What can the financial services industry learn from Dyson?

by Tim Dier

Learn from Dyson

There is no greater danger than satisfaction

Users and suppliers of financial services have much to learn from Dyson, made famous by his bagless vacuum cleaner. His company’s products are designed to use less energy and resources, while providing exceptional performance. Implementing some of the traits that were necessary for Dyson’s success could benefit the finance industry.

Challenge perceived wisdom

Sir James Dyson is often likened to a modern-day Thomas Edison. He is driven by doing things better and more efficiently and has argued that we all need to question more. Re-think what you are doing and do not just copy everybody else. Often that means challenging perceived wisdom –which can be hard in the traditionally conservative and rigid world of finance.

An expert thinks he knows it all, but he’s also rather inhibited by his experience, his knowledge, and he finds it difficult to steer off the well-known path.

Sir James Dyson

Approach with naivety

We should approach challenges with naivety. There are innovations and improvements that can always be made, and one should start by asking “Why?”  Why is something done that way?

It’s not about being brilliant — it’s about being logical and persistent… you have to start right at the beginning with the most basic, simple thing, and then make one change to see what effect that has.

 

Focus on frictional costs

In today’s challenging times, it is more important than ever to control costs and find savings. The founder of Vanguard, John Bogle, known for his pioneering work in the field of low-cost index investing, similarly recognised that controlling costs was a route to superior returns.

With many readers coming from the active investment community, there will be debate over whether Warren Buffet’s famous bet‘that including fees, costs and expenses, an S&P 500 index fund would outperform a hand-picked portfolio of hedge funds over 10 years’ – will truly stand the test of time.

But one thing is for sure, costs are a huge drag on investor and manager returns, and active managers who can control unnecessary costs will steal a march on their less efficient peers.

The drag of unnecessary costs compounds

Like the drag on a boat’s hull caused by barnacles and algae, the handicap only compounds over time, and without any remedial action your more efficient competitors will win.

Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.

Albert Einstein

The same applies for costs.  A few basis points today compounds to hundreds of basis points in the medium term. Less for investors, and less for managers.

So how can you apply Dyson’s principles?

When trying to understand why a business process is done a particular way, we often come across “It’s the way we’ve always done it” response. This is where emulating Dyson can be an excellent starting point to improve outcomes.

Even if things appear to be in some kind of stasis, a company must move on. It has to get better, evolve and improve in order to survive. There is no greater danger than satisfaction.

Sir James Dyson

With OptimX’s independent and unbiased support, several clients have identified and realised material savings across a number of functions without having to overhaul their systems. “Nobody at our bank ever highlighted that we could have achieved the same outcome for materially lower cost”, one client said.

As Dyson discovered, vacuum cleaner manufacturers made a fortune from selling vacuum bags, so had no incentive to change. This was to the detriment of their customers, and ultimately themselves. OptimX partners with its clients in asking questions, not for their own sake, but to lower costs and augment returns.

We need continuously to learn, question, and challenge conventional wisdom. The Dyson way.