# Digitization's Second Wave Finds Buy Side Seeking Wisdom From Within

## Buy-side digitization has traditionally focused on making the client-facing portal right, often spending years and millions of dollars in the process of perfecting a front end. While that still remains a priority, technologists tell Tim Bourgaize Murray that a subtle philosophical shift is in thrall.

For many years, buy-side digitization has focused on making the client-facing portal right, often spending years and millions of dollars in the process of perfecting a front end. While that still remains a priority, technologists tell Tim Bourgaize Murray that a subtle philosophical shift is in thrall—with a turn toward tactical projects and a focus on internal efficiency that is reflective of the way asset managers and insurance organizations are now structured. But can the industry catch up?

Chapter IV of Confucius’ Analects contains a simple instruction; as the Scottish Sinologist John Legge translated it, “When we see men of worth, we should think of equaling them; when we see men of a contrary character, we should turn inwards and examine ourselves.”

In other words, allow room to be both aspirational and introspective.

Scholars believe the Analects were written and widely known by 206 BC, but this particular chapter likewise applies just as easily today — and in contexts well beyond matters of personal virtue.

Indeed, many large firms on the buy side—from asset management giants to insurers and private wealth managers—have begun to take their own steps to “turn inwards” with digital initiatives, following a sustained period of extensive, often prolonged transformational projects that were mostly outwardly facing.

As digitization veterans tell Waters, this new second mode of self-improvement has proven the more difficult. But the growing sentiment among these firms is that it must be done, even if their tech teams are now reinventing the way they think and plan in order to get there.

###### With a multi-boutique, you strive to keep the unique characteristics of each fund manager, but when it comes to distribution, relationship management and compliance, we leverage a shared function. So it’s a hybrid approach and striking the right balance. - Brian Ness, Principal Global Investors

Tough Sledding

Many of the more impressive digitization projects Waters has seen in recent years have revolved around user interfaces and client portals capable of providing deep transparency to investors.

These will sometimes take several years from start to finish; they’re elegant, highly strategic and when done successfully, the end product explains itself. After all, the centerpiece—the front-end—is geared toward the visual and intuitive, and the key focus on clients is music to any chief executive’s ear.

Despite being both time and resource-intensive, though, in many ways these initiatives are actually easier to pull off than the less-visible digital projects focused on operations within the enterprise, itself.

In fact, this latter variety, Stanford University professor Behnam Tabrizi tells Waters, accounts for most of the estimated (and surprising) 70 percent fail rate that digitization projects still suffer, particularly in financial services.

“The main reason why is they’re just too slow,” he says. “They underestimate the amount of change required to digitize, and think technology can solve things by itself. In finance, we’re used to getting things perfect, pushing it over the wall, and calling it done without introducing a culture of digitization and really authoring the change, front to back. Part of the problem is that finance tends to retain a top-down leadership model rather than the flatter structure you’ll find elsewhere and in Silicon Valley, and that doesn’t mesh with the rapid transformation, holistic involvement, and constant feedback that internal digitization demands.”

Josh Sutton, a managing director at Sapient, adds that it’s often a misunderstood delineation between one category of project and another, even at C-level.

“Firms tend to clearly understand the challenges with regard to the direct customer interaction—that’s been well defined during the past five to ten years—but they’re surprised that it reaches beyond customer engagement,” he says. “I sat down with the COO of a large asset manager a few months ago, and midway into the conversation, he realized that 'this isn’t just about technology.' It is a very different paradigm than most people think about digital work because the real upside is on that back-end: employee enablement, optimizing processes, and eventually, creating new business lines overall.”

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