Necessity is the mother of innovation

Innovation through combining existing processes offers extraordinary results.

Nick Gallop

Nick Gallop

Director, Strategic Marketing at Dell
Nick Gallop is Director, Strategic Marketing at IAA-Advisory. He worked as a consultant to Dell Financial Services and was recruited to be their European Marketing Director as they established Dell Bank International and launched Dell Financial Services.
Nick Gallop

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Introduction from Executive Producer JO DAVIS

In an environment where there is vast untapped potential for financing an approach to innovation through combining existing processes offers extraordinary results. Dell's Nick Gallop writing as part of the Catalysts: innovation in leasing and asset finance series.

Who should be interested in this?

All professionals involved in leasing and asset finance, industry commentators, and marketing and communications professionals.


Necessity is the mother of innovation


You can get innovation by seeking continual improvement in what you already do (not really catalytic) or doing something quite new (which is rare).

Or you can combine existing processes. And in an environment where there is vast untapped potential for financing this approach offers extraordinary results.


I come to this from a particular perspective: experience in captive financing in the rapidly evolving IT industry. In a captive the opportunity is mainly the sales the parent company makes. In IT change is permanent, an IT parent’s sales are around one third products less than a year old, one third the previous year’s products, and one third older products. Some of that change is substitution, a new laptop replaces the previous model; some is dramatic, like the shift to cloud, or the emerging Internet of Things.

With permanent change you have to focus on financing the brand new as well as financing the evolving. Without innovation to enable financing the brand new, an IT captive would quickly become irrelevant and vanish.

For most financing much improvement is incremental. A focused approach to driving improvement leads eventually to an innovation, where a financing activity has become quite different. This process should be continual, though it’s easy to be distracted and derailed.

A second form of innovation occurs by combining separate processes to create something new. When done well, this leads to rapid and substantial change. Catalytic change.

A move to captive financing

While captive finance is not innovative per se, it’s worth a quick reflection on Dell’s recent experience. Even though Dell had a good working partnership with CIT, trading as Dell Financial Services, integration delivered a major boost to our business: In only 6 month financing penetration rates have risen significantly. The improvement has happened because the sales teams are integrated, they share the same opportunity pipeline; the captive uses a different, risk model; there’s a different attitude to blind discount; etc. From the perspective of this paper, the captive move gives scope to combine parent and captive processes, and so to develop financing capabilities to do much more.

Three examples

Making customers aware of financing

Many customers (not just Dell customers) are not aware that financing is an option. Simply ensuring it’s mentioned to them as they consider their investment yields results. So we’re combining the Dell quote with an indicative financing quote. After only a pilot programme it’s too early for statistics, but the indications are that 10-20% of additional customers make a financing enquiry, and 10-20% subsequently go on to finance their investment. This innovation allows investment by customers who thought it unaffordable, enables those sales for the parent, and the captive sees a 2-3 point improvement in penetration rates.

Software financing

With neither residual value nor real collateral, financing software poses challenges. If you can use financing to improve software sales the gross margin reward for the parent is dramatic. So instead of leases or loans, we’ve introduced receivables financing to the licence renewal discussion. Now major customers are contracting more three-year renewals. This innovation offers customers a better per annum price and payments that fit their budget, the parent gets a bigger sale and a longer-term commitment, and the captive sees a 1-2 point improvement in penetration rates.

Optimising the end of lease experience

Independent financing organisations make money out of customer inertia: at the end of a lease many carry on paying for months, or years. A captive has an opportunity to optimise the end of lease behaviour for the whole organisation. Proactively seeking to refresh or replace equipment creates sales for the parent, and helps customers run more efficient IT using the latest equipment. If you can mine historical invoice data appropriately you can extend the approach to equipment that was financed by a third party and drive a financing switch as well as equipment renewal. This innovation leads to customers pleased with the proactive approach, creates sales opportunities for the parent and offers the captive more to finance and the chance to displace a third party.


Innovation can come from a focus on continual improvement. More exciting, though less frequent, is a combination of process to deliver a new way of doing business. In the examples given, innovation by process combination helps customers discover financing is an option, enables financing of new types of business (software here, but extensible to services) and improves the end of lease experience for customer, parent & captive.

CC BY 4.0 Necessity is the mother of innovation by Nick Gallop is licensed under a Creative Commons Attribution 4.0 International License.