Why forward-thinking companies are focusing on data and agility
Technological innovation is having a transformational effect on the economy, with businesses in every sector realising the importance of quality data and being agile to respond quickly to changes. The disruptive power of technology on incumbent businesses and business models varies across industries, with consumer firms hit first and, so far, hit hardest. However, this fourth industrial revolution is still in its infancy and promises to deliver even more profound shifts in ways that can’t yet be seen in the coming years.
Technological disruption was initially slow to impact the financial services industry, particularly when compared with the likes of the retail sector. It’s now clear, with much discussion around blockchain, big data, machine learning and artificial intelligence, that there are many opportunities to disrupt financial services.
The organisations -- across all sectors -- that have prospered most from this disruption are those that have been able to adapt, resulting in a scramble to transform. As noted in a recent McKinsey Quarterly article[1], large firms are reorganising with increasing frequency, at least every two to three years, to meet new challenges. According to its consultants, the most successful firms “create adaptive, fast-moving organizations that can respond quickly and flexibly to new opportunities and challenges as they arise”.
Conventional wisdom in the C-suite is that agility is essential to long-term success. Equally important, this ongoing flexibility can only be achieved if it is underpinned by operational agility, i.e. the infrastructure, systems and processes that provide management with the tools to adapt and adapt again to customer demand, regulatory mandate and of course further technology innovation.
It is therefore no surprise to see a dedicated operations stream for the first time at this year’s FundForum highlighting the increasing importance of efficient and agile operations. Moreover, business transformation is very much on the buy-side agenda: operational efficiency, regulatory compliance and AUM growth are the three leading drivers of current business transformation plans for large asset managers[2].
But what are the operational building blocks that will enable both the business transformations and ongoing responsiveness needed to drive long-term growth and success in the investment management sector? Research conducted on behalf of BNY Mellon’s Eagle Investment Systems suggest that two of the most critical are a focus on data management and an agile approach to systems, services and platforms.
To ensure responsiveness to business demands, many investment managers are building organisational infrastructures that support a ‘DevOps’ approach, i.e. assembling and combining a unique set of components and capabilities – often involving skills and services from third-party suppliers – to quickly develop and then refine a product or service in response to continuous data-driven feedback.
This approach relies on the ability to plug-and-play multiple applications and systems as needed. This in turn requires a data management framework that allows multiple sources of data to be captured, stored, distributed and analysed cost-effectively on an enterprise-wide basis. To support this robust data quality first approach, many firms are turning to managed services to help achieve and maintain the data needed to empower the business while enabling an agile and innovative culture. Almost half of asset managers acknowledge that business transformation depends on use of managed services, as they look to leverage data assets without incurring burdensome overheads[3].
Many firms in the investment management sector already recognise the urgency and scale of the challenge, and as such are adapting fast. A survey of buy-side firms conducted by Waters Technology[4] found that just over 50% of respondents are using seven or more systems across their core investment processes, reflecting a preference for best-of-breed applications over more ‘monolithic’ platforms that attempt to handle the entire investment life cycle. When combined with survey participants’ declared priorities – efficient solution delivery and system integration/compatibility – this preference suggests firms are moving toward a more componentized approach to operating infrastructure that will support business flexibility.
The importance of data management and governance to business strategy flexibility is also becoming more widely appreciated. A total of 86% of global asset managers[5] agree that high-quality data is “critical” to their business transformation plans, with operational risk mitigation, better decision-making abilities and improved agility cited as the main benefits of a strong data management foundation.
We have all noticed the changes in consumer preferences and choices that technology has enabled in recent years, but change is no less profound in the investment industry, with low-cost, technology-driven options gaining ground, from robo-advice to ETFs. It is no surprise that the most successful investment organisations are responding to change through data and agility. Today, investment managers realise the importance of quality data and the ability to quickly access and take action with confidence; the winners will be the firms that find the right partners to help them execute successfully on this strategy. At BNY Mellon, we can help and look forward to discussing these solutions with forward-thinking firms at FundForum.
[1] Organizing for the age of urgency – Aaron De Smet and Chris Gagnon (McKinsey Quarterly, January 2018)
[4] The Age of Agile Solutions – Waters Technology, sponsored by Eagle Investment Systems (2017)
[5] How Agile Data Management can Power Business Transformation, A-Team Group sponsored by Eagle Investment Systems (2017)
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6/2018