CXO: Capture the value-add outside of performance

Read the article and learn about:

• Continuous learning as a key driver of professional development and motivation
• The need to transform the organization and the operational platform together
• Separating the ongoing hypes from the actual trends that will shape the future
• Capturing the added value for investors outside of performance

Erik Kaland
COO of Storebrand Asset Management
Connect with Erik on LinkedIn

About the interviewee

Erik Kaland, M.Sc. & MBA, joined Storebrand Asset Management in 2011, now holding the position as Chief Operating Officer. Erik has a professional background in IT and Management Consulting, comprising previous positions at Accenture and Deloitte.
 

The global investment management industry faces much complexity and many challenges. In the recurrent CXO Corner relay column, we ask top executives to point the way ahead, sharing their views and best practices for meeting the challenges. This time, we interview Erik Kaland, COO of Storebrand Asset Management.

Journal: You’ve had a long career in consultancy before joining Storebrand Asset Management (Storebrand AM) in 2011. Can you tell us about your professional journey and your main drivers?

Erik Kaland: In 2001, I started in Accenture as a fresh graduate. My main motivation was to work in an environment that focused on continuous learning and the opportunity to work across different industries and knowledge areas. I didn't really have a clear view of where I wanted to go with my career, but I was attracted to the fact that a consulting firm allows you to try out different things without having to plan specifically for it. I guess my main driver has always been to learn new things, whether they are related to for instance new technologies, business models, or operational setups.

Journal: How do you recall your first 100 days with Storebrand AM, e.g. your initial ambitions, first reflections, and long-term vision?

Erik Kaland: The first 100 days in a new position or company are always a bit confusing. You are exposed to a torrent of impressions; new people, systems, processes, and not least the internal politics of a new environment. I think, it’s a good idea to use this initial period to observe and try not to draw too many quick conclusions. It takes a while to understand the root causes of any real issues at hand.

That being said, at Storebrand AM, it was quickly clear to me that a shift needed to happen in terms of building stronger technological capabilities. There was also a need to adapt current roles and skillsets to an operational model where we would increasingly be using offshore resources to perform daily operational tasks. Consequently, we would need to put more focus on project management, process ownership, and making a shift from performing the usual daily operational tasks to building better ones for the future.

Journal: How has your background from the consultancy business impacted your vision for Storebrand AM’s technology strategy and the company’s ambitions?

Erik Kaland: I guess a major impact from my background in the consultancy business comes from having seen lots of different organizations with different problems and with different perspectives on how to solve them. That has given me a big inspirational toolbox, you could say. If you stay in the same organization for very long, you become part of the culture, which is a good thing, but it can also prevent you from thinking outside the box. When developing a vision or a technology strategy, you need to be able think outside the box and let yourself be inspired by others. Otherwise, you'll just end up rehashing the status quo.

Besides that, I think what has impacted me the most has been learning the value of thinking long term and developing long-term strategies. Working with technology forces you to think long term, because the infrastructure you need to have in place to provide you with the desired digital capabilities almost always moves slower than the current market demands. This means you need to aim beyond the current digital trend, and you need to think strategically in terms of what capabilities you want build into your platform.

… a major impact from my background in the consultancy business comes from having seen lots of different organizations with different problems and with different perspectives on how to solve them. That has given me a big inspirational toolbox, you could say. Erik Kaland, COO of Storebrand Asset Management

Journal: How do you achieve the knowledge and insights that enable you to think ahead of the current digital industry trends and buzz words?

Erik Kaland: I get my knowledge and inspiration from many different channels. Everything from internal meetings, external seminars, and conferences to reading whitepapers and watching Ted talks. The important thing is being able to separate the ongoing hypes from the actual trends that will shape the industry in the future.

The important thing is being able to separate the ongoing hypes from the actual trends that will shape the industry in the future.Erik Kaland, COO of Storebrand Asset Management

Journal: How would you advise your peers to tackle big changes like Storebrand’s technology consolidation project – from a technology and a people perspective?

Erik Kaland: There's no silver bullet in terms of being successful in these large consolidation projects, but the most significant success factor will always be the people you empower to run them. I have been able to form a fantastic leadership team with highly motivated and competent professionals that have done much of the heavy lifting. I think the most important thing is to form a group that are effective in problem-solving instead of focusing on the specific issues that you'll encounter underway. These projects will always be unpredictable, and you'll need to adapt and learn while going through the process.

When you have that foundation, the next important ingredient is to form a long-term business strategy where the technology is an enabler for the business goals, and not an end in itself. There's a lot of talk about digital strategies these days, and you need to pay attention to new digital technologies, but not so much that you replace your business strategy with your digital strategy. New technology changes the rules of the game, but not the game itself. Creating value for your customers is still what matters. Our experience was that once the business strategy was clear the technology consolidation project was the obvious enabler of that strategy.

Journal: What do you see as the biggest challenge and the biggest opportunity for investment managers in the next 10 years?

Erik Kaland: To begin with, the biggest challenge, I would say, is the margin pressure that we are experiencing. The increased competition and transparency in the industry has driven down prices across all asset classes and put pressure on existing business models. Changing consumer behavior has also led customers to substitute actively managed funds for index and smart beta funds, and with that reduced the fees we collect. Some say it's a race to the bottom, but I think this is a natural process for all maturing industries.

Currently, the industry is trying to adapt to the changes by reducing cost, increasing volume and increasing focus on assert classes where the pressure is less intense (like alternatives). That will ease the pressure in the short term, but the fundamental question is whether the existing business model will have to adapt to the new environment?

I think the biggest opportunity going forward lies in understanding and capturing the added value for investors outside of performance. Performance will always be the main focus for investors, but as increasingly larger portions of capital flows to products where performance is not the main differentiator (i.e. alfa generation), the industry will have to find new ways to differentiate. That can be better digital experience and reporting, sustainable investments, increased transparency into underlying assets and investment methodology, or innovation in new products or asset classes.

I think the biggest opportunity going forward lies in understanding and capturing the added value for investors outside of performance.Erik Kaland, COO of Storebrand Asset Management

I also think asset managers in the future will have to choose which part of the value chain they want to compete in. It will be difficult to be best-in-class in portfolio management, product management, as well as distribution, as the underlying skillsets needed in each category are different. Previously, distribution was simply making your funds available on your website and making sure that sales knew the value proposition of your products. Distribution going forward is about user experience at multiple different touch points, and the ability to create value-add throughout the customer experience process. Whether this is through robo advisors or other intelligent digital interfaces, I don’t know, but I think we are moving into areas that are outside the core competencies of the traditional asset manager. That doesn’t mean we can't compete in those areas, but I think we have to choose where to put our primary focus and align the organization accordingly. You can't win on all fronts at the same time.