Developing an “Internal Kickstarter” program at Fidelity Investments

Fidelity_Center_for_Applied_Technology

The Fidelity Center for Applied Technology (FCAT) is the innovation lab of Fidelity Investments. FCAT’s role is to explore new technologies and methods on behalf of the functional business units at the company. In 2013, FCAT began discussing the idea of starting an internal “Kickstarter” program and assigned me to prepare the research. My boss Rick Smyers, VP of the Center for Accelerated Innovation, described to me a conceptual vision where Fidelity associates could pitch their ideas for internal projects on this platform, and they could receive funding for the projects from other Fidelity associates. As with the original Kickstarter, ideas could come from anywhere such that innovative projects that might never have been funded would flourish.

Before diving in with a make or buy decision, our team looked more closely at the forces at work within the existing Kickstarter community. We broke it down as follows:

  • Kickstarter attracts entrepreneurs, by enabling people all over the world to self-identify
  • The entrepreneurs can test demand for their new ideas in advance of creating them. In effect, a Kickstarter campaign is a form of pre-sales. Bad ideas are not backed, which keeps costs down.
  • The successful entrepreneurs get funding for their ideas quickly, without going to banks or venture capitalists
  • The nature of crowdfunding is such that the funders of ideas take a relatively low risk (usually small dollar amounts) in exchange for small rewards (usually early access to the product)
  • The world gets lots of cool new products

Kickstarter crowdfunding

Could this model to work at Fidelity? We analyzed each of these success factors to see if it would translate into an internal program:

Success Factor: Identify and attract entrepreneurs
Fit: YES
Notes: A main goal of the program would be to identify those Fidelity associates who not only have good ideas, but also want to take the next step to actually implement them.

Success Factor: Test demand
Fit: NO
Notes: Company employees are a decent proxy for customers in some markets and segments, but not all. Just because Fidelity associates liked an idea wouldn’t necessarily mean that external customers would like it. This is potentially a big problem!

Success Factor: Entrepreneurs get funding
Fit: YES
Notes: The hypothesis is that good ideas that would have been rejected in a traditional top-down investment review process would be approved in this crowdfunding model. This notion will have to be validated with a series carefully designed experiments.

Success Factor: Funder risk and reward
Fit: Uncertain
Notes: At Kickstarter.com, no cash changes hands until the project is fully funded which reduces the risk somewhat – but there is still real money on the line. In our proposed idea, the funders would actually not be using their own money but money from their respective business units or a central pool. Would they take this task seriously enough, given that they had nothing to lose? Would we need penalties for funders who backed “bad” project ideas? How would we define “bad ideas” anyway? Rewards would be challenging too. Is it really much of a reward to get “early access” to a new Fidelity product? (Couldn’t employees probably get that anyway?) We could make this work if the products were for internal use (e.g. a new app for scheduling meetings), but would it work for externally-facing products?

Success Factor: New products
Fit: YES
Notes: That is the overall goal – new products and services for Fidelity!
Next Step: Ask questions of others
Given the mixed results in this initial analysis, the clear next step is to look into what other companies were doing in this space. Fortunately, we were not the first ones to have this idea. Through ICEX, we met someone at a large pharma company who had proposed a similar program but ran into roadblocks:

  • Employees weren’t very good at making compelling pitches for funding
  • Their finance department wouldn’t move small amounts of real money from one department to another
  • They didn’t have the pre-sales or rewards model that make Kickstarter work – no external demand validation

As Fidelity continues to research this idea, we at Open Innovation Central welcome your comments below. Thank you for reading!

Chris Kluesener, Open Innovation Central

3 comments

  1. […] through the Fidelity Center for Applied Technology (FCAT), the company’s innovation lab.  In a fascinating post FCAT describes how it is undertaking research to see whether a “Kickstarter” model could work […]

  2. […] Bynghall in which he is pointing to what Fidelity Center for Applied Technology (FCAT) has done. In a fascinating post FCATbroke it down as […]

  3. […] through the Fidelity Center for Applied Technology (FCAT), the company’s innovation lab.  In a fascinating post FCAT describes how it is undertaking research to see whether a “Kickstarter” model could work […]

Add a Comment or Question

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: