Written by: George Cooper
When coming up with solutions to problems it’s natural to begin by looking at what already exists to solve the problem you’re working on.
In software, you see this all the time.
If we look at the advisor world, technology firms are constantly innovating to create more sophisticated, more fully-featured products which aim to solve advisors’ problems.
And, that is of course a good thing in many ways.
The risk, however, is that we end up seeing re-inventions upon re-inventions of existing solutions, rather than utilizing new methods to solve the fundamental issue.
Let me give you an example:
Say your CRM doesn’t reconcile fund flow data well. The industry says “we’ll build a more fully-featured CRM.”
Or your fact find isn’t nuanced enough to capture the information required for your firm. In that case, let’s build a more customizable fact find system that has a richer feature set, a better user experience and the like.
I do, however, wonder if we’re putting the cart before the horse here.
Let me try and explain:
Broadly speaking, I think there are two ways you might want to design a toaster.
One method would be to perform a detailed assessment of the existing toaster market, rank the quality of existing products, look at different feature sets and costs, perhaps even interview toaster ‘owners’ about their experience with the product. (I appreciate the example is a little banal, but stay with me.)
And you’d probably end up with something that is very similar to what existing toasters are like today, albeit with ‘better energy efficiency, ‘faster toasting speed’, or something of that ilk.
However, there’s a totally different approach you could take.
Instead, what if you sat down and said “what’s the best way to apply heat to bread?”
And while in this example (and utilizing the second approach) you’d likely come up with a toaster design that is very similar to what’s already out there, when solving problems with greater complexity the value of going to first principles is much higher.
When thinking about solving issues far more complex than applying heat to bread, the most innovative approach is often to discard what has already been done and ask yourself, “how do we solve this problem?”
Then, you might find that you end up with a very different solution to the ones others have already created.
So, how does this relate to our industry?
While we’re making huge strides in advice tech, reg tech, even internal tools in large firms right now, I sometimes wonder if we’re re-inventing better versions of the same solutions.
Yes, incremental improvement is valuable, and this is natural as advice tech becomes a more mature marketplace. But, in my opinion, there is yet room for innovation that far exceeds simply improving existing tools in our industry. There is a lot of opportunity for genuinely disruptive innovation among advisors.
As such, the most innovative companies, I think, will be the ones who set about to solve advisors’ problems in very novel ways, and that means thinking outside the traditional model of software solutions.