We continue to see lots of consolidation across the financial services industry. In fact, a lot of traditional FIs have entire innovation programs designed to tap outside talent. But what if you’re looking for organic growth? If you’re Experian, the global financial data firm, how do you get more out of your existing assets, things like the data across the enterprise, its distribution channels, its salesforce and brand.
You create DataLabs, an internal environment outfitted with data scientists and crack product professionals, where Experian can create future products around customer needs. Eric Haller, head of Experian’s DataLabs joins us on the podcast today to talk about how the data firm finds pathways to innovation while positioning the greater firm to be competitive in the future. We geek out a bit on tech as Eric describes some of DataLabs' experience with new modalities like text and voice for credit. We also discuss AR, VR, and advances in cryptography.
The genesis of DataLabs
We are the R&D part of Experian. The labs are all about breakthrough experimentation in all of our businesses and all of our geographies. We were always looking for inorganic growth. I realized we could do a lot more as a company just investing in ourselves and leveraging our assets like our data in the enterprise, our distribution channels, our brand and our salesforce.
I made a pitch internally to create an environment that would allow us to outfit ourselves with data scientists and product development experts -- where we could de novo, organically build products for our future. That investment was made about nine years ago. It began as a toe in the water -- I was given enough budget to hire seven people.
We have four labs now in San Diego, London, Sao Paolo and Singapore. We have 110 scientists, engineers and product leaders. Labs products themselves generate nine figures in revenue for Experian. Lab products have grown revenues at a CAGR of 120 percent over the past five years.
Measuring the success of innovation
When we first entered into this adventure, the bar was pretty low. My boss said that if we're positioned so that our customers call Experian when they're running into challenging problems, that would be a great measure. It wasn't revenue related. I don't want to hold Labs accountable to hit a specific revenue target because that's likely to cause us to ease off on the risks we'd take to skate ahead of where our business is currently.
We track everything -- from every talk with a client to client engagements. We have a product pipeline, just like if you were running a P&L. Deals funnel in from the top and filter their way down to the bottom. The four labs are involved in about 800 client engagements per year. So, we're very much in the market, hearing challenges, and engaging with that.
Managing a network of labs
When we started to build out the labs, management asked how we wanted to have different labs contribute from different regions as part of our portfolio. Our answer was to have the region shape the problems that wind up being resolved in the product portfolio for the regional lab.
So, in London, for example, our lab is very involved in GDPR and open banking. In the U.S., we have a very heavy emphasis on customer acquisition. The front end of that pipeline is very focused on that and developing new thinking and products to address that.
Spreading innovation across the organization
The first thing we do is prioritize. Out of 800 client engagements, we have 41 projects that we're working on to develop products to market. Nine years ago, we did that by committee. It was a terrible idea to have all the strategic business unit presidents to sit around a table to shape our priorities.
Now, we don't hold that type of process. We're very good at communicating what we're doing. If I spent a lot of time building proposals and presentations for every idea we were looking at, we'd need a larger group than who we have doing the work.
We distilled all of that thinking down to two things. The first was magnitude of impact -- could this product achieve at least $10 million in revenue? The second is about our ability to execute. Labs' role is to beta test, maybe get to half a dozen clients on a product and then it goes to the business to scale.
New channels for credit
We've spent time building beta products in voice, text, and AR/VR. These channels are all in varying S-curves of adoption, though. Some, like mixed reality and VR, will take more time until they hit the mainstream. Voice might be closer -- I'm a big believer that if someone is going to spent the money to lay down the railroad tracks, I'm a big believer in in building the cars.
Between Google, Amazon, and Apple investing a tremendous amount on building smart speakers, the idea of building skills that people can upload and use is a no-brainer. But how many people have uploaded a skill in their smart speakers? But it's a disconnected process and doesn't really happen. There will come a point where display and voice unite. When that happens, we've already developed interfaces for how people will shop for credit. When it's the right time, Experian wants to be on the forward foot to get out the front door.