Case analysis

86 To deliver operational efficiency, Santander has launched the intelligence tool Santander NEO CRM, which increases both efficiency and personalisation by integrating information from all channels (branches, online, mobile and so forth) and incorporating new transactional capacities. This enables Santander to offer customers better and more personalised proposals (Santander, 2017a). Santander is also involved in various blockchain technology projects and utilises big data analytics. In 2016, Santander UK also launched a voice assisted banking technology in their mobile banking app. The voice recognition technology enables customers to ask the app questions and transferring money to existing payees by purely speaking to the app (Martin, 2017).

As part of Santander’s digital transformation, the bank is expanding its multi-channel offering by improving its mobile banking offering, introducing new apps and digital solutions, financial management tools, online trading and investment platforms (Santander, 2017a).

87 radar to identify the latest trends and innovations within the technology space. Through events and competitions for fintechs, IV scans the market for innovative technology and accesses knowledge networks that may help Santander build knowledge and awareness of developments that might otherwise be unfamiliar to them. IV investments often lead to collaborations and partnerships run by Santander’s internal innovation and technology divisions. As mentioned, IV aids these departments, by screening the market for suitable solutions and partnerships, sometimes even without indenting to invest themselves, thus adding to the bank’s capabilities to discover.

Santander’s incubators can be argued to serve as important vehicles for discovery, as they attract fintechs and start-ups with novel technologies and business models that Santander can explore.

5.2.4.2 Act

Santander’s capabilities to act stem from internally as well as externally oriented vehicles of innovation.

InnoVentures is a vehicle that is central in developing Santander’s capabilities to act. Through IV, Santander gains direct access to a wide range of capabilities that the bank does not have internally, ranging from front-end applications to new technologies and analytic tools (InnoVentures, 2016b). The technologies, products and services that IV invests in are used to increase the efficiency and effectiveness of Santander’s processes and to advance the bank’s customer-offering, thus adding to the Santander’s capabilities to act. Furthermore, through IV, Santander builds capabilities to collaborate, with the portfolio companies as well as internally across departments. By frequently engaging in collaborations with new, high-technology companies, Santander gains experience, knowledge, networks and processes that able them refine their capabilities to act.

As discussed, Teece et al. (1996) suggest that winners in the marketplace have capabilities such as “rapid and flexible product innovation, coupled with the management capability to effectively coordinate and redeploy internal and external competences” (p. 515), capabilities which we suggest belong to the act category. We argue that while IV contribute to the product innovation capabilities, Santander’s capabilities coordinate and redeploy internal and external competences stem from the group’s internal innovation departments. At the highest group board level, the technology and innovation committee develop capabilities to effectively allocate resources and coordinate activities and initiatives within the innovation and digitalization area. The capability to effectively coordinate activities is developed by Group Innovation, and further facilitated by local the innovation teams on a country level, such as C&I. C&I adds to Santander’s act capabilities by coordinating and managing projects, serving as Santander UK’s octopus in terms of managing the implementation of innovations, projects and initiatives coming from Group Innovation, InnoVentures, or partnership initiated by C&I itself. C&I adds to Santander’s capabilities to act by finding the right partners needed for a project to be efficiently developed and integrated. The UK team further builds on Santander’s capability regarding customer centricity, by looking at innovation from a customer point of view, making sure that customer experience is a key priority throughout projects. Another internal group function adding to Santander’s act capabilities is Technology &

88 Operation. T&O’s efforts to simplify processes, ensure system compatibility, employ advanced analytics techniques and agile systems, often in partnership with external technology providers, continuously develop Santander’s dynamic act-capabilities on a global level.

Lastly, Openbank adds to Santander’s act-capabilities, by serving as a platform where Santander can try new solutions and build new partnerships without having to go through the long process of integrating the solution in Santander’s complex legacy system. Openbank is an experimental innovation vehicle, and experience and insight from it continuously add on to Santander’s capabilities. Openbank develops alliance routines, a dynamic capability emphasised by Capron et al. (1998), Gulati (1999) and Lane and Lubatkin (1998), that we argued belong to capabilities to act.

Santander’s capabilities to act are dependent on external partnerships. With internal efforts building capability to coordinate and collaborate, most radical innovations and transformation stem from competencies existing outside the boundary of the organisation. The most evident example is Openbank’s platform, which, as suggested by the name, is built specifically to integrate other third-parties’

technologies, products and services easily. Through collaborations, partnerships and investments, Santander essentially has access to an ecosystem of a wide range of capabilities and competencies.

Santander’s utilisation of vehicles of innovation to build capabilities is consistent with Chesbrough’s (2006) definition of Open Innovation, suggesting that firms “use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” (2006, p. xxiv).

As suggested by Martovoy et al. (2015), by building capabilities via externally oriented vehicles of innovation, Santander benefits from reduced costs, access to partners’ networks and the ability to leverage complementarities. Quinn's (2000) argument that that it is too costly and complicated for any one company to have all capabilities internally also speak for the benefits of Santander’s innovation efforts.

Having worked at both T&O and IV, Arts has insight from Santander’s external as well as internal endeavours. Arts (interview, February 14, 2017) argues that it is more practical for Santander to partner with other companies than to build new capabilities internally. Consistent with the previously discussed observation that the industry lacks talent with tech-knowledge to support innovation from within banks, Arts (interview, February 14, 2017) further suggests that Santander lacks the skills and resources needed to build all solutions internally. Instead, start-ups and fintechs have an advantage in these capabilities.

Instead of investing in building these capabilities internally, Santander relies on its capability to collaborate and partner with other companies for accessing these.

We try to build some things internally but at the end of the day, are we going to have the resources and skills that a start-up has too often spend like four years just working on building a single solution and have a crazy amount of tech-knowledge? I think that’s why it is just more practical to go with a solution to partner with a

start-89 up than building the solution yourself, and it ends up probably building an internal

solution will cost more than it would to invest in a start-up. (A. Arts, interview, February 14, 2017)

5.2.4.3 Protect

Facing disruption, Santander devotes substantial resources and efforts to acquire and develop new capabilities to facilitate the bank in the changing business environment. As discussed, changing the core business when facing disruption comes with a risk of diluting an organisations core dynamic capabilities in favour of newly acquired static capabilities. Thus, one could argue that pursuing dual business models, such as exploring with Openbank separately from Santander’s core, adds to Santander’s capabilities to protect.

Although Santander’s incubators primarily would build on the organisation’s discovery-capabilities, one could consider that these vehicles in themselves are an act of protection. Industry thinkers’ comments on Santander’s latest fintech incubator underpin this argument, saying that “It will allow [Santander] to find and invest in interesting and relevant fintech startups before they are large enough to compete with some of the bank’s core businesses.” (Novoa, 2015, para. 7).

The [venture] will let Santander keep an eye on the fintech world to make sure some plucky startup doesn't catch it on the back foot. It will also let the bank try and bring any promising startups into its fold rather than face it as competition. Keep your friends close and your enemies closer, as the saying goes. (Williams-Grut, 2016, para. 9)