Hoping you are having a great Sunday! Love the weather here in Northeast!
A couple of articles caught my attention and I thought I would share. First, Price Waterhouse Cooper (PwC) had an article on their Disruptor Profiler (see link). The Profiler, 15 questions available at the bottom of the article, says that there are five aspects that can disrupt your business. You need only one but here are the five.
- Regulation
- Customer Behavior
- Competitors
- Production Technology and Models
- Distribution
Seems to me that we don't have one, we have ALL five! The retail financial industry is being disruptive on a massive scale and no one can predict how this is going to end with any certainty. But we do have some clarity about what we actions need to take so we can maintain our lifestyles.
Now this leads to the second article (link) by in Strategy and Business on disruptive innovation. Professor Howard Hu says we need to refresh our thinking on disruptive innovation because the speed of change has accelerated to "an unprecedented speed".
"If we’re looking at the S&P 500, a company’s average life span on that index dropped from 67 years in the 1920s to 15 years today, and the average tenure of a CEO in corporate America has also shrunk over the last 20 or 30 years." Wow! Amazing.
We are the CEOs of our own businesses and we do not want to disrupted or that our company dies prematurely. What insights and/or solutions do the two articles talk about?
First PwC shows that customers are the number one disruptive force that we face. The third link below is the PFGC Retention/Attrition Strategies which discusses how our customers are choosing new investment vehicles that are disrupting our business and the Asset Management Business. Bottom line you ignore the actions of your customers at your own peril. What we did before doesn't mean we can continue to do in the future. We need to watch our clients to understand how we fit into the new world. What is the old saying? The customer is always right.
Second, Professor Hu points out that the incumbent "usually" loses out for a variety of legacy issues around costs and organizational inertia. Organizational inertia to us is our inability to change, adapt to a new business model. Professor Hu says that the incumbents should employ a hybrid model of business continuity while developing a growth component.
What kind of growth should we focus on? Revenues, velocity of trading or assets? Which one helps us build a sustainable business model that protects us against disruptive innovation?
PFGC believes that we need to change how we function everyday so we can grow our assets dramatically. Yes the word is dramatically. Look at the asset managers. Ten years ago you were a big global player with $500 billion in assets. Today our new competitors are raising twice as much new assets in a year. We need to think about that $100 million in assets is now the ante to stay in our business where ten years ago it guaranteed our success.
Managing more assets mean standardized investment portfolios based on metrics and risk adjusted returns so we can manage them in an efficient and effective manner. Training ourselves as portfolio managers based on a process that is definable, repeatable and scalable so we can concentrate on adding wealth solutions to our business model.
With great clarity I believe we need to fail forward, fail fast and then fix fast as we build a flexible, adaptable, standardized wealth management business that we can sustain our lifestyles.
Have a great Sunday night! Go Cavs!!!
Danny
"One left-footed step per day"
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