Operating Model Shifts


Use every tool to differentiate the operating model

Insourcing and buy-or-build decisions are critical to the value chain and use of technology.

Decisions on strategic partnerships and choice of technology and the quality of their execution will increasingly differentiate operating models.

The investment firm of the future will:

Understand comparative advantages to strengthen strategy
All parts of the investment firm’s value chain can be managed with internal or external intellectual property. The trick is knowing your comparative advantages and getting the mix right.

Be comfortable with technology
It is hard to be positive about investment firms that fail to benefit significantly from technology. They will surely be operating with an unduly costly infrastructure, given that technology has the potential to transform the value chain.

Make data strategy a comparative edge
IT and data strategy must work with agile and adaptive features implemented by well-informed but non-IT-specialized leadership. The new IT imperative is fully integrating data strategy into all levels of the business.

Exploit investment platforms to build scale
Investment firms should be able to use investment platforms to exploit the opportunities from building scale and addressing client needs. In particular, technology enables platforms to scale their customization models within appropriate cost limits.


Technology is firmly embedded

Data strategy, AI, and fintech provide essential collective intelligence. Embedding technology involves moving technology from IT implementation providing business support to data strategy, and AI providing essential collective intelligence in the end-to-end investment process.

In the investment industry of the future:

The application of technology shifts the economics (i.e., lower costs for end investors) and accuracy (i.e., improved control of outcomes) of the investment process.

The inter-workings of technology and people are significantly accretive to the value generated by investment firms and experienced by end investors.

Bias around technology must be managed to ensure successful implementation; although many believe that AI and machine-learning technology mitigate human bias, in many cases they have been found to amplify bias.

The technology used in quantitative and systematic investment approaches produces large-scale improvements in added industry value.