterprise companies are well-positioned to innovate
Enterprise companies possess certain characteristics that fuel innovation.
One major advantage that these companies have is scale, specifically as it relates to resources. Unlike some cash-strapped new entrants or smaller businesses with modest means, established players often have vast resources like diversified employee backgrounds and capital at their disposal. This resource advantage helps fund new ventures and paves the way for much needed innovation.
With the larger scale also comes more data. Sloane and Goldberg both underscored the importance of harnessing as much data as possible, be it transaction data, consumer data, or information from merchants. Since large companies have more data to work with, they can better identify key trends and develop products accordingly.
Another advantage of enterprise companies is years of experience. For many companies, years of being in business has resulted in a network of solid professional relationships. As Goldberg put it, when you’re a major company with a long history, “you have partners that love to work with you.” Through these partnerships, enterprise companies can tap into different markets and develop new capabilities in a way that less established companies cannot.
In addition to having many partners, incumbent businesses also have an established customer base. This aids innovation in two ways. First, the company should already be familiar with their customers’ needs, meaning that solutions can be better tailored to widely experienced problems. And since customers already know and, hopefully, trust the company, they will be more likely to trial and adopt new products.
By having ample resources, business partners, and existing clients, enterprise companies can better engage in trial and error while seeing what works. This approach enables major companies to unlock opportunities to innovate.
Unlock speed by changing company structure
One of the main advantages that startups have is speed. For massive companies, speed is often curtailed by complicated chains of command and slow-moving decision making. Therefore, companies that want to adopt the same speed of startups need to reconsider their management structures.
Instead of a rigid, top-down approach to decision making, Goldberg explained that companies should give more autonomy and context to the teams building the products and services that customers interact with.Sloane agreed, noting that companies should “communicate the key strategies that are important to that company and organize itself around those, which often means reorganizing the enterprise.”
By giving lower level teams freedom to operate as needed, companies can better respond to new challenges and solutions and are more responsive to the situation on the ground. Goldberg characterized this approach as doing away with traditional command and control structures within a company. “It’s a very different model but it’s helped us really unleash a lot of the power that you’re seeing in PayPal right now,” noted Goldberg.
Innovating in the face of COVID-19
PayPal’s swift response to COVID-19 illustrates the points emphasized above. Even though PayPal is a massive, multinational organization, it acted quickly when the pandemic began.
Goldberg explained how the company realized that its business plans and long term strategy had to be altered. “Touch-free was something we really wanted to do in the future,” he said. “But all of a sudden, it became a hugely important capability for our customers, especially our small merchants who had to change their interaction model with consumers.”
Therefore, PayPal pivoted. In a matter of weeks, PayPal scrapped its existing roadmap and developed a new plan that was tailored to the pressing needs of its clients. Teams at PayPal, empowered to act independently, focused on developing a QR code solution that allows small merchants to accept contactless payments without investing in expensive hardware. The solution has been deployed successfully in 28 markets around the world, including the United States. In the last week, this initiative was expanded to enterprise merchants with CVS Pharmacy signing up as the first multi-year agreement.
Goldberg attributed this success to the culture at PayPal. He explained how everyone at the company, from the top to the bottom, understood that “there are going to be moments like this and it’s okay.”
Power in partnerships
PayPal’s success can also be attributed to strong partnerships. Goldberg noted that PayPal has completed more than 40 partnerships with leaders across the financial and technology ecosystems. This has allowed PayPal to innovate and help customers in tangible ways. For example, during the pandemic, PayPal worked closely with the U.S. government to help facilitate the Paycheck Protection Program (PPP). PayPal provided access to more than $2B in PPP loans, helping save more than 308,000 U.S. jobs.
“We have a close relationship with the U.S. government and were able to very quickly become part of that program and also, most importantly, get the money to the customers that really needed it,” explained Goldberg.
Grounding innovation in a central purpose
While having vast resources, a flexible management structure, and a multitude of high profile partnerships helps PayPal innovate, Goldberg noted one last aspect of PayPal which helps: a clear purpose.
“Our purpose is to serve the underserved around the world and to be the payments platform of choice for merchants globally,” said Goldberg. By having such a clear purpose that everyone at the company can rally behind, PayPal can act quickly and develop solutions with passion. “Whether it’s for 26 million merchants or our 346 million consumers, every day we come to work to engage on building amazing solutions for them to continue navigating through the crisis we’re in,” concluded Goldberg.