How To Spot Cutting-Edge Financial Product Developers

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In todays highly competitive financial services marketplace, there are two types of product providers: those who set the tone and those who simply repeat the same old message.

How to spot those who are innovators is the subject here.

While marketing plays a significant role in making products and features stand out, it is ultimately the product innovations that must captivate investment professionals and their clients.

Consistent innovation requires a process that goes beyond merely “valuing” or “encouraging” new ideas. Consistent innovators expect to pioneer, so they structure their organizations to support that expectation.

This requires combining speed with a rigorous process that keeps the focus on new ideas. In addition, cutting-edge developers use substantial market research to guide the process, ensuring the product will be valued.

Product innovation in the financial services arena entails several components. These are attributes you can look for, in assessing where your own companies and partners stand.

Creativity. This is the most important component of innovation. It is not something that can be delegated. It needs to be an integral part of the process.

Innovative companies foster creative thinking by committing time as well as people with the skills and knowledge to develop and test concepts.

Deep understanding of the external environment and the trends that drive the innovation process. What are the competitors doing? What products and services are the competitors developing, and what direction are they taking? What are the effects of tax laws, state laws and even political trends? All of these factors impact innovation and determine whether a product-to-be will see the light of day.

Distribution. The way a firm works, what it focuses on and even what its technological capabilities may be, are all important pieces of the puzzle in developing a product that will be well served through the distribution channels. Consistently successful innovators study emerging trends in the way products are distributed and sold. This is the only way to know who needs to see the value of the product-in-process, as well as how it needs to be seen.

Understanding what investors want. Understanding demographics and the trends in investor demand will help innovators develop a product that seems tailor-made for specific clients. Think of the recent trend of investors seeking guarantees in their investment products and how that has led to release of a number of guarantee-type products. Investors want it all, yet they have an aversion to risk, so they look for products that potentially serve both needs. Investors have embraced these types of products, and the companies who produced them have seen their efforts succeed.

Cutting-edge developers are those that combine the four components above with a commitment to rapid execution.

Research, from sources such as focus groups, plus feedback from the sales force and other market metrics, can be crucial to pinpointing marketplace demand and measuring a products potential success. Focus groups can also help keep the products launch prospects on a fast track, because after completing effective focus group research, companies can often send a new product out the door within just a few months.

Some companies, rather than innovating, try to one-up other companies by copying products. This strategy is known as “fast follower.”

But, in financial services, the real winners are companies that work to captivate the marketplace by putting the investment professional first. For such companies, the investment professionals reactions are the barometer by which they test all innovations.

Therefore, look for companies that involve investment professionals early in the development process. Such involvement is more about correcting any misguided “home office” thinking than validating that home office product designers got it right the first time!

In the competitive financial services marketplace, companies really face only three choices: be innovators; be low-cost providers; or be customer intimate.

All three are potentially feasible differentiation strategies, but no company can be great at all three. Every company must choose a “lead horse” that fits its culture.

If you are looking to work with innovators, be sure there is a focus on product development–because, for innovation to occur, product development takes priority over other aspects of the business.

Innovators understand that they are on the leading edge of shaping the entire industry. This position is not always easy for the company, but it certainly is exciting for investment professionals who work with such firms.

How so? Investment professionals who work with innovators know that they will always be first on the street with new products, bringing their clients the features and benefits they need.

is director of annuity product management at American Skandia Inc., Shelton, Conn. His e-mail address is rodonnell@skandia.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.