April 5, 2019 | Christina Benoit, Vice President, Business Development
Years of helping asset managers to succeed has made me a big fan of small. Small steps are an effective means to lasting change. A narrow focus spotlights a manager’s strengths. A community approach to client interactions leads to long-term investor loyalty.
Small has a big impact. Consider your phone. Whether you carry it in your backpack, wear it on your wrist, or have it embedded in the frame of your sunglasses, your device is now smaller and more powerful than ever. Think of the medical field. Tiny ingestible bots are becoming capable of delivering megabytes of diagnostic information and targeted micro-doses of medication.
Leveraging the power of small is not a new concept. Over 2,000 years ago, the Five Agents Theory 1 inspired the idea that miniature replicas of objects are able to capture and concentrate the potency of the replicated object. This concentrated potency concept is a powerful one, and it drives exciting changes in science – and in business.
So how can asset managers concentrate their potency? The ‘methods of miniaturization’ descriptions in this Edge-of-Innovation post 2 provide an interesting starting point. Small, the post says, is achieved by combining functionality, outsourcing, minimizing component size, and leveraging power-pack technologies. Brainstorming around these concepts can help asset management teams decide how to get small so they can concentrate their focus on the high-impact work of intellectual property development and client relationship building.
For example, ask the question “Where could we combine functionality (or effort)?” One possibility could be to combine information extraction and quarterly report generation into a single flow. This is possible when the data warehouse is directly integrated with a reporting engine. Another example is in parameter-based trading, where the work usually includes one flow to identify accounts meeting parameters and a separate flow to build trades. But what if the trade builder could ‘read’ the account parameters and instantly identify the right accounts for trading?
Similar brainstorm prompts can be used for the remaining methods. Where can we minimize the size of the component parts for… the number of steps to complete a task or achieve an outcome; the number of calls required to settle a trade; the volume of physical files we store? Which of our activities are outside of our primary area of expertise and can we outsource these? Do we have an opportunity to get more power (processing power, computing power, and/or brainpower) by reconsidering each of our processes, how they get done, and how well they contribute to our goals?
I can feel the jitters at some of larger firms as the switch to small takes hold. But the reality is that large firms who concentrate their potency have the most to gain. Michael Spellacy, Senior Managing Director and Accenture Global Capital Markets Practice Lead, published a study in which he found that “only half of the costs in asset management are actually spent on the core value proposition of creating, packaging and selling investment products. The rest is swept up by the so-called ‘back office’ functions of internal servicing demands and external interactions with other Wall Street players.” 3
If you’re intrigued, try it. Start small. Brainstorm around one of the methods-of-miniaturization concepts, then try at least one of the brainstormed changes, even if just for a week. Drop a process that doesn’t directly impact your IP or your clients, or at least find a way to do it with less effort. I’m fairly certain that this concentrated potency proof-of-concept will have the power to excite and inspire your team. And that you, too, will become a big fan of small.
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