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Maybe you should be.
Background
I recently attended a Private Markets conference and it was refreshing to see an increasing emphasis on leveraging technical solutions to improve company outcomes. Particularly in a space not usually associated with advanced technology, this is hugely satisfying to observe (I've been saying it for a long time…). Sadly I also kept hearing the phrase "We are an asset management company, not a technology firm." I made my dismay known fairly publicly, as this LinkedIn post demonstrates:
People. Wake up. You're a technology company that happens to be managing assets. And if you're not, then you should do something about that, because everyone else is! The runway you have left in running your business the "way you used to" is decidedly limited.
The reactions to my post suggest that there is broad consensus in the community that I might be onto something - but clearly widespread understanding still eludes us. One thoughtful commenter asked:
Are these comments a litmus paper on general tech knowledge within operations leadership? And if so - why is that? Does it boil down to failed strategic work by us and our CIO peers? Mattias Hindfelt, CTO of EQT.
So, in response, I vouched to do my bit to spread the word.
I think it's fair to assert that any successful business today is already differentiating itself through its technology. We even have scientific evidence confirming that "high IT performance correlates with strong business performance, helping to boost productivity, profitability, and market share " [1]. If you think that this is only applicable to organisations building and selling software, then hopefully this article will make you see the world through a slightly different lens.
What is a technology company anyway?
Let's start by identifying what we mean when we talk about a technology company. It turns out that agreeing on a definition is hard; evidence of how pervasive technology has become in everything that we do.
Let's use this definition as a starting point: "[...] if your product – the thing you make money by selling – consists of applied scientific knowledge that solves concrete problems and enables other endeavors, you are a technology company."
So if you have engineering teams [2] that help you solve concrete problems and enable you to generate superior performance for your clients, you are closer to a technology company than you may have thought!
Let's look at a few other musings on the subject:
"If you took away the technology that a company has created and it wouldn't survive, it's a tech company. [...] If the contribution of technology to your business and your customers becomes an integral part of your operations, then it's time to ask yourself if you're a company in X industry, or if you're a tech company that also happens to be in X industry. The shift in focus might unlock your next level of growth." Nail on the head. Thank you, Jamie Hinton.
Let me ask you this - do you think you could run your business without technology? Or has technology become such an integral part of your operation that you could not effectively service your clients' assets without it?
You might argue that while technology is integral to your operations, it wasn't created by you. Maybe you're exclusively relying on vendor products to run your business. If you are, then my original point stands - you have limited runway left to continue as you are. Isn't it time to cease the growth opportunities that differentiating yourself through technology will bring?
What is the alternative - telling your clients that nothing differentiates you from others in the market? Anyone can go out and buy product X and use it to run assets. Yes, there is a human element to good asset selection. Having been CTO for a large discretionary asset manager for many years I am intimately aware of how important human beings are in the technology equation - but would you hold your head up high and say that you can outperform those that have their capabilities enhanced by technology? Those with access to algorithms that wrangle and make sense of the enormous amounts of data we have at our fingertips today? Just having data alone is no use unless you have the means to derive knowledge, insight and wisdom from it [3] .
Do you really want to rely on an out-of-the-box solution that your vendor sells to all of your competitors so you can be sure you're looking at the data in the exact same way as your competitor across the street?
Let's look at one last definition before we move on to some practical tips on how you can put this newfound awareness into practice. "[It's] often shorthand for a specific culture and approach to business: collaborative, innovative, purpose-led, and values-based."
Now there is an interesting angle - and beyond the ability to differentiate your offering from others, I think this aspect is critical. Engineers are scientists forever in search of better ways of executing their craft. It was more than 20 years ago that the agile manifesto proclaimed that people and interactions should be valued more than processes and tools. Customer collaboration over contract negotiation. Responding to change over following a plan. Would you not want to be recognised for these traits?
Technology is forever evolving, allegedly at a more rapid speed than ever before. We are experimenting with better ways of delivering technology, yes, but we're also continuously searching for better ways of building high-performing teams and creating environments where people feel safe and can contribute to the fullest extent possible. We look for better ways to understand and solve our customers' problems. And all of these experiments lead to learning, improvements and ultimately better outcomes. Are you saying you don't need any of that in your organisation?
How can I become a technology company?
What if Google went into asset management? Are you confident your business would survive? Or would you become victim to the kind of unexpected disruption that wasn't all that unexpected? What can you do today that gives you a chance to not just survive, but thrive in this new world where technology is everywhere?
Technology is as fundamental to your business as money, or electricity. It is not a discretionary choice, but you can choose how to respond to it. Are you just going to keep up with everyone else, or are you going to use it to differentiate your offering, set yourself apart from your competition and create products your customers will want to buy?
How do you do that?
Let's look at a model I've found helpful in the past - the purpose alignment model6, credited to Niel Nickolaisen. If you look at your fund offering (or whatever products you are selling) through the lens of market differentiation and impact/criticality it becomes easier to see where you should invest time, money and effort: in stuff that matters (to your customers) that only you can give them. Only do what only you can do.
Focus your hiring efforts on creating differentiation - that applies equally to technology and business roles. Don't be afraid of bringing technologists on board, even if you have never done it before. You don't need large teams to make an impact, on the contrary. Start by trying one (or all!) of the following:
Embed an engineer with your operations team and see your hiring needs drop because existing staff, enabled by a few clever technology solutions, can suddenly handle more complexity and volume of work.
Embed an engineer with your portfolio management team and watch how their time is freed up to think and interpret data at their fingertips, rather than spending hours cleaning data in spreadsheets and building brittle VBA models.
Bring somebody senior into the organisation that not only understands your business but how technology can transform it. Give them a broad mandate and don't silo them into an IT department. Hire them to help you drive your business to the next level.
Start there and I bet you will see your business transform into an organisation that delivers superior client performance by leveraging ALL tools available: human and machine. We can then argue whether or not you are now a technology organisation; either way, you will be better off.
[1] cf Nicole Forsgren,Jey Humble and Gene Kim "Accelerate: The Science of Lean Softwareand DevOps: Building and Scaling High Performing Technology Organizations", 2018.
[2] Engineering being definedas the “branch of science[...] concerned with the design,building, and use of engines, machines, and structures” according to the Oxford dictionary.
[3] cf Known as the “DIKW pyramid” ttps://www.ontotext.com/knowledgehub/fundamentals/dikwpyramid/#:~:text=The%20DIKW%20Pyra mid%20represents%20the,and%20adds%20value%20to%20it.
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