We all know that we are living in one of the most disruptive times in history. Which also means that this is a dream time for innovation and reinvention. Never has there been a more rewarding period for businesses in any industry to re-imagine themselves.
As chairman of the InvestmentNews Icons & Innovators Summit April 17 in New York City, I thought I’d share insights on innovation and what differentiates growth firms from firms that plateau.
Why aren’t we all innovating?
There is no such thing as a perfect firm, not in any industry, but most certainly in wealth management. That means every company in the world has ways in which it might improve and evolve to be more competitive and better serve its clients. Yet most wealth managers will be content to do the same things this year that they did last year, and the year before that. What holds people back from evolving, even though they know it’s what’s best for their future? There are three major roadblocks:
1. The success paradox (aka overvaluing the status quo). This is a mindset that says, “I am successful because of all the things I have done to this point.” It often causes people to stop evolving because they do not want to risk change and endanger their accomplishments.
But the world around you changes constantly, and your clients always have new alternatives that might be better than what you can offer. What if you asked yourself a different question: “What would we do differently to be twice as successful as we’ve been?” That’s the beginning of challenging the status quo.
2. We overestimate the cost of change and underestimate the cost of not changing. It is relatively easy to calculate how expensive any major innovation might be in time, effort and money. It is much harder to know the cost to our business when we forego change and stay the course.
Figuring out the benefits of innovation by evaluating the impact that a major innovation might have on our future growth, our profit margin, or improvements in client satisfaction or employee happiness is tough but it can help us to justify any major innovation costs. However, it’s really difficult to calculate the impact of not evolving. What will it mean in client losses, employee turnover or fee pressure if a firm does not evolve? Most folks simply don’t think about the lost opportunities as a “cost,” but these missed chances are almost always the reason that firms plateau.
3. The “good enough” problem. The biggest hurdle to innovation occurs when change is a choice rather than a requirement. When what we are doing today works well enough that it might not be worth the hassle of changing, our complacency can stop us from progressing.
Innovative firms understand that the advantage goes to those who move before it is necessary; they establish a mindset that the standards for “good enough” are always going up based on how they can be better than everyone else in the industry. Shaking the “good enough” mindset is the key to embarking down the road of innovation.
So what are the keys to building an innovative mindset?
• Embark on the “quest for better.” Ultimately change should always be about improvement. At United Capital we have a saying: “Every Friday we are better than we were last Friday, as a company, as a department and as individuals.” This frame of constant, unending improvement in every aspect of who we are is the cornerstone of a growth mindset. It establishes that we are never done, we are never satisfied with “good enough.” Every innovative growth firm has a variation of this perspective ingrained into its culture.
• Create urgency. Impart to your team that every minute you do nothing to evolve, someone else is building a better mousetrap, a better firm than yours. However, if you evolve yourself faster than everyone else, you give your firm a massive competitive advantage. The sooner you improve, the sooner you win.
• Allow for failure. All change comes with pain. The challenge is to find the right mix between maintaining your existing business and evolving mid-flight. Consistency and change by definition are almost always at odds, so you must allow for setbacks and mistakes that do not harm your core business. When you grant permission to fail, you will encourage your firm’s evolution by letting people do new things, even if many of these ideas don’t work out quite as you’d hoped. Do not punish failure. Recognize it as a cost of innovation.
Decades ago, my mentor and partner of many years shared with me an expression that has always stuck with me: “You either ripen or you rot.” It’s a really interesting perspective to think about when you consider change in any context.
Growing is the natural human condition. It’s what makes us vibrant and connected. The same is true for any business. Innovation is either helping you to win or killing you. The good news is that it’s your choice.
This article originally appeared on Investment News “Duran Duran” blog.
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