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Practice Management > Building Your Business

What Advisors Can Learn From Software Makers

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“Software is eating the world.”

Jamie McIntyre, CEO of Fortigent, kicked off his session at the IMCA annual conference on Tuesday with that quote by Marc Andreessen from 2003.

By that he meant software is changing the way some industries do business.

For example, car maker Tesla uses sophisticated software to build its cars and maintains those cars with over-the-air software updates. Cars are purchased online, not at dealerships.

Then there’s Dropbox, the online storage system. In five years, McIntyre said, Dropbox has gained 200 million users and now has a $10 billion valuation.

That growth is from access to cash and from its agility, McIntyre said. Dropbox doesn’t have the typical entry barriers, infrastructure and marketing. The cloud replaced the need for extensive infrastructure, and social media and word of mouth took care of expensive marketing strategies.

Agility is when a company can respond to customers’ needs immediately. Building software used to require an initial meeting to determine what the customer needed, and then they weren’t involved again until the product was delivered, McIntyre said. The company building the software would go through the design, coding and testing phases without customer input. If there was a problem, it wasn’t recognized until after the software was released.

“The problem is they’re only engaging with the customer at the beginning and the end of the process,” McIntyre said.

Cloud-based software isn’t as linear, he said. More agile, cloud-based systems are more collaborative and can respond to changes as they arise. “Being agile is learning by doing small tasks that deliver value,” McIntyre noted.

Robo-advisors have taken those lessons to heart. For example, Wealthfront, an online financial advice provider, has enjoyed explosive growth. Initially launched as a crowdsourced security selection website called kaChing in 2009, it adapted to what consumers were looking for and started offering portfolio management. From $500 million in assets under management in February, the site now manages $800 million, McIntyre said.

There are two rules to effectively adopt these strategies, McIntyre said. First, establish a process that provides incremental value to clients. Then, transparently monitor progress with clients  to evaluate that value.

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