When Rabobank sounded him out about becoming the new head of innovation, Van der Vorst first wanted to explore whether the position suited him. "I talked to a number of people to help me get my bearings, after which a number of things became clear to me. First, Rabobank is urgently looking to change. After all, the banking industry is under significant pressure from various different directions, including low interest rates, regulatory pressure and competition from fintechs. Rabobank's strong focus on food and agriculture was another important factor for me. If you’re looking to innovate, having a niche is a major advantage, as it tends to let you take a broader approach to innovation. Our efforts now are related to finance, of course, but they also transcend the financial domain, which is made possible by Rabobank’s traditional and inextricable link with the agricultural sector. F&A(food and agriculture, ed.) is in the bank's DNA, and we are still one of the key players in that field." Meanwhile, the close ties with the sector are proving to be a great way to foster innovations and experiments with new revenue models: "Rabobank has a pleasant culture: if you want something and you can back it up, I’ve noticed that you can get a lot done. I work with a diverse team with about twenty nationalities, and with backgrounds from data scientists to derivatives and food specialists."

Generating new revenue streams

ORTEC: How do you organize innovation and how do you involve the business community?

“We have a centralized budget and I get to come up with plans. Some of our projects are still at a very early stage, while other projects are already up and running as real businesses. Some innovations stay squarely in the innovation silo, while we team up with the business community to develop others. It all depends on the nature of the innovation: how close is it to our own activities and can we use the systems we already have in place? At first, I thought we would have to rely heavily on businesses, but I’ve gradually started to discover that being a bank has tremendous added value. It just requires a lot of our culture and our technical systems.”

It is up to Van der Vorst to generate new sources of income for the bank. “My focus is primarily on F&A, because it’s the biggest international field there is, And because of our mission to feed the world sustainably. I have set myself the goal of capitalizing new revenue models and harnessing our current relationships and strengths to innovate, which I aim to achieve through cooperative thinking, a philosophy that runs through everything I do as a common thread.”

“I have set myself the goal of capitalizing new revenue models and harnessing our current relationships and strengths to innovate.”

ORTEC: What does cooperative thinking mean to you?

“It means thinking about interests, rather than about mentality or atmosphere. I may not want the same colour wallpaper as my neighbour, but our interests may still be aligned if we both want to install solar panels on our roof. Keeping collective interests in mind fits our current zeitgeist like a glove: creating things that benefit us and others alike, playing a positive-sum game rather than a zero-sum one. Much of what we do at Innovation is based on cooperative thinking.”

Reconciling conflicting interests

The Acorn carbon credit project is a good example. After Van de Vorst was sent an article on measuring biomass from above, he and his team came up with an idea. “Our customers include lots of big farmers in America, Canada and Australia, as well as many smaller farmers in Africa. If we could incentivize small farmers to plant fruit-bearing trees on their land (agroforestry, ed.), their soil would benefit. There are now companies that are willing to pay to have carbon dioxide captured. Because we can measure the biomass of the trees, we can turn them into carbon credits and sell them. 80-90% of the income flows back to the farmer, while we keep the rest. We started a mere 18 months ago and we already have a 20-strong team working on 8 pilots. What’s more, we have two customers and the first real transaction will, if all goes well, go through very shortly.” Van der Horst heralds it as a typical example of how to reconcile conflicting interests - the farmer, the world, the corporate and the bank. "That, as far as I'm concerned, should be the compromise 3.0. In the past, the aim would be to come up with something that everything agrees with, whereas in fact you should be trying to find a way to make opposites productive, getting one and one to add up to five.” I am a big believer in Janusian thinking, after Janus, a Roman god who had two faces. It’s another word for the ability to entertain two contrasting ideas, perspectives, or concepts at the same time, and it’s the basis for myriad technological inventions.”

“You have to find a way to make opposites productive, getting one and one to add up to five.”

ORTEC: Can financing also find its way to those who need it in some other way, e.g. in a way that will help us reach the sustainable development goals?

“There are alternative ways to value existing financial resources, and many of them have already been put into practice. Regulators are coming down hard on us and reminding us that the money we manage for our clients has to meet certain sustainability requirements. We ourselves are hard at work to get more money flowing to initiatives that will help us reach the goals, and innovations that boost traceability, especially of food, are particularly valuable. Where did it come from? Does it meet the requirements? In many cases, companies have taken major strides in this themselves, which enables banks like us to link other forms of financing to the insights provided by traceability. Sustainable finance: offering solutions to companies who meet certain sustainable requirements, as well as their suppliers and their suppliers’ suppliers.

Nature in the economy

A hundred years ago, we had too little monetary capital and a lot of natural capital, Van der Vorst recalls. "Now it's exactly the other way around. This raises an interesting question: can you create a nature-based currency? A carbon credit is basically that: a valuation unit that meets specific requirements, certified by external bodies. We create them. I’m not interested in trading credits, but I am interested in creating them and securing a place for nature in the economy. There are two different types of currencies: emission credits and capture credits. I’m mainly interested in the latter. Even if we were to stop emitting pollutants altogether, we would still have to remove carbon dioxide from the air. Can we create a credit with real additionality that can be tracked in real time for accurate monitoring? I think you have to exercise caution in how tradeable you make your credits, because I do not support the notion of having carbon credits being resold a hundred times over. By the time they reach their hundredth owner, they’ll have lost their link to the physical tree, turning the market for credits into a bubble. The advantage of blockchain is that you can much better capture the relationship between the physical reality and its digital representation, which makes me hopeful.”

“A hundred years ago, we had too little monetary capital and a lot of natural capital. Now it's exactly the other way around. This raises an interesting question: can you create a nature-based currency?”

ORTEC: What resources can the bank use to help feed more and more people in a sustainable way?

"Over the past two and a half years, I have learned that the food system is enormously complex. In fact, there’s no real system to speak of, and Dutch farmers face radically different circumstances than their African counterparts. Our farmers are so efficient and we have so little space here: a business model like Acorn is simply not compatible with the Netherlands. The situation of large farmers in America is very different, the land they farm is two or three times the size of the province of Utrecht and they take a tremendously data-driven approach. In the US, insight into data is the be-all-end-all. That is one of the reasons why we have acquired a stake in a farm management information system that requests soil data at various different levels. We link these insights to financial data to form a better understanding of what is happening on the land, which can be translated into practices that benefit the farmer and the people alike. We always tailor our approach to the specific country we’re working in.”

“The world is becoming an increasingly risky place, and anyone with a keen eye for risk will have business. Assessing risk is essentially a bank’s core activity, and what we excel at.”

Dealing with risk differently

On the one hand, says Van der Vorst, banks are under pressure, but on the other hand, the world is becoming an increasingly risky place. “Anyone with a keen eye for risk will have business. Assessing risk is essentially a bank’s core activity, and what we excel at. Much of our income is based on our expertise in determining credit risk. The bank used to be decentralized; local Rabobank branches knew exactly who was doing business with whom and how reliable the underlying companies were, giving them access to a lot of knowledge they could use to mitigate risk. Decentralization and digitization require a different approach to risk assessment, and that’s why we have technology. We’re working on an initiative to use alternative data sources in smallholder farming to determine credit risk, such as satellites. We don't finance smaller farmers ourselves, but they can struggle to secure funding at times, and when they do get money they pay high interest rates. This is a form of risk assessment that is based on entirely other factors than historical cash flow, and using technology opens the door to tremendous accuracy and efficiency gains, as well as enabling us to incorporate different kinds of risks in our models.”

The centaur model: combining data-driven and intuitive innovation

Van der Vorst agrees that data analytics can drive innovation: “I think data analytics should play a role of greater importance, and - truth be told - that’s where we’re headed. Dutch companies have certainly taken to data with great gusto, because they have access to uniform datasets. We are fortunate to have advanced infrastructure in the Netherlands. WRR, however, operates in many different countries in vary diverse situations: eight million clients is a far cry from 2,000 major clients. The scale is different, the history is different. We have, however, gradually started developing more innovations that produce vast quantities of data, so finding new ways to use those data is a natural response.”

“Computers are excellent at making connections, but so are people. Data-driven and intuitive innovation are both important.”

ORTEC: Is it your ambition to transform your team into a data-driven innovation team?

“Yes and no. Some innovations require a great deal of imagination, and data alone would never have led to a project like Acorn, which sprouted from individuals who connected different factors and parties to create something altogether new. Computers are excellent at making connections, but so are people. Data-driven and intuitive innovation are both important. Look at Garri Kasparov. After he was beaten by Deep Blue (an IBM computer with artificial intelligence (AI), ed.), he discovered that a human chess grandmaster who was supported by an AI would always beat a human grandmaster or AI on their own. Yes, I believe in the centaur model."

About the interviewee

Roland van der Vorst is head of innovation at Rabobank and professor of industrial design at TU Delft. He also writes a weekly column in Het Financieele Dagblad. Van der Vorst has a bachelor's degree in sociology and master's degrees in business administration and communication studies. He studied for his PhD at Radboud University Nijmegen, and first made a career in advertising and communications. He was head of strategy at FHV/BBDO, chairman of BBDO Netherlands and founder of THEY. Van der Vorst previously lived and worked in Singapore, where he was an entrepreneur and consultant, as well as serving as the director of FreedomLab, where young thinkers from different scientific disciplines write future scenarios.

This interview is held by Frans van Helden, Managing Director ORTEC Data Science & Consulting, and Arjan Gras, interviewer.