by Tony Vidler
“Innovate or die” said Peter Drucker. Innovation is of course about finding new ways to create value.
Have financial advisers been innovating in recent years? Have they been finding new ways to create value? If not, does it mean they are slowly slipping towards their commercial death?
Many have of course. Many haven’t too. And there is no doubt that innovation and new methods of creating value for consumers are happening throughout the industry at a phenomenal pace. All of the fintech plays – and there are literally thousands of them looking to create more value at every point in the financial services process – are the greatest innovators of recent times.
Of course for advice businesses in the last few years the emphasis which has been forced upon them has been upon creating businesses models and practices which meet the approval of external parties such as governments, regulators, dealer groups, and so on. While the arguments for the ongoing change in advice businesses is that these changes are for the benefit of the consumer, the short term impact of all the change has been to distract the advice businesses from their primary purpose of providing advice. Frankly, many advice businesses have less time to deliver advice to consumers and create value now.
This dilemma is actually the prime reason for why advice businesses need to focus on innovation as a means of creating value, and perhaps greater relevance to their own clientele. There is a need for innovation in the financial advice business given the overwhelming sense of sameness that is beginning to evolve and the general lack of understanding about the value that good planning can create for customers.
In considering where one can look within the existing business to create additional value I think there is merit in a simple model created during some government funded research a few years ago for the manufacturing sector. NZ Trade & Enterprise explored the challenges facing the manufacturing sector and ultimately provided an excellent, research-based, suggestion about creating innovation with its “Value Creation Model”.
The 4 key drivers for innovation and success were identified as strategy, creativity, connectivity and operations.. The same four drivers would appear to be central to creating innovation and success in business development of financial advice practices. Each is an area where we should re-think “how we do stuff” and consider how we may do it differently to create greater value for clients.
What I especially like about this model for our industry is the clarity of purpose it provides in connecting each facet of the business. Our objective once we have our operations (our back office) sorted is to then figure out how to use that to improve connectivity with clients. How do we align operations with communications? How can we create additional value from our systems in how we connect with our clients?
Having done that, how does this improved connectivity result in better information, tools, resources….”value”….for clients? Are we now sharing more information of pertinence and value to them?
It is an excellent model for maintaining focus on the purpose of innovating in each area. Rather than innovate simply for the sake of efficiency or improving the bottom line for the company, it shifts the focus to innovation which enhances the value for the end user.
Aligning strategy and operations (why and how we do the stuff we have to do) with customer needs (what the people paying us want) is the critical step in innovating for value creation.
These have proven to be the common drivers of excellence and high value creation in manufacturing, and it would appear to be a model that has merit for financial advisory practices too.