The Digital Nebula in Asset Management


When I think of the most confusing strategic topics in the asset management industry, I must place anything related to digital near the top. Digitalization, digitization, digital operating model, digital architecture, digital platform…I’ll just call it “going digital” for the purposes of this blog and it all sounds great, but what does it mean in the microcosm of the investing lifecycle? How is it applicable to challenges faced by investment, operational, and technology support models? How is it deployed in the vast and disparate landscape of asset managers whether small, large, regional, or global?

The science geek in me thinks about the digital sphere in our industry as a nebula, which is essentially a cloud of particles and gas in space. Reflecting on what a digital strategy is intended to deliver, one could start with basic academic building blocks such as using data and systematic processes for client enablement, competitive advantage, and cost reduction. The mashup of processes and technologies that would enable digital objectives creates a “digital nebula” that can be random and complex.

As an industry, we are at the “innovators” stage of the adoption curve for most of the underlying systems required for going digital, which I would argue is a convergence and integration of cloud architecture, robotic processes automation (RPA), artificial intelligence (AI), business process management systems (BPM), data science, mobility, and more. Further, most of the platforms servicing the end to end value chain of asset managers—whether best of breed or multifunctional—do not solve for either the broad complexities of the industry or the uniqueness of individual managers. This means that ALL asset managers have a material amount of manual processes embedded in the end to end process chain.

This explains why a significant number of managers have not realized cost efficiencies or human capital reduction from rationalization exercises and investments in data architecture and governance. In fact, many organizations discover the opposite occurs, namely the need for increased manpower to develop and operate architectures which provide automation but require massive amounts of control and governance. Desired cost reductions will not be realized until the manager eliminates the complexity, the vendor community can solve all things for all firms (an unrealistic ask and unrealistic goal), or all disjointed digital assets converge and the “digital nebula” forms a star.

In the end, I feel the first step in realizing the potential of digital strategy is to design an operating model that is inclusive of people, process, and technologies that enable strategic objectives and are also purpose-built for digital tools and processes. Without laying the groundwork for both elements of operating model design, you’ll probably experience the flip side of how nebulas are created: when a star explodes.