Your IndustryJan 17 2020

How to change your company for the better

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How to change your company for the better

My distant memories of going to the circus are mostly of standing in the cold, queuing for tickets, watching unmoved as clowns threw water over each other and unwilling animals were prodded to do their tricks.

More recently we went to Cirque du Soleil. We sat mesmerised through the telling of a story in glorious technicolour with astonishing acrobatic feats. We paid 10 times the price of entry to a traditional circus and still came away feeling we had had great value for money.

That is innovation. Taking an existing, often traditional service and making it radically better. Some 90m people around the world have now experienced a Cirque du Soleil show. 

So what is the key to innovation? How can you use it to transform your own company’s performance, whether that is to grow your revenues, profitability or the value your clients receive and are happy to pay for?

This article sets out the three key steps to prepare to innovate and the four fundamental questions to answer to achieve successful innovation, and it is a tried-and-tested process.

 

Key Points

  • Consider how your company can innovate
  • Innovation can be examined in other industries
  • Look at who your target market is

We have used it in our own business: when we founded the company and most financial and cashflow planning was done manually (we support over a third of all advice companies today); when we started risk-profiling investments and no one else was (we cover 120 asset managers today); and when, more recently, we launched an annual review process (adopted by more than 500 companies in five months). If it works for us it can work for you.

The good news is that innovation is not invention. Innovation is about taking something that is in your business already and changing it to achieve better results for some, if not all, of the clients you already serve today. You do not have to be an inventor, you just need to know your business and your clients.

Shifts in performance?

There are a number of big benefits to innovation, not least unlocking unique value like Cirque du Soleil. Two others worth focusing on are:

• Enhancing the consistency of quality and suitability.

Local opticians in the 1980s were dominated by expert professionals with long waiting times and a low range of choice. Specsavers, founded in 1984 by a husband and wife team, asked themselves, ‘How do you take the quality and suitability provided by the professional and scale it?’ 

They used the following formula to grow their business to more than 2,000 branches in a dozen countries: they added consistency of quality and suitability through intelligent software; welcoming branding, experience and stores; increased product range; and reduced waiting times and prices.

• Enhancing efficiency.

We all dislike check-in queues at the airport. It was Alaska Air in 1999 that introduced the ability for passengers to check in via the internet. Subsequently, almost all airlines have innovated to adopt the process. This added convenience, speed and certainty of seating. It reduced personal contact, agent’s upgrade discretion and queues.

Whether it is enhancing suitability, dramatically growing efficiencies or delivering extraordinary value to your clients, innovating your services can deliver dramatic results, but how do you go about it?

There are three key steps to prepare:

• Who is your target audience?

Who are the people who really value what you do? Let us take the annual investment review process for example. The average age of a client in review where Dynamic Planner is used is 63 and it is in their 50s that clients are turning to the service, right through to their 70s.

Once you have an idea of who your target audience could be it is important to check and see if it is large enough and growing. According to the Office for National Statistics there are 30m people in this target demographic and it is expected to grow by 250,000 a year. A good start.

The question of whether the market can be served profitably is key. Our data show that while the average assets under advice of a client in review is £315,000, it ranges from a few tens of thousands to £2m.

Looking at the distribution, most clients have less than the average, and so with an adviser charge of 1 per cent a year the amount of work that can be applied to deliver value profitability needs to be considered.

• What is keeping them up at night?

Understanding what is keeping your target clients awake at night is important. Here there is no substitute for asking them. According to the Financial Conduct Authority’s Financial Lives study in 2018, almost two-thirds of consumers do not feel highly confident managing their money, and this rises to almost three-quarters when it comes to pension decision making. Companies tell us that clients in review present themselves with key questions such as, ‘Will I be OK? Will I run out of money? How can I avoid unnecessary risk?’

• Map their journey.

Next map the customer journey through their eyes: find an adviser they trust; have their situation understood; know if and how their desired retirement expenses can be met; gain a good return for the risk taken; and check they are on track each year.

Once you have mapped the journey, ask your clients where they place most value and how your current service delivers against this.

Look for gaps. Is your comprehensive fact-finding really delivering against clients’ desire to be understood? Are basic illustrations really helping them understand whether they will meet their expenses? Does the annual platform statement really help them understand whether they are on track?

The final step is to answer four questions:

• What can be reduced? For example, with fact-finding time, could you use online risk profiling that the client completes beforehand?

• What can be enhanced? Deterministic cash flows enhanced to risk-based forecasts to help clients understand the likelihood of achieving their retirement expenditure.

• What can be removed? Advised portfolios requiring significant attention and rebalancing to be replaced with risk-targeted multi-asset or discretionary fund management portfolios.

• What can be added? A personalised annual review centred on clients’ plans and objectives, rather than a product designed to address their key questions. The review should be set out in plain English, designed to look more like a lifestyle magazine.

Through innovating your proposition to deliver in areas valued by your target client group and reducing the things they value less, not only does it become easier for clients to answer the question, ‘Do I feel I am getting value for money?’, but also your cost to serve can be radically reduced, meaning you will have the ability to service more clients, more profitably.

Ben Goss is chief executive of Dynamic Planner