Reruns anyone? I know I’m old and wear a funny bow tie, but the events of the last year remind me of a game show that was recreated on several networks, “Truth or Consequences.” As our prior industry leaders are paraded in front of Congress, tried in the media, and admitting “guilt” in an effort to find the “truth,” will technological improvements be a consequence of the non-truth? Will it improve our social responsibility? How about conformance and auditability? What about investor confidence and the hundreds of billions raised in new capital? More precisely, if we fail to advance the precise, expanded electronic processes and their data isolation modules (DIM’s), what will be our consequences?
Yes, I do ask a lot of questions. However, let’s examine two of the common “truths” and their potential “consequences” (and I promise it won’t turn into a Nickelodeon permutation by pouring green slime on everyone’s head).
Truth? “Innovation always happens during times of crisis.” Innovation requires relevancy. Just because something is innovative does not mean it will be adopted, sustained and mainstreamed. Consequences of crisis induced innovation demands suspending of hierarchical structures, acceptance of failure, and yes, investment. Orchestrated collaboration with other firms possessing the technology is always a method to lessen capital demands for specialized needs including regulatory compliance, valuations, appraisals, customer mining, security, default servicing, and foreclosure management. Some argue passionately that delivery techniques such as SaaS are innovations and our future. Yes they are, but only to the extent that these solutions are fully integrated and internalized by personnel while being continuously integrated with changing operational processes and interfaces. Within the mortgage industry, how does the incorporation of innovative ideals such as semantic web, Omni-functional platforms, data web, and of course SOA, impact innovation during a crisis? A cross-industry lesson learned and consequence of innovation introduced during crisis is that it is often transitory — it can take on new maturity after the crisis is over, or like in evolution, it becomes extinct.
Truth? “Global Sourcing (aka outsourcing) holds the best opportunity for innovation while lowering operating costs.” During the rapid expansion of the origination and servicing industry since 2000, global sourcing was a key driver to deal with rising volumes and varied product offerings. Yet, was outsourcing innovation or was it about improved cost efficiencies? If we examined many of the larger providers, were they leading the charge on improving contractual arrangements with the adoption of “e” processes and innovative technologies? A consequence of our good and bad experiences with global sourcing is about to change the landscape of provider offerings. Outsourcing providers are now recognizing that their business model had changed — perhaps permanently. New operating models (e.g., Co-Op’s and domestic knowledge workforces, transplanted foreign national teams) are orchestrating change and providing the gain-sharing models that were always sought after but seldom delivered. There will be a greater emphasis from offshore-based providers and domestic firms with substantial offshore operations to reposition their business models to adapt to market conditions, gain-sharing arrangements that do not demand multi-year contracts, extensive transitions, and unwieldy governance. What is the end consequence? Global sourcing will become less about borders and more about competition in a “flat world.” Innovative domestic sourcing models will experience a rebirth for at least the next three years. After all, globalization is not a one-way street — the road moves both directions.
My collegiate daughter, tired of me lamenting about the need for change and innovation this week, reminded me of a cartoon we watched when she was little. Sure enough she was correct and even Wikipedia confirmed her analogy and linkage to the old “Truth and Consequences” show format. I even found the show tucked in the back of a shelf and replayed it — of course, as part of my research.
About 50 years ago, Looney Tunes (i.e., Warner Brothers) created an episode called “The Ducksters,” where that silly piggy Porky can do no right — at least that is the way Daffy Duck saw it. She said, “Dad, you kind of remind me of Porky.” After some awkward silence on the phone I said, “Yes, but in the end Porky bought the company, and Daffy got the consequences. It’s good to be Porky!” Join me next week when we discuss, “Whac-a-Mole, Mortgage Style.”
