Digital Parallels
“Good decisions come from experience, and experience comes from bad decisions”
The year is 1881
In 1881 an American gentleman called George Eastman, gave up his job as a junior clerk at the Rochester savings bank in America and founded a company producing photographic dry plates. This company, later known as Kodak, went from strength to strength, developing affordable cameras and the famous 35mm film, bringing affordable photography to the masses.
In 1973 Kodak had 120,000 employees globally. One of whom was Steve Sasson, an electrical engineer, who in 1975 invented the world’s first digital camera. Steve continued his work at Kodak and went on to develop the first digital single-lens reflex (DSLR) camera, which was a true milestone in the evolution of digital photography.
Sadly, Kodak never took the digital camera seriously. It waited a long time before timidly offering digital cameras, first in 1991 with a camera for professionals at a price point too high for most, and in 1995–96 with retail models that were behind the market. With a 70% gross margin on film sales at the time, Kodak saw no need to embrace the new technology, ultimately leading Kodak to file for Chapter 11 in January 2012. Today, back from the ashes, the new Kodak company (ticker KODK) describes itself as a technology company and employs a bit more than five thousand people. It rightly calls itself a cultural icon.
So why am I telling you this story?
We are not suggesting that any established money manager is heading to Chapter 11, but the digital revolution is upon us, and there are substantial challenges in the structural shift from a product-led model to a service-led model. Some firms are hoping to address this through scale generated via acquisitions, but that is both expensive and fraught with execution risk and the risk of the resignations of key staff.
A similar trend happened in the digitization of the entertainment and the travel industry. In the latter we have recently seen a particularly bad outcome for a UK firm and its employees, but that has also led to some brilliant stories about Thomas Cook employees, who were out of a job and never going to be paid, still spending their now personal time helping stranded passengers. As a perfect example of a service-led model apparently Virgin has been actively seeking these very people out to interview for jobs as they are hiring!
Returning to asset and wealth management, relentless cost/income ratio pressure, with headline management fees having dropped by close to 20% since 2015 (see for example a recent study by Fitz Partners), forces many organisations to rethink their strategy and client servicing model — on the institutional, third party distribution and HNW fronts.
Producing strong product offerings is a given in an ever-increasing competitive field, with passive fund sales already outpacing active fund sales in some markets. Achieving efficiency gains across the entire front-office and providing client-facing teams with the right digital tools to engage in a meaningful way with their clients is the key to winning trust, increasing retention rates and growing net sales.
Learn from bad decisions others made
I want to leave you with an anonymous quote which resonated with me: “Good decisions come from experience, and experience comes from bad decisions”. Learning from bad decisions previously made by others, carefully re-thinking the business model and embracing technology to avoid a “Kodak Moment” have become essential to remain relevant and win in a rapidly changing industry.
We are privileged to partner with many prestigious Asset Managers, Wealth Managers and product providers globally as an enabler, not a disruptor. By providing one of the keys to remaining competitive in the digital age, we help our clients sharpen and execute on their strategy, re-tool their front-office, and expedite their journey by years of development and roll out time.
Contact us at info@alpima.net to find out how we can help.
