Stone & Chalk: Finding the sweet spot for innovators

Stone & Chalk chief executive Alex Scandurra. Photographer: Andrew Finlayson.

Former army officer Alex Scandurra is on a mission to provide safe haven for fintech start-ups – and change corporate thinking in the process.

By Beverley Head

It’s late afternoon on a damp Friday and the first drinks are being poured at Swaab Attorneys headquarters in the heart of Sydney. A posse of lawyers is gathered to hear what fintech hub Stone & Chalk is all about and how they can hitch a ride on the innovation rollercoaster. 

Stone & Chalk chief executive Alex Scandurra declines a drink; he’s focused on his message and understands that the stakes are high. Fintechs are transforming the financial services industry, and opportunities to educate a new audience must be seized firmly with both hands. 

A former army captain with an MBA from the London Business School, Scandurra was appointed founding CEO of Stone & Chalk in 2015. He describes the independent non-profit as a large hub where people can work alongside other start-ups and with accelerator programs that educate entrepreneurs, introduce them to potential investors and clients, and support them through the early, often rocky phase.

Stone & Chalk never takes equity in the start-ups it hosts and its IP is its own. Along with Tyro FinTechHub, it has become the epicentre – or “centre of gravity” as it prefers to say – of fintech activity in Australia. 

Related: Fintechs: small business lenders fill a market gap

Globally, the fintech sector is one of the fastest-growing areas of the financial services industry. In Australia alone, analyst Frost & Sullivan has estimated that the sector will grow by more than 76 per cent until 2020, when it will be worth A$4.2 billion. To put that in context, last year the entire fintech market in Australia was worth just under A$250 million.

Achieving real outcomes

The Stone & Chalk initiative was kickstarted with around A$2 million from corporate and government partners such as Westpac, IBM, AMP, Allens Linklaters, Woolworths and the NSW Department of Industry. This allowed it to lease premises in Bridge Street, in the Sydney CBD, and execute a funky fit-out that now houses almost 300 people and 70 start-ups.

“Our mandate with government is to create a leading fintech ecosystem,” explains Scandurra, adding that “collaboration must lead to a proof of concept or a pilot. This is not like a hackathon with buzz and noise but no real outcome.”

Chaired by former AMP boss Craig Dunn, Stone & Chalk works with its corporate investors and major enterprises to incubate internal enterprise development teams as though they were start-ups – injecting innovation into the established enterprise while protecting the parent brand. And it acts as an innovation matchmaker – linking fintechs with those established enterprises.

“If you work with the ecosystem, you have a range of options,” says Scandurra.

“You can white-label their service, license it so your brand is never visible and enter new niches that might not be viable for large organisations. The options increase exponentially but cost a fraction.

“Large organisations are now realising there is no such thing as a 10-year plan. Things are moving so fast, it’s irrelevant beyond three years.” 

For the start-up, it’s a perfect opportunity to test a hypothesis. “If you’re selling apples but the market wants pears, it’s a good idea to pivot,” notes Scandurra.

A new innovation model

What Scandurra wants is to find the sweet spot where the start-up demonstrates that its technology works, attracts a large enterprise for its products or services, and then sees its innovation embraced on a wider level. 

He acknowledges that there is some re-education needed for corporates, professional services firms and law firms, many of which need to shed “20th-century thinking”, where success is predicated on winning the competition for resources, talent and capital.

Previously, that’s where innovative efforts have been focused, because, says Scandurra, “if a company could produce a new product faster than the next generation, it would be the one that wins the marketplace”.

To a large extent, he adds, that still holds true – but the way it is executed is different. Scandurra points to the demise of Nokia, where he worked from 2004 to 2011, as a great case study of 20th-century thinking.

“Having lived through that intimately, ” he says, “it was an organisation stuck in the paradigm of keeping everything in-house, trying to deal with a new paradigm from Apple and Android which was ‘we will create a platform and innovate from the outside in’.”

It’s critical now to look for innovation everywhere – inside, outside and through partnerships, says Scandurra. 

“Even a Google or Apple with enormous resources and cash at hand recognise that things are moving so fast, they could never hire enough people of the right calibre and expertise to innovate internally,” he says.

“So there is this concept of open architectures, open APIs [application programming interfaces] and shifting from product to platform centricity.

“In the past, the chess game was won by the intellect of a single player. Now there is a collection playing on behalf of the main player – making moves collaboratively.”

When it comes to the practicalities of working with a start-up, big business “needs to be start-up ready”, says Scandurra, and avoid any temptation to “create contracts where the liability and risk goes onto the third party”. 

Instead, he says, when dealing with start-ups, private enterprise and government entities need to develop more of an appetite for shared risk and a willingness to close deals for proof of concept or pilot projects in 30 to 60 days. They also need to create contracts that won’t cripple fledgling businesses and encourage an understanding of the language of innovation, of “runways” and “burn rates” – or how long a start-up can survive without a customer or cash injection.

It’s all about the team

On that damp Friday afternoon, Scandurra also provides a valuable lesson to the assembled lawyers about what it takes to succeed in start-up land, and that’s “team, team, product, team”.

“You can take a top-gun team with a crappy product and succeed,” he says. “An average team can take a brilliant idea over six months and mess it up.” 

Scandurra has seen his fair share of both. Born to hard-working migrant parents in Sydney’s southern suburbs, Scandurra left school to join the Australian Army, where he spent more than eight years before becoming a project manager with Lendlease. Then came the lengthy stint with Nokia, after which he moved to Barclays, initially as innovation strategy and business development director, and then to head up Barclay’s strategic partnerships and accelerator program.

Now 40, he sees his role at Stone & Chalk as an “opportunity – almost a duty – to step up and help lead the evolution and revolution of our economy and society so we become relevant in a digital world”. 

He believes that Australia can take a role as a global fintech leader, but notes that “what we have lacked is the unlocking of our entrepreneurial and innovative capability”. 

“People say we are not risk takers and entrepreneurial,” he adds. “I’d disagree with that – look at mining.

“But we have not had the opportunity to take risks into other industries that are highly regulated.”

That, it seems, is changing.

Professional Development: Leadership essentials: leading innovation

A dynamic community

Anne Moore doesn’t fit the start-up stereotype. She’s a woman, has spent three decades in human resources, doesn’t code and is in her 60s. But she knows that her strategy to move her company, PlanDo, into Stone & Chalk’s fintech hub is spot-on.

“We no longer derive much benefit from being isolated,” says Moore, who describes herself as an “accidental entrepreneur”. “It’s time for us to move into the community ... be with other entrepreneurs and innovators. You just get smarter through osmosis.”

PlanDo is a career management platform designed to meet the needs of both workers and employers. Workers use the platform to plan and document their career, achievements and professional development. Employers can be provided access to the platform to assess the talent that’s available. 

“It’s addressing all the trends that are emerging and converging in the new world of work,” says Moore.

“Part of the digital disruption is that companies need to be far more flexible in how they engage talent. The platform tracks with the individual across their working life.”

Currently, a team of three runs the business, but Moore’s plans to insource the software development will see PlanDo grow to as many as 10 over the coming year. 

She believes that by moving into the hub, it will be possible to “imprint” on the team what a successful start-up looks like and be part of a broader “ideas exchange”.

At the same time, she believes that it will help her attract the calibre of personnel that she needs.

“I want to recruit enthusiastic, brilliant tech people and they want to be part of a dynamic community,” she says.

My favourite business thinker: Clayton Christensen

There’s barely a moment’s hesitation when Alex Scandurra is asked to nominate his favourite business thinker. 

“I love Clayton Christensen – I know him personally. He’s an incredible thinker and extremely humble and a wonderful man.”

The Harvard Business School professor is regarded as one of the world’s leading thinkers on innovation and enterprise disruption. Born in Salt Lake City, in the US, he is the author of the best-selling book The Innovator’s Dilemma and co-author of The Innovator’s Solution, along with multiple reports on innovative processes and practices.

“Through his research, he has helped organisations think through the different types of innovation, the challenges with internal innovation and how to understand other case studies and translate that to themselves through their own insight,” says Scandurra.

“His research and books have been hugely educational for loads of people and a major contribution to the broader understanding of innovation today.”

ASIC's innovation sandbox

The Australian Securities and Investments Commission (ASIC) this year set out the framework for an innovation sandbox that will allow fintechs to test a new product without first securing a financial services licence.

While there are consumer and market protections in place, essentially it allows start-ups to test their ideas in a regulatory sandbox for up to six months. It will lower the cost of entry to the market and also allow start-ups to have a proof of concept tested in the market when they search for capital to take them to the next stage of development.

Alex Scandurra considers it an important and world-leading initiative that overcomes an unfortunate nexus in financial technology development: “In the case of financial services and regulated industries,” he says, “you can’t launch some things unless you are licensed ... some start-ups may not be clear enough or have validated what they are doing to confidently go through that process.”

The initiative also allows ASIC to consider how it might have to regulate emerging markets – for example, what constitutes a “responsible manager” when the financial advice comes from a robot?

“If we can end up with industry-wide relief, that’s the game changer,” says Scandurra, “because no-one else in a regulatory context is contemplating that. It shows a lot of trust and maturity in the Australian market.”


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