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Article
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June 13, 2017

Culture Change

Steve Young Steve Young

It is hard to see how firms will survive if they retain the same culture, business model and IT footprint.

Most established asset managers have built their firms on a very careful, conservative basis. Almost by design, such firms have created a culture and an infrastructure that is resistant to change and generally risk-averse. Whilst new technologies have entered the industry, these have mainly been devoted to automating processes that are already in place, so they have not disrupted the industry substantially. This unadventurous philosophy can be successful in an environment that is slow moving and consistent (which the asset management industry has largely been for many years).

As the digital economy takes hold, however, technology is rapidly changing a great number of aspects within people’s lives and it is difficult to see how this will not eventually alter the state of the asset management industry. The issue, therefore, is how will asset managers adapt to this new environment and the consumer of the millennial generation, when the biggest firms are steeped in years of incremental change and display a paucity of dynamism?

This issue is compounded by the changes in customer loyalty within many industries. Consumers are more loyal to the customer experience now than the brand; technology will be a significant enabler in the process of transitioning loyalty from brand to customer experience. The need for agility will be paramount.

If an asset manager considers the dynamics of the market at present and how technology can change it, then compares the demographics of their current clients with likely future clients, it is hard to see how the firm will survive if they retain the same culture, business model and IT footprint. Those firms that can adapt the fastest to the needs of the evolving customer will be far better positioned for the future.

In order to gear up for this scenario, some of the big global firms are beginning to realize that their internal cultures are often not best suited to the kind of ‘out of the box’ thinking that they require. A few of these firms are building ‘innovation incubators’, on separate premises and with different management from the main business, in order to facilitate truly creative, agile solutions.

The incubator concept is very laudable, but at some point the best of those ideas will need to cross over into the main business in order to be effective. By pushing the development process ‘outside’ the firm, there is a danger that the asset manager will have created a silo from which invention will not readily emerge.

To avoid this situation, senior management from the main business will need to be seen as actively sponsoring the incubator, becoming internal ‘early adopters’ and champions of the cause as the idea reaches the main part of the business. Once the new concepts begin to bear fruit, successful firms will need to break their current business model in order to give the new model a chance of survival.

Enforcing this change will involve major adaptations to multi-layered organizational structures and the movement of (often reluctant) staff, a process that a large, conservative firm will undoubtedly find painful. Indeed this kind of cultural change is always the most difficult transformation to effect.

 To conclude, as asset managers look to modify their business models and deployment of technology, they will have to revolutionise the culture of the firm in line with this process or they will inevitably fail. Creating a centre of excellence for innovation is one thing; altering a mindset a quite another.

Tags:

  • Operations
  • Technology and Innovation
Steve Young
Steve Young

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