Disruptive Behavior in the Banking Mess
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Everything was fine, until everything on Wall Street was not fine. Now two old players in the investment banking business are more bank, less investment. Goldman Sachs and Morgan Stanley, after resisting change and insisting all was well, have changed their stripes and are now regulated bank holding companies (White). Less risk. Lower rewards. That's Wall Street today.
In parallel, as the investment banks become less investment and more bank, the remaining investment bankers are looking to build market share. Jefferies & Company and Evercore Partners are thinking of becoming more dominant in the new Wall Street (Story).
The rules have changed. The deck has been re-shuffled, disrupted. Disruptive strategies have pretty set processes, although they aren't sometimes obvious.
- Simple as compared to complex strategies make more sense. Warren Buffet said back in 2003 some of the derivatives he was looking at "weapons of financial mass destruction (Serwer, 24)." I think that pretty well describes some of the products that failed in the last couple of months.
- Cheap launches are more likely to succeed.
- Speed to market is a good indicator of future success for technology companies. It might be a predictor for service companies as well.
- Disruptive companies might actually not be as good as their competition. They'll have fewer bells and whistles on their products, but they'll be simple and easy to understand.
- Innovation in tech products does show, usually in unique design features that make the experience easier or more fun. Making a service product more fun makes it easier to use if done correctly.
The bigger investment banks are becoming more commercial and will probably leave opportunities for smaller investment banks to grow. Some people say the big companies will retain their business; others say the little guys have a change (Story). It seems to me that, if handled correctly, the smaller banks have a chance if they follow the disruptive strategy game-plan.
References
Serwer, Andy and Allan Sloan. The Price of Greed. Time. 29 September 2008. 32.
Story, Louise. As the Giants of Wall Street Topple, Smaller, Nimbler Rivals Move In. New York Times. 23 September 2008. http://www.nytimes.com/2008/09/23/business/23streets.html?_r=1&ref=business&oref=slogin
White, Ben and Louise Story. Last Two Big Investment Banks Reinvent Their Businesses. New York Times. 23 September 2008. http://www.nytimes.com/2008/09/23/business/23streets.html?_r=1&ref=business&oref=slogin