Disruptive innovations

Rereading Christensen’s Innovator’s Dilemma. Some takes (emphasis mine) :

- most successful enterprises get into deep trouble sooner or later and one theme common to these failures is that the decisions that led to failure were made when the leaders were widely regarded as the best in the world

- Good management was the reason for failing to stay atop. “Precisely because these firms listened to their customers, invested aggressively in new technologies that would provide their customers more and better products of the sort they wanted and because they studied market trends and systematically allocated investment capital to innovations that promised best returns, they lost their position of leadership.”

- “Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.”

Important book to read – lots of food for thought.

Domestic issue - false picture

We often come across statements that e-invoicing is a domestic issue - the cross border part is so small (some 5%) that we do not really need to care. This is a false picture as can be arrived at by just looking at the volumes of cross-border trade.

The reason for this misunderstanding is that enterprises have to establish local subsidiaries and thus - from legal and statistical perspectives do only domestic invoicing. From the operative perspective the picture is often totally different as a single shared service center can handle all invoicing.

For these companies it is very important to move faster to the global ISO20022 standard and harmonize regulations and then not having to support costly country specific practices. Another reason - especially in Europe - is the mandatory migration to SEPA payments. The ISO20022 e-invoice standard is by design fully compatible with downstream SPEA messages such as Credit Transfer as well as ISO20022 account reporting. This is seldom or never the case with local e-invoicing formats.

Typical - especially in banks?

There is a lot of evidence that hunch is often the best guide to good business. Due to scarce IT-budgets and even scarcer key skills many organizations have resorted to a systematic "business case" process approach. This all sounds very logical and orderly and is often difficult to argue against. And when we are dealing with big investments it is naturally necessary to analyse pros and cons and scenarios very carefully.

The problem - as delightfully described in the cartoon below - is that:

1. If you have a hammer everything is a nail - the heavy process is applied for even the smallest improvements - the decision making process ending up costing more than the project. The right solution is to empower people in charge with decision making power and resources - instead of delegating it upward. Then they also take more responsibility.

2. The most creative and innovative people hate formal processes. They will move elsewhere - exactly what we cannot afford.

3. Agility and speed is self-evidently lost.

4. Those who have the nerve to paint up the rosiest business case pictures may win - and the responsibility still resides with high level decision makers or elsewhere in the organizations.

A centralized model will not work for smaller investments anyway - as so many know from experience, that it is easier to get forgiveness than permission.. And luckily they have the nerve to move forward - but it is of course necessary to make this also officially allowed.

Progress in the payments area

This allows corporations and financial institutions to communicate with their financial institution counterparties through one highly secure global channel. The service covers all the operational SWIFT connectivity needs for corporations and financial institutions - payments, Forex confirmations, trade finance as well as other messaging. Acquiring the functionality as a service provides numerous additional business benefits, such as a decreased need for in-house IT infrastructure, technical competences and capital investment.

Markus Hautala, Head of Financial Messaging Services, Tieto, says: "We are seeing significant interest within the financial as well as corporate sectors to move to centralized cloud based services.

More:

http://www.tieto.com/archive/news/2011/tieto-receives-swiftready-connectivity---best-practice-label

More news on country deadline front

Latest on the country front – aiming at > 1. saving tax payer’s money, 2. collecting VAT due – efficiently, 3.pushing the SME-sector into better productivity, 4. increasing work force upward mobility and 5. contributing to CO2 targets.

Deadlines issued: Denmark, Singapore, Italy, Spain, Sweden, Finland, Brazil, Greece, Mexico, Norway

Latest:  Greece is expected to adopt e-invoices for business-to-government (B2G) transactions starting with 2012 aiming at a single prototype for electronic invoices, in a bid to enable enterprises to adopt this method in 2012.

The Greek government expects to save around 3.0 billion euros annually, while enterprises are likely to save more than 1.0 billion euros annually, the source indicates. The plan aims for all financial transactions between the public sector and enterprises to be made exclusively electronically in the Q1 2012.

Countries with partial deadlines and preparatory deadline-discussions include:

- Argentina (mandatory for importers in 2010),

-  Portugal (may actually belong to the having-done-category),

- USA (heading for 2012),

- Canada, Luxembourg, Russia..

- The Netherlands have issued an ambition to reach 80% in 4 years

-  the German Procurement Office (Bundes-beschaffungsamt) has electronified its process completely.

Latest:

- Switzerland had first deadline to prepare public sector systems for being e-invoicing ready; second step is now the discussion in the parliament to go towards obligation

- France - plan was to declare it as mandatory in 2012 – now a bit unclear

- Nepal – VAT-fraud driven “To our reckoning, we must not delay enforcement of an electronic billing system,” the source said.

More information surely around – please let me know.

The biggest of them all

We read that PayPal is moving into e-invoicing. Natural step for anyone who wants to stay in the payments business = keep the funding and profitability transaction accounts offer. Some banks have not yet seen the need to make the choice - keep the profitable and stable funding intact or not.

In the same news we also read:

"Separately, the US Treasury has signalled plans to switch all supplier payments to e-invoicing by the end of fiscal 2012, in a move the agency says will halve processing costs by $7 million annually.

If adopted government-wide, it could eventually save up to $450 million annually through lower staffing costs, according to official estimates."

This is really important and raises the question if there still are countries where wasting tax payers' money by sticking to inefficient and environmentally unfriendly practices will be accepted beyond 2012. Please let us know..

The US saving potential has probably not been taken to all the levels involved as the saving is rather moderate. To take the Finnish example (similar and higher figures from several other countries): Businesses can save 2,8 bn (EU-level equivalent = 196bn), the state sector 150m (EU eq = 10,5bn), the municipal sector 150m (EU eq 10,5bn). Some money.. for tax payers - and liberating increasingly scarce workforce for productive, better paid and more interesting meaningful work.

The list of progressive countries with public sector deadlines (as far I know of) include:

- Denmark (by law as of 1.2.2005) - scanning still part of solution?

- Singapore (1.5.2008) - would be interesting to hear about penetration rate

- Italy (by law 1.7.2008 - deadline later pushed forward)

- Spain (1.11.2009)

- Sweden (1.7.2009) - rather mild so far..(many municipalities have been progressive)

- Finland (31.12.2009)  - also scanning will be discontinued soon. Some 30 municipalities and most large companies have established deadlines. Several have stopped scanning and return non-structured invoices. E-invoice penetration rate now estimated to be 35% and exceed 40% by yearend.

- Brazil (2010)

- Greece (31.12.2010)

- Mexico

- Norway (2012)

Countries with deadline discussions in active phase (that I have heard of)

- Canada

- Luxembourg

- Russia

Please fill in....

The municipal sector is in some cases included (eg Denmark) and is very important as they can bring the local micro enterprises over the hurdles and get the CUT 50 progress started.

CUT 50: http://www.finextra.com/community/Fullblog.aspx?blogid=5538

Innovation in banks is difficult

I attended a very good innovation meeting last week and there one senior banker said that innovations in banks are so difficult because there is an obsession with business cases. No innovation investment is allowed to fail (is this attitude imported from credit risk evaluation?) and the endless business case argumentation actually puts innovative people off. If this would have been the case in society at large not much innovation would have taken place.

But of course there are other reasons - like the fact that much of innovation has to be done together with competitors to succeed- creating rulebooks and standards for payments, e-invoicing, cards, trading, e-id etc. This is both difficult and against competitive people's basic spirit and you can get to move forward with the speed of the slowest (if all have to agree - as is often the case in bankers associations). This again leads to the nimble banks trying to break loose and do it on their own - successful only in small countries.

and many more here:

http://thefinanser.co.uk/fsclub/2011/06/why-innovation-is-so-difficult-in-banks.html

Cut 50

CUT 50 is the name of the next phase in the Real Time Economy program run in Finland since 2006. It stands for cutting SME administrative costs in half by 2014-15. The main building blocks are the following:

1. Implement the European Commission target to cut read tape so that 25% of the cost of this public sector related administrative burden can be lowered by 2012. An additional element here should be radical simplification of the language used. Trying to understand what authorities say is as we know a major stress factor and cost both for citizens both in employee and private roles

2. Implement automation of administrative processes inside the enterprises. It is not fair to complain about bureaucracy caused by authorities if there is not a real effort to rationalize own work. This sector contains many different elements - some using electronic invoicing as platform (for both implementation and further innovation). To briefly list:

2.1. E-invoicing based productivity improvements: e-invoicing itself, payment automation enabled, lower financing costs (better cash flow as invoices can be sent more frequently and are paid faster and easier use of lower-margin invoice financing), lower credit and currency risk costs for the same reasons, lower fraud risk costs (sending of e-invoices requires proper authentication), lower audit costs (ordinary and VAT), automated real time accounting, automated real time VAT, automated real time cash flow estimates and automated invoice financing.

When all this is done using international standards (ISO20022 ready > lower IT-costs and service charges) and in an EU-harmonized (cost and stress of having to deal with country-specific practices can be substantial) way it is plain to see that this the cost savings potential is massive.

Not only productivity and financial control is improved by sending and receiving e-invoices - also service levels to customers and suppliers is significantly improved - indeed increasingly often a prerequisite for doing business already today. To this should be added the possibility to free up staff and time for income creating work (from only cost creating..) - production, development, customer service and sales - certainly a central productivity aspect.

All of this ties into payments, cash management, account statements, financing and risk mitigation services - goes without saying that banks need to be actively involved.

2.2. Other digitalization examples include automated tax returns, harmonized and automated salary administration and integration of growing environmental reporting into ordinary business document exchange.

2.3. Digitalized enterprises enables digitalization of the public sector > lower cost in the public sector > lower tax pressure - both for enterprises and their employees (higher net salary lowers employment cost > more jobs > more tax income).

Cut 50 should be a piece of cake - once the big picture is clear and thus gets a determined and  networked effort is started - especially when this at the same time harmonizes the Single Market (a much larger home market add opportunities to enterprises with the will and skill to grow).

Out of the many (20) listed above - automation of VAT is worth much efforts - both from enterprise and public sector efficiency angle and as it can build the Single Market and cut fraud and the need for VAT avoidance programs. I will go deeper into this separately.

Five easy steps to national e-invoicing

We have recently experienced a surge in interest for global e-invoicing from multinational enterprises. This is not surprising - cost savings are so large - and the usual ice-hockey stick effect typical. And we should be very pleased that the ISO20022 e-invoicing message standard (built on UNCEFACT CII V2 content standard) is ready for global adoption - strongly supported by SWIFT.

Still it is clear that the immense competitiveness improvements that can be made are in the national markets. Any government worried about cost-efficiency - its own and in all enterprises should now take strong action - establish national programs. We have been through this process and recommend the following five "easy" steps:

1. See to it that service providers create e-invoicing portals - so that the smallest SMEs have the templates for keying in their invoices (no investments, no IT-skills needed) and larger ones can send files (in local or ISO formats) from their invoicing programs to invoice service providers of their choice. Banks are a must-have both for providing the portals, file services and payment automation at the receiving end.

2. Agree on national interchange in 4-corner model (just like payments) and agree on national standard so that e-invoice applications and services can adapt and use ISO20022 as network standard - especially important for x-border.

3. Set deadlines for incoming paper and unstructured PDFs and charge visibly for having to send paper. Scanning should be stopped and receiver-specific portals replaced by generic.

4. Service providers should accept local standards and preferably convert to ISO in network. Endgame is ISO end2end.

5. Tell the wide SME-sector the e-invoicing is not a goal in itself - but the base for automated accounting, automated cash flow estimates, automated VAT, automated invoice financing, real time visibility of financing, better cash flow/less need for financing/lower credit and currency risks as invoicing frequency can be a increased etc

No time to lose - now Action - Bold Action is needed.

National productivity programs - must-haves

In today´s global market place it is more than evident that most European countries need to take a really hard look at the competitiveness of their enterprises. This is naturally a multidimensional issue - education, innovation climate, workforce mobility, risk capital, bank lending, lower tax on work etc.

One of the most critical issues is the high cost level - in production, services, agriculture and the public sector. The quick win medicine here is digitalization - so much can be done fast with small or even no investments - and the side effects are both workforce mobility, innovation incubation, new businesses, lower CO2, lower tax pressure etc. And naturally a more competitive service level - once it becomes digital it is not only cheaper - but also better.

Our focus - in the Real Time Economy program - has focused on cutting enterprise administrative costs in half - with a wide range of actions. The first phase was called Full SEPA  (payments and e-invoicing - 2006-7), followed by Full Value Chain (adding purchase to pay aspects in 2007-8) then Fully Integrated Accounting 1 (2009-10) and FIA2 2010-11. E-invoicing is the platform of most of the automation programs - but there are an increasing number of public sector reporting automation initiatives that can be achieved in the same spirit in parallel.

The next phase 2011-13 will build on these (add enterprise risk mitigation), add  and be named CUT 50. Stay tuned!

Will post 5 "easy" steps for national e-invoicing migration separately.

Why is innovation so difficult in banks

Interesting aspects:

http://thefinanser.co.uk/fsclub/2011/06/why-innovation-is-so-difficult-in-banks.html

Banking sector –EBA- taking responsibility

“For several years, the Euro Banking Association (EBA) has been conducting an e-invoicing working group (EIWG), with the objective of contributing to the mass adoption of e-invoicing in Europe and of exploring the potential roles and opportunities for the banking industry.”

 Service Description & Rulebook’ document.

“This document provides an approach and ‘blueprint’ for a pan-European e-invoicing network, consisting of banks and e-invoicing service providers. The Service Description & Rulebook is now made available to the members and associate members of the EBA and a number of partners, who have contributed to the thinking:

https://www.abe-eba.eu/N=E-InvoicingDocuments.aspx

We strongly believe that the work presented provides a valuable contribution to support the mass adoption of e-invoicing across different segments and industries. It is our hope that the concepts laid down in this document are now adopted and put in practice by market practitioners.”

ISO e-invoicing standard marching forward

Ready, global, open for all to use and influence. All based on the UNCEFACT Cross Industry Invoice content standard.

 

http://www.tieto.com/archive/news/2011/tieto-and-b2boost-to-utilize-iso20022-e-invoice-standard-in-electronic-business-document-interchange

Some challenges..

In some sort of priority order:

1. first slow down and then stop global warming

2. stop terrorism and murderous dictators

3. spread democracy and help the developing countries to create sound societies and growth

4. stop over-borrowing in our children’s name and solve the ongoing sovereign debt crisis

5. educate people so that they do not fall for populists

6. find financing for the welfare state in the future when the workforce is radically smaller and elderly population much bigger

7. fight inflation

All of this will cost a lot of money and if it will lead to higher tax on work it will make the situation worse. So the answer must come from better productivity, wider and more just taxation on over-consumption and environmentally unsustainable practices and lower tax on work in many countries.

Online banking is not ready

Online banking is not ready as long as users:

- users have to type in loads of reference numbers, dates, amounts etc when paying bills

- do not get mobile notifications when needed for too low or too high balances, transactions effected, invoices received etc

- cannot approve proposals with mobile press “a” for affecting proposal (invoice payment, new repayment schedule, new service etc)

- do not have handy way of listing payments per receiver and sender

- cannot use the account statement as cash based accounting (in accordance with new EU VAT directive) and cash flow estimate

All of these can be done once the bank is starting to provide e-invoicing as a part of extended payments services and connect to multi-device mobile environments.

Nice sustainability video

http://youtu.be/C4QB9pdH0mc

Real Time Economy on Facebook

https://www.facebook.com/pages/Real-Time-Economy-Program/128016310610648?sk=wall

IT Cycles presentation

http://streams.metropolia.fi/old/MultimediaTech2010/bo_harald_2/

What did I write - you read - updated

04 May, 2011 12:37

On EU:

• Questions European Tax Payers should ask: 7275 times!!  http://www.finextra.com/community/fullblog.aspx?id=2815
• A digital Single Market – why and how?: 2829 http://www.finextra.com/community/Fullblog.aspx?id=4497
• The future of Direct Debit – e-invoicing with standing order: 2655 http://www.finextra.com/community/Fullblog.aspx?id=4156
• Far more important than SEPA: 2732
• http://www.finextra.com/community/Fullblog.aspx?id=4020
• Enterprises – high time to stand up: 2189 http://www.finextra.com/community/Fullblog.aspx?id=3689
• Now we have two legs – where is the body?: 2306 http://www.finextra.com/community/Fullblog.aspx?id=4021
• No commercial constellation will create this Single Market milestone: 2276
• http://www.finextra.com/community/Fullblog.aspx?id=4022
• It is our money: 2161
• http://www.finextra.com/community/Fullblog.aspx?id=4684
• Dream scenario for VAT auditing: 1822
• http://www.finextra.com/community/Fullblog.aspx?id=3156
• 118,8 bn € lost in 2009: 1948 http://www.finextra.com/community/Fullblog.aspx?id=4774
• Liberating the power of SMEs: 1795 http://www.finextra.com/community/Fullblog.aspx?id=3519
• EU Commission request delivered: 1745 http://www.finextra.com/community/Fullblog.aspx?id=4790

On banking:

• Blame it on the banks 1: 2225 http://www.finextra.com/community/Fullblog.aspx?blogid=4789
• Blame it on the banks2:2638  http://www.finextra.com/community/Fullblog.aspx?blogid=4797
• Too complicated - a no-brainer:2334  http://www.finextra.com/community/Fullblog.aspx?blogid=2902

On e-banking:

• e-banking in the old days: 2801 http://www.finextra.com/community/Fullblog.aspx?id=3357
• Avoid Ice Ages: 2337 http://www.finextra.com/community/Fullblog.aspx?id=3418
• E-banking STILL growing strongly in Finland: 2523 http://www.finextra.com/community/Fullblog.aspx?id=4038
• Pyramid upside down – finally: 2060 http://www.finextra.com/community/Fullblog.aspx?id=3705
• Have banks given up?: 2261 http://www.finextra.com/community/Fullblog.aspx?id=3803
• Banks – time to deliver new customer value: 2011 http://www.finextra.com/community/Fullblog.aspx?id=2540
• Standard feature in any e-bank: 1964 http://www.finextra.com/community/Fullblog.aspx?id=2620

On e-invoicing:

• Think small: 6366!
• http://www.finextra.com/community/Fullblog.aspx?id=2813
• 966 billion reasons for split payment VAT: 1931 http://www.finextra.com/community/fullblog.aspx?id=4775
• Final report – roadmap to paradigmatic platform: 3778 http://www.finextra.com/community/Fullblog.aspx?id=3625
• Republic of Finland – exemplary action: 3523 http://www.finextra.com/community/Fullblog.aspx?id=3651
• Happy end for SME-tale in sight – if banks do their part: 3454 http://www.finextra.com/community/Fullblog.aspx?id=3650
• 54 billion reasons in Germany: 3365 http://www.finextra.com/community/Fullblog.aspx?id=3150
• All of Europe moving to equal treatment: 3294 http://www.finextra.com/community/Fullblog.aspx?id=3950
• Nobody promised you a rose garden: 2948 http://www.finextra.com/community/Fullblog.aspx?id=4488
• Letter to Santa Claus: 2365 http://www.finextra.com/community/Fullblog.aspx?id=2297
• Expectation surge from corporate customers:  2404 http://www.finextra.com/community/Fullblog.aspx?id=4093
• 3-corner model – a problem on our hands: 2532 http://www.finextra.com/community/Fullblog.aspx?id=4260
• Germany to simplify e-invoicing: 2386 http://www.finextra.com/community/Fullblog.aspx?id=4664
• Paper invoices have NO future: 2388 http://www.finextra.com/community/Fullblog.aspx?id=3490
• The end of the beginning: 2232 http://www.finextra.com/community/Fullblog.aspx?id=4050
• Excellent paper from the EU Commission: 2461 http://www.finextra.com/community/Fullblog.aspx?id=4776
• From sending e-invoice to receiving payment – less than 30 minutes:2231           http://www.finextra.com/community/Fullblog.aspx?id=4660
• Will banks do their part?:2235   http://www.finextra.com/community/Fullblog.aspx?id=4638
• If I would be a banker: 2078  http://www.finextra.com/community/Fullblog.aspx?id=4170
• First billion passed: 1987  http://www.finextra.com/community/Fullblog.aspx?id=4185
• Half baked efforts:1953  http://www.finextra.com/community/Fullblog.aspx?id=2940
• Heavyweight support for global e-invoicing ISO standard:2376  http://www.finextra.com/community/Fullblog.aspx?blogid=5081
• In praise of negative carrots:2209  http://www.finextra.com/community/Fullblog.aspx?blogid=5160
• Consumer e-invoicing 2004-10 in Sweden: 2194  http://www.finextra.com/community/Fullblog.aspx?blogid=5162
• Automating away a 1 billion cost in Finland: 2097  http://www.finextra.com/community/Fullblog.aspx?blogid=3860

On e-id service:

e-id service making great progress:5156!!  http://www.finextra.com/community/fullblog.aspx?id=2820

Miserable public isolation: 2585 http://www.finextra.com/community/Fullblog.aspx?id=4415

e-id and e-payment progress in 2009 Finland: 2054    http://www.finextra.com/community/Fullblog.aspx?id=4033

On innovations:

• I cannot see around the corner: 3720 http://www.finextra.com/community/fullblog.aspx?id=3658
• If you do not know where you are going – any road will do: 3509 http://www.finextra.com/community/Fullblog.aspx?id=3664
• Where do innovations come from: 3093 http://www.finextra.com/community/Fullblog.aspx?id=3951
• There are no corporate customers: 2302  http://www.finextra.com/community/Fullblog.aspx?id=2867
• Innovations do not come from outer space: 2236  http://www.finextra.com/community/Fullblog.aspx?id=3728
• If you want to go fast – go alone – if far – go together: 2444  http://www.finextra.com/community/Fullblog.aspx?id=4019
• Which innovations will drive growth in Payments business:2166  http://www.finextra.com/community/Fullblog.aspx?id=4109
• Socio-technical landscape:1985  http://www.finextra.com/community/Fullblog.aspx?id=3199
• Addictive e-experience:2268  http://www.finextra.com/community/Fullblog.aspx?id=4355
• Game-changing Innovation:1830  http://www.finextra.com/community/Fullblog.aspx?id=2997
• Innovator’s new dilemma: 1750  http://www.finextra.com/community/Fullblog.aspx?id=2747
• On our way to the Singularity: 2032  http://www.finextra.com/community/Fullblog.aspx?blogid=5142

On cash:

• Demise of cash: 3015  http://www.finextra.com/community/Fullblog.aspx?id=4800
• Cash for crime: 2095  http://www.finextra.com/community/Fullblog.aspx?id=3399
• Cash is expensive – also for the environment:1405  http://www.finextra.com/community/Fullblog.aspx?id=2261
• Cash not in favor in Finland: 1805  http://www.finextra.com/community/Fullblog.aspx?blogid=4882
• ATM transactions heading south: 1333  http://www.finextra.com/community/Fullblog.aspx?blogid=5249

On blogging:

• Blogs and blogs: 2592  http://www.finextra.com/community/Fullblog.aspx?id=3676
• A quarter of a million page views: http://www.finextra.com/community/Fullblog.aspx?id=4721
• What did I write: 3238  http://www.finextra.com/community/Fullblog.aspx?blogid=4840

Thank you for reading. Soon 400 000 page views.

and then there is the video on e-invoicing: http://www.finextra.com/fullfeature.asp?id=1020

ATM transactions heading south

Accelerating decline in use of cash clearly reflected here and in card transaction statistics in Finland (even without costs being visibly charged for ATM withdrawals..). Good news for all. On EU level the cost of cash usage was estimated to some 50bn€ some years ago - and the consumer pays 100% of it + some profit margins for the service providers involved.

More interesting statistics here: http://www.fkl.fi/en/material/statistics/Statistics/Statistics_banks_payment_systems_2001-2010.pdf