In this era of disruption in financial services, successful companies are those who learn to collaborate, Gavin Holland advises.
Mr. Holland is a partner at VC advisory firm Anthemis Group, a company investing in and advising digitally native financial services companies. Originally founded in 2010, Anthemis Group has invested in 54 best-in-class, high-growth, digitally native financial services companies based around the world.
Successful financial services companies embrace collaboration both within and outside their organization, Mr. Holland explained. While many legacy financial institutions struggle to overcome communications silos within the company, successful startups nurture cross communication between departments and benefit from more diverse perspectives.
That philosophy doesn’t stop at the door on the way out either, he added. Strong companies seek out complementary partners from outside the organization to fulfil their goal of providing a wider range of benefits to consumers.
Assisting leaders with development issues, Anthemis employs their network of executives and partner companies to help solve them. Perhaps it’s getting the executive team a meeting with a key individual at another company. Maybe it’s advice on how to approach a government legislator. There are countless reasons why that key contact could be pivotal to a company’s fortunes and all it takes is the right introduction.
The companies are small networked organizations where everyone is incentivized to work together to drive success, Mr. Holland added. A firm can have capital, the opportunity and a great idea but if the right team isn’t in place they will not likely be successful.
“For us, it’s not just about the individual, it’s about the diversity across that founding team,” he explained. “And we look at diversity in a broad way. We think very passionately about having that broad set of viewpoints.”
Contrary to what many think successful business leaders often stand out for their humility, Mr. Holland observed. They engage people and nurture relationships without requiring anything in return. When such sincerity is reciprocated the entire company benefits.
Strong leaders also stand out for their desire to keep learning, Mr. Holland said. Every year Anthemis brings portfolio companies, investors and advisory clients together for a retreat. They discuss business issues and challenges and are eager to new perspectives.
“One thing that strikes me is pretty much to a person every single one has a level of breadth, curiosity, intellect and worldliness,” Mr. Holland observed. “That you do not see in as much volume in the traditional corporate space.
“That level of brilliance and desire to do good we see play out in their interconnectivity, their desire to help and to use themselves for the broader purpose instead of simply doing their job and building their company.”
There are many people dreaming of contributing on such a level only possible with fin-techs, but they are stuck in the big financial institutions due to regulatory mandated compensation structures that can penalize them in the millions of dollars for leaving early.
“How do you unlock the talent that is sitting in the big financial institutions?” Mr. Holland asked. “Partly it’s about creating a story, creating a vision why they should come and I think the industry’s done a good job of that.
“We talk to regulators and say there is a vast number of people sitting in large institutions that have zero interest in being there. We tell them the regulation around compensation has unintended consequences, one being it’s harder for amazing talent to leave financial institutions.
One financial sector seemingly late to the fin-tech innovation party has been insurance, but it is catching up with a vengeance, Mr. Holland said. By definition insurance companies think long-term, whether it be a one-year travel plan or decades-long mortgage or life policy.
“It’s a very thoughtful portfolio of activities, venture design that needs to be delivered over a period of years not months,” Mr. Holland explained. “While it’s reactively late we think they’re executing on it much more thoughtfully.”
The EU’s PSD2 directive, where an institution’s individual and corporate customers can use third parties to manage their finances, provides a strong opportunity for insure-techs to innovate, Mr. Holland said. They have great customer data sets and, now armed with the potential access to customer accounts can build a set of interactions bringing value to the relationship.
“They can develop alternative business lines at places in the value chain they had not been able to access before,” Mr. Holland said.
Insurers are also wise to take a global perspective and adapt approaches from different cultures.
“Innovation is not necessarily doing something that’s never been done before,” Mr.Holland said. “It can be taking an old idea and modernizing it by adapting technology.”
China has woken up in its approach to fin-tech innovation over the past two years, Mr. Holland said. They are doing well in the payments space and their P2P sector is huge, though admittedly accompanied by regulatory issues.
Most other areas are a green field. Chinese investors are deploying capital in EU and US companies with the goal of learning and building it out across Asia.
Mr. Holland said society at large has adapted to a digital world and executives have now fully embraced it too. The remaining challenge is at the board level. Anthemis Group conducts regular relationship outreach with board members and it is clear the success or failure of many companies as they adapt to the digital revolution lies in their board’s approach.
“These organizations need to see business and culture in a meaningful way and not every board of every company is equipped to do that,” Mr. Holland said. Most boards may have that one digitally-minded person while others may have a subcommittee of the advisory board. Few realize they must become more nimble and technology-driven.
“They need more than the token digital person,” Mr. Holland said, “In our mind that has to change. Those boards need to be modernized.”