This story originally appeared in the October 2019 issue of strategy.

Investments in technology are table stakes for a successful business, but the rate of change inherent in innovation can make it hard to keep up (or comfortably find room in the budget for what is often a sizeable monetary investment). But as the organizations that have embraced risk and innovation can attest to, even the earliest and simplest efforts help build the foundation for where a company ends up – and position it to be ready for new opportunities that arise.

Everything is an experiment

L’Oréal Canada has become a hub for innovation within the company’s global operations, especially when it comes to artificial intelligence. The beauty giant has been drawing from the country’s AI talent and the capabilities of companies like Automat and ModiFace, which it acquired in 2018 and is now working out of its Toronto digital hub.

The personal care brand’s earliest forays into consumer-facing technology included augmented reality “try on” apps, like Makeup Genius, which are ubiquitous today but revolutionary for 2014. They also paved the way for digital services from its Vichy and La Roche-Posay brands, which have used ModiFace’s image recognition and AI technology to analyze a user’s face to detect imperfections, signs of aging and future skincare needs – suggesting a personalized routine using L’Oréal products. Those services are also infused with conversational AI, built using insights from earlier experiments with Automat on a dozen different tools, like chatbots that make suggestions for gift boxes.

Robert Beredo, chief digital officer for L’Oréal Canada, says there is a direct path between those experiments and where the company is today: building high-tech, digital tools that allow consumers to engage with brands through services, instead of just products. That is now a strategic priority for the company globally and could transform its business for years to come.

“Our global vision is to be the number one beauty tech company in the world,” Beredo says. “New technology always comes with a risk because you don’t know how consumers will respond to new things. But we’re comfortable with risk in a controlled way because we know the potential is endless.”

L’Oréal is always in a test-and-learn framework, Beredo says, adding that the key to having it pay off is not in avoiding risk, but controlling it. The inclination might be to keep the budget low, but he warns that could doom a project from the start.

“We try to contain scope to the minimum viable product,” he says. “What’s the minimum we need in order to prove success of what we’re testing? But the investment on an experiment has to be high enough so there are resources available to show success.”

A culture of innovation

If a company is looking for a single magic tool or tech to be innovative, Martin Wildberger, EVP of innovation and technology at RBC, says they’re going to be disappointed.

“I know people are looking for that example, but that’s not how it works,” he says. “We looked at the expansiveness of what we needed to do and realized that what would make RBC successful is having the executive leadership commit to providing resources to do the full range of what needed to happen.”

RBC now spends $3.2 billion annually on technology and innovation. When it started on that path roughly five years ago, the bank decided to spend more on “changing the bank than on operating it,” Wildberger says. It began by carving $520 million from its budget to devote to strategic initiatives that would transform its culture, specifically when it came to attracting staff, as the bank would have to appeal “to a whole new set of talent.”

Its student development programs have grown from 100 five years ago to over 600 participants today. The Amplify program, which invites teams of four from different backgrounds to solve a business problem over four months in an accelerator-like environment, has expanded from eight teams in 2016 to 21 today.

“Now you’ve got 84 students who are doing innovative things with us and going to their peers and talking about what RBC is doing,” Wildberger says. “We’re augmenting that with a program of 600 initial students. That’s going to change the buzz on campus and get us attention from the best talent coming out of these schools.”

Once the talent reaches RBC, they will find themselves in offices that have been reorganized to work within an agile framework, so they “would be working the same as if they were at the best technology companies in Silicon Valley,” Wildberger says.

The other thing that generates interest in RBC as a centre for technological excellence is Borealis AI, the company’s stand-alone artificial intelligence lab, which focuses on research and development, both in and outside of banking. First spun out from its research division in 2016, it has since grown to 85 researchers and scientists working in Toronto, Edmonton, Montreal, Vancouver and Waterloo, Ont.
A pain point for innovation can be having a fast-moving division work with other departments, like marketing.

At L’Oréal, staff from Beredo’s team “is the centralized innovation hub” that manages innovation projects from start to finish, and also acts as the point of contact between the digital team that develops it, and the brands that understand the consumer behaviour and needs the project is looking to address. But it also works within every brand and company division “because they activate the experiments.”

“[Marketers] help us strategize and deliver against their challenges,” he says. “Innovation needs to be democratized if it’s going to be effective.”

For Wildberger, reorganizing into an agile framework has not just supported technology development, but also helped teams across RBC – including marketing and tech staff – work more seamlessly to develop solutions.

“Banks can sometimes be the worst at collaboration, because they are these massive vertically optimized companies,” he says. “One of the best things a focus on innovation can do is horizontally integrate the organization. When you have somebody from marketing on your team, they are along the journey with you as subject matter experts. It changes the structure of the way you approach, and eventually solve, a problem.”

The snowball effect

Telus Health was created ten years ago when it offered those in the healthcare industry a range of digital solutions, such as electronic health records, pharmacy management software and services to digitize claims management systems. Today, it offers consumer-facing services, like an AI-powered symptom checker and the Babylon virtual care system, serving the needs of both an aging population that wants to maintain its independence and the young families struggling to fit a family doctor visit into their busy schedules.

Juggy Sihota, currently VP of consumer health at Telus, has served in a number of technology and innovation leadership roles throughout her 20 years with the brand. She has also seen the company through investments outside of what might traditionally be considered the realm of a telecommunications company, which today include things like Telus Health or its dedicated connected home service.

Sihota says Telus has been able to embrace new avenues, like healthcare, because it has a philosophy of taking its already-existing tools and tech and applying it to the core of what a telecommunication company does: moving information to connect people and create experiences.

“While other telecommunications companies at the time were looking at sports sponsorships or acquiring content rights, we thought it was a great opportunity to take what we had and differentiate by helping with what is probably the biggest social challenge of our generation,” Sihota says.

To get ahead, Sihota says the company invested $10 billion in its fibre optic network. Being an early adopter of high-speed data transmission for faster TV and internet service gave it a head start on technology that made it easier to transition into health and connected homes (which also require high speed networks). But it has also prepared Telus for the coming 5G network upgrade, with data transmission speeds that will improve the function of connected devices and change the role they play in Telus customers’ lives. Sihota says an infrastructure investment creates the “backbone” for the company to provide experiences that meet consumers’ standards in a connected world.

“When I was first building fibre out in 2003, we had a lot of people question why we were going to do that and why would a telco deliver TV,” Sihota says. “No one would question that decision now, because it’s part of the communications landscape. We’re a business that uses technology to give customers a better experience, whether it’s through their phones or TV or healthcare. Our longevity will be dependent on the services we are providing and making sure they are valuable to our customers, and when we know how well it works, it creates affinity for the rest of the brand.”

RBC has also been pushing into new areas with RBC Ventures, the bank’s internal incubator.

Over the last two years, it has been creating and scaling new digital businesses that are tangentially related to finance, such as new loyalty and rewards programs, apps to manage rent payments and tools for everything from job searches to finding a home.

“There’s a whole ecosystem associated with every financial transaction,” Wildberger says. “We have newcomers to Canada and young people entering the job and home markets, and we can lean on RBC’s strengths to deliver value during those moments. There is also an element of capturing data and leveraging that relationship to create new opportunities. We can create an ecosystem where clients understand we are transparent with their data, how we use it and the value that comes from it.”

Beredo, Wildberger and Shiota all agree that, looking back, their companies would be better off if they had begun their digital transformations even earlier, as failed experiments would have put them further along their current paths. That makes the lesson for any company that is skittish about innovation clear: whatever you do, start now.

“The technology is super complicated and there’s a variety of solutions out there,” Beredo says, speaking specifically to data and AI but offering advice that is applicable across the board. “Among beauty companies, we are much more advanced than a lot of others, but if we could have done the data transformation even earlier we’d be even more focused on how we are going to get power out of our data.”