With the Paris Olympics just behind us and the Paralympics still to come, much has been said already about how different the staging and infrastructure of the event were.
The opening ceremony gave us a taste of what was to come. Landmarks – from the Seine to the Eiffel Tower – were used to showcase Paris and other locations in an exciting and bold new light. Technology played a starring role too. The International Olympic Committee (IOC) deployed AI in a variety of ways including using it to safeguard against cyber abuse, to manage its energy management system and for new ways to identify talent.
This step change came about due to a distinct set of new criteria the games must now comply with. The new measures are social, environmental and economic, with fostering gender equality and legacy elements also playing a part. Hosts must now be more sustainable by using a maximum of existing and temporary venues.
These new constraints fostered rather than hindered innovation, making the Paris 2024 games a launchpad for a modern Olympics.
How does this relate to innovation in Investment Management? First, it is no secret our industry is highly regulated. We face the challenges of constraint and compliance as a result. Second, we should take a cue from the Olympics and not let these challenges hinder progress, they are an excellent catalyst for innovation.
Let’s define innovation. At Reseo, we believe innovation is the process of bringing about new ideas, methods, products, services, or solutions that have a significant positive impact and value. It involves transforming creative concepts into tangible outcomes that improve efficiency, and effectiveness, or address unmet needs. It is also about having an innovative mindset and bringing together diverse skills and thinking to create bold new solutions and industry firsts.
How can we foster the same behaviour, attitudes and outcomes in Investment Management?
When thinking about innovation, it is essential to look beyond technological advancements. Innovation encompasses many things from novel approaches to problem-solving, processes, organisational practices, to new business models and product development.
5 Key components of successful innovation
Fantastic ideas take lots of work to bring into fruition. There are many stages, challenges and often setbacks, but we see successful innovation in organisations all the time and they all have these approaches in common:
- Innovation-led – the resources and infrastructure of a big company are not necessarily better than those of a bootstrapping start up. The size of the firm does not matter. Prioritising innovation as a key business objective does.
- Nurture – organisations, be they startups or large corporates, must foster a culture of innovation by keeping people motivated and rewarded.
- Diversity of thought – being open to all ideas from everyone, both inside and outside the organisation, engenders diverse thinking and better results. On top of this the organisation must implement and put this thinking into practice, listen to and gather feedback, adapt and then incorporate this into the innovation, or if necessary to pivot.
- Freedom to invent – innovation comes from testing, prototyping, and going back to the drawing board. Therefore understanding and managing the inherent key risks and uncertainties of innovation are important, but not to the level that it stifles progress.
- Acceleration – having the courage and commitment to drive the initial idea to a successful execution involves risk-taking, empowerment, agility and leading by example but it must also be timely. Innovation underpins competitive advantage but only if you keep ahead of the pack by being first to market.
Innovation in focus
When it comes to the focus of innovation, we always ask ourselves who is it for ultimately? Is it the end user, and who really benefits?The Investment Management industry has seen enormous innovation over the years. Fund Management tools have had a huge impact on how the analysis of investment opportunities and performance is being carried out – everybody wins.
The pandemic triggered significant innovation due to the constraints of lockdown. The in-person sales process was changed forever. Meetings with the market and clients over a coffee were replaced by automated digital tools, not just Zoom, Teams and the like, but also the analysis of investor preferences and their next likely step for investing in specific strategies. This ‘needs must’ scenario was a digital adoption learning curve for everyone.
We are now experiencing generational change where different needs drive demand for new solutions. The Investment Management industry has to meet the needs of Boomers who hold the biggest assets but are not seen as particularly tech savvy. The emerging digital natives are data hungry and want user friendly apps to manage their investment and to know everything about their investments too. There is no one-size fits all here.
Elsewhere, disruptors and trail blazers have changed the world we live in and have shown great innovation that our industry could emulate.
The travel agent has vanished from the high street with the advent of Airbnb, records and CDs have been largely replaced by Spotify, retailers by Amazon. Netflix has made DVDs obsolete, and so on.
This raises the question of disruption in our sector – and what if the IFA should soon disappear, and if so, how? What shape or form would this take?
Which leads me to my final point. Not all innovation is necessarily a plus for the ultimate client or the industry itself.
What then is the message for the Investment Industry when considering innovation? We think these are the two key questions to be raised:
- Should innovation be focused on the benefit of the company or should the focus be on the benefit of the customer?
- Is the focus of the innovation on reducing cost or on better service to the client;
Company and client focus are in our view not mutually exclusive here and innovation should benefit both parties. We also believe in keeping an eye on the future and the new innovations on offer. A constant appetite for entrepreneurialism and change will help protect against disruption in the financial sector too.
The industry must be open to turning constraint and compliance into a competitive advantage. This can lead to highly positive outcomes as we have seen with the Paris Olympics and among many of our peers.
