BlackRock – industry Goliath facing a Blockchain David?

BlackRock may be the industry ‘Goliath’ about to be hit by a stone from a ‘David’ competitor.

The advent of a combination of Blockchain (click here for brief explanation of Blockchain), ‘Smart Contracts’ and IBORs (Investment Book of Record) enable Asset Management firms to eliminate up to 50-95% of their operating costs across people, process, IT and infrastructure.

This facilitates a potential and immediate 50-60% cut in pricing for Asset Management-related services and product fees.

There is an assumption among many industry experts that new operating models for the Asset Management industry are perhaps five-10 years away.

They are wrong.

Major technology businesses, such as Microsoft and IBM, are funding major Blockchain initiatives.

Combine these with existing Workflow technologies and new operating models in the Asset Management industry may be only six-12 months away from market deployment.

Surely not Blackrock?

One reason to be sceptical about the Blockchain threat to asset management Goliaths is that naturally conservative institutional customers are unlikely to flock to a challenger startup. They are more comfortable in doing business with a $60bn market cap business in Blackrock and its peers.

The scepticism is misplaced.

At Close Quarter, we have good reasons to think that an existing player in the industry may launch a service at a much lower price of, say, 50% below existing charges, and with superior service.

The more aggressive pricing could be in place as early as the first quarter of 2017 whilst they transition fully to a new operating model facilitated by Blockchain technologies over the following 12 months.

History shows disruption kills faster

Goliath was not complacent but he was too large to move at speed.

History shows that disruptive innovation kills incumbents faster than ever.

It took 38 years from the invention of Kodak’s Digital camera before Kodak filed for Chapter 11 bankruptcy in 2013.

Newspaper and magazine businesses that thought they were at the bleeding edge of connecting with audiences proved to be grossly ill-equipped to deliver scale and technology.

Those who owned easy-to-use hardware and software – Nokia, Blackberry – were brought low within a decade of the launch of the iPhone.

There is no reason to think that in a low- or zero-interest world facing weak growth that the complex, multi-layered fee and commission structures enriching fund managers at the expense of their clients is immune to disruption.

At Close Quarter we speak with innovators, developers, CEOs and technologists and our view is clear – disruption in the Asset Management industry is coming fast. And we love it.

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John Corr – Managing Director (Close Quarter)
@johnpcorr 

Of playground paradoxes and ancient gods: how to innovate with Janusian thinking

Today, we would declare in the playground, is Opposite Day. On Opposite Day, everything you said meant the opposite of what you said, so you had to say the opposite of what you wanted to say in order to communicate what you wanted to say. But to say Today is Opposite Day on Opposite Day meant it was not Opposite Day, so how could you spread the word around school that it was Opposite Day?

Still with me? Getting our heads around paradoxes takes some concentration. However, the ability to conceive of conflicting or opposite thoughts simultaneously has been identified as a mark of outstanding creativity by the psychiatrist Albert Rothenburg.

Rothenburg named this type of thought ‘Janusian Thinking’, after the Roman god Janus. Janus was a two-headed god, one of whose heads could look into the past whilst the other looked into the future. Whilst few of us have two heads with which to hold antithetical ideas concurrently, we can emulate the Janusian thought process in order to approach what we do at a higher level of thinking.

Rothenburg studied 54 Nobel prizewinners and attributed many major scientific breakthroughs or artistic works of genius to a specific process: taking a problem formulated in terms of opposing concepts or ideas, and trying to resolve the paradox.

Many of the problems you may have with your business can probably be captured in terms of a paradox.

Can you now think of a non-business equivalent to the problem your paradox describes?

In your analogy, what can be done to improve the situation?

Now can you apply this improvement back to your original paradox?

What’s your new big idea?

Rothenburg has claimed that Einstein, Bohr, Mozart and Picasso were all Janusian thinkers. Our paradoxes may be more Opposite Day than Quantum Theory, but with a little prayer to Janus we might come up with some creative innovations to improve on our company’s status quo.

Want to walk on the moon? It’s all about the small steps

How does change happen? Newton’s first law states that objects keep going in the same direction at the same speed until an external force acts upon it which changes its course and velocity. There isn’t much point arguing with the laws of physics, so if we want to make a change, we have to be that external force.

Luckily for us, to improve your personal productivity, you don’t have to grab your Sunday golf club and bludgeon yourself into action; a small nudge should do the trick. This is because it’s the little things that can have the biggest impact.

Accentuate the positive

Research shows daily habits are the most powerful of all behaviours, and therefore the most powerful way to make the changes we want is to start with the small things.

First off, we need to acknowledge that we can’t do everything. Recognising this takes a certain strength and self-awareness, but if we remember to let go and focus in on one or two small but key priorities, we are well on our way to improving personal productivity.

You might want to make a positive improvement to your health: how about starting your day every day with a fruit smoothie? You can easily tick off three of your five a day before you’ve even left the house.

Want to increase your client or customer numbers? What about going to events where you can network twice a month? Schedule in an hour for following up with new contacts after each event and you’ll soon reap the benefits.

It’s this attention to detail that makes a big difference. This does not mean we lose sight of the big picture, but focusing on the small things making a small alteration to the daily routine, or instigating one minor innovation in the weekly plan enables us to achieve real change.

Eliminate the negative

There’s a flipside to the power of the small things. If small, positive things can have a huge impact, so too can small, negative things. What bad habits in your company or your life could you do without? If we don’t keep an eye on the details, the little things can wreak havoc in our personal and professional lives.

Cognitive therapy treats problems big and small by helping patients to challenge unhelpful reactions to everyday situations.

You probably don’t feel this applies to you. But have you ever felt rejected or upset after someone has said no to an invitation? Been self-critical when you haven’t achieved what you set out to do by the end of the day?

These are exactly the kinds of situations CBT focuses on, because this therapy recognises how changing the small things can have a huge impact on how we approach the world. We can learn a lot from these techniques to eradicate those unhelpful little things from our own lives.

One small step

To create real impact by changing the small things, you need to do it consistently. The engagement and the investment doesn’t have to be big, but it has to be there. Can you think of a significant change you’ve made for the positive? Can you break down the big picture into the small things that got you there?

Many of us can probably come up with a few things. But now it’s time to have a think about a small alteration or new activity you could introduce today one which you could do regularly with a modest amount of effort which could help you towards a big change. And then do it.

Take one small step in the right direction, and you might find that, with consistent effort, you’ve made a giant leap for you or your business.

Got a case of experts’ disease? Don’t call the doctor

In the lofty world of academic research into language, experts speak of a common plight of those who spend their days trying to decide whether sentences they encounter are grammatical or not: linguists’ disease. The symptoms? Because these specialists spend so long examining their area of expertise, they find that they increasingly struggle to maintain perspective and make accurate judgments over whether a sentence sounds right in their native language or not.

Diagnosis

When you’ve built up a company yourself, or spent many years working in a certain sector, you probably know your stuff pretty well. But do you think you might ever find yourself suffering from experts’ disease? The more you know about a certain area, the more you think in a certain way about that area. We create the box we’re always being told to think outside of.

Our thinking remains inside the box, even when we search for new ideas. What’s more, we often surround ourselves by people with similar expertise or outlook, further limiting our horizons. Indeed, the greater our knowledge or experience of a certain field, the more difficult it is to innovate.

Treatment

Don’t just self-medicate by telling yourself to think outside the box. And don’t call the doctor. A more effective treatment is to talk to someone who is not an authority in your field. Often the greatest innovators are those who do not have expert knowledge and so have to search elsewhere to bring new ideas and solutions to the table.

If you have a problem, run it past someone who is from an entirely different background to you. The less associated they are with your business, the more likely they are to offer you a new perspective. This could be anyone.

Track down people you know to be creative, imaginative or big on ideas. They may not have your professional know-how, but they might have a talent for innovation that could spark something new.

Talk to strangers. They might observe something you haven’t. Talk to customers or clients. Their criteria for how they evaluate your product could well be different from your own.

Prognosis

Talking to non-experts is only an effective treatment if you listen to what they have to say. Your success depends upon your ability to hear what they tell you and take them seriously. This can be hard to do when you are the expert and they are not, and you may resist what they have to say if it goes against your way of thinking.

If you consult someone, or even if someone offers you a suggestion unsolicited, make sure you keep an open mind to what they are saying. Resist distractions when you are listening, concentrate on extracting the key ideas and hear out what they have to say until the end.

Make sure you judge their content, not their delivery. Be critical in your analysis, but resist the temptation to make a judgment on their words until they have finished speaking: you may not like everything they have to say, but you might miss something valuable if you are overly hasty in reaching a verdict.

 

From baked beans to iTunes: the why, how and who of establishing company principles

Remember that friend from university who moved in with you and became the nightmare flatmate? Never did the hoovering? Left pans encrusted with baked beans all over the kitchen? Didn’t notice when you went on bin strike for two months?

Maybe that was just me. But we’ve all experienced a similar mismatch of standards and values with another person in our personal or professional lives.

Why

It is crucial to establish the key principles we wish to live and work by. These define what we believe is important and give impetus and purpose to our decisions and choices.

A common mistake is to assume that our own standards and expectations are shared by others we come across. All too often, we only realise there is a difference in values after someone has acted in a way we find inappropriate.

I thought I had no reason to believe my flatmate wouldn’t share what I considered to be basic standards of cleanliness and courtesy to others: but these were my standards, not his.

If your values and expectations aren’t established and shared from the outset, you run the risk of having to firefight all the behaviours that go against these. Indeed, I spent the rest of the time my flatmate and I lived together trying to amend the mismatch between his standards and mine.

What’s worse, you may end up instigating rules which may appear simplistic or petty to protect against infringements of your standards. In doing so, you limit others’ freedom to make their own decisions or choose their own behaviours. The old adage rings true: prevention is better than cure.

How

Make a checklist of your key principles, whether these are personal or professional. There is likely to be an overlap between the two if you are in charge of your own business, as your personal ethos is likely to be the eyes through which you focus the company vision.

In order to draw up what your key principles are, think about what you are like when you are at your best. Truthful? Trustworthy? Creative? Community-focused? Are you more of a risk-taking or risk-averse business? If you are risk-averse, are reliability and steadfastness at the heart of what you do?

Write down what you do best. Always write these in the positive (dependable and consistent sounds better than risk-averse, right?). Be truthful. And make your definitions as clear as possible.

You can also think about whose behaviour you have been questioning. What standard is it that they have been violating? Add it to the list.

Who

You may create your checklist on your own, or achieve it as a shared task. If you go it alone, make sure that your list is shared with others. Expectations need to be shared so that everyone is singing off the same hymn sheet.

Best practice is to ensure that the standards you have enshrined in your key principles are collective values. It’s not just a case of making sure everyone knows the right tune and the words, but that the song they’re singing is one that they would at least consider downloading off iTunes.

Finally, for these principles to have purpose, make sure you refer to these standards as you go about your day-to-day. Challenge yourselves to adhere to them. Question yourselves and your standards. Are we living up to this principle? How? How are we not? How could we tweak the behaviour, or the standard itself? Are we sure this this is how we see the world?

Don’t be the flatmate who never does the washing up. But don’t be the flatmate who assumes everyone will share the cleaning rota that’s in your head, either. Discuss it, write it down, and stick it on the fridge door. And remember to refer back to it when you walk in the kitchen, too.

Designed by: Carne Associates & modified by Dawud Miracle