After the digital camera became popular, Kodak spent almost 10 years arguing with Fuji Films, its biggest competitor, that the process of viewing an image captured by the digital camera was typical, and people loved the touch and feel of a printed image. Kodak tried to convince people that film cameras were better than digital cameras and lost 10 valuable years in the process.
It is not that they didn’t have the technology. The prototype of a digital camera was first created in 1975 by Steve Sasson, an engineer working for Kodak.
Kodak was busy adopting the ‘Razor and Blades’ business plan. According to the Razor and Blades business plan, Kodak planned to sell cameras at affordable prices with only a small margin for profit and then sell the consumables such as films, printing sheets, and other accessories at a high-profit margin.
Kodak failed to understand that its strategy of banking on traditional film cameras (which was effective at one point) was now depriving the company of success. Rapidly changing technology and evolving market needs made the strategy obsolete.
The ignorance of new technology and not adapting to changing market needs initiated Kodak’s downfall.
We are repeating The same mistake in the MF Industry. We are ignoring customer needs and, we are moving forward with our ‘Razor and Blades’ business plan instead of protecting investors capital against market risk. You must be wondering how the ‘Razor and Blades’ plan be implemented in the MF industry? Here ‘Razor and Blades’ plan, instead of adopting required strategies, risking investors hard-earned money by using easy and automated process based strategies.
We are ignoring the need for the changes in strategies adopted considering the market proposition.
Once, Sheikh Rashid, the Founder of Dubai, was asked.
[Anchore]
What is the future of the country?[Sheikh]
My Grandfather rode the Camel.
My father rode a Camel.
I ride Mercedes.
My son rides Land Rover.
My grandson is going to ride a Land Rover.
But My great-grandson is going to have to ride a Camel again.[Anchore]
Why is that?[Sheikh]
Hard Times creates a strong man.
A strong man creates an easy time.
An easy time creates a weak man.
A weak man creates difficult times.
The above conversation explains the reality of life and is most appropriate for our Mutual Fund Industry also. You might be surprised how it is related to the Mutual Fund industry? But it is true. The Mutual Fund Industry is running in the middle of the conversation stated stages.
Most of the MFDs might be knowledgeable, but they are not truly entrepreneurial. Their AUM has been touching the sky. They feel there is no need to adopt any changes. Why does something happen when it is not broken? Why change?”
People will only change when they have a desire to make an impact instead of just making money. I am not saying that making money is wrong but do not dig a well when there is a fire. There are so many examples in the world, but the best and most appropriate example is Why did Kodak fail?
An easy explanation is myopia. Kodak was so blinded, by its success, that it completely missed the rise of digital technologies. But that doesn’t square with reality. The prototype of a digital camera was first created in 1975 by Steve Sasson, an engineer working for Kodak.
Spotting something and doing something about it are very different things. So, another explanation is that Kodak invented the technology but didn’t invest in it. Sasson himself told The New York Times that management’s response to his digital camera was “that’s cute – but don’t tell anyone about it.” A good line, but not completely accurate.
According to the former president of Kodak’s consumer digital business, “Kodak management has been criticized for compromising its digital efforts because it wanted to protect film.”
Kodak failed to realise that its strategy, which was effective at one point, was now depriving it of success. Rapidly changing technology and market needs negated the strategy. Kodak invested its funds in acquiring many small companies, depleting the money it could have used to promote the sales of digital cameras.
In the MF Industry, people are more interested in updating processes automation instead of thinking about changes in the market that have taken place after the pandemic. MFDs are not aware of what are the challenges they are going to face. How can anybody expect that they are prepared when they don’t even know what the problem is?
Two big challenges the MFDs are going to face are.
- How excessive usage of SIPs are going to hurt their business after the prolonged phase of the bull market. Everybody might have experienced that up to 7 years SIP was gone negative, on March 20. We are going to discuss some other times that How SIP is hurting after a prolonged bull phase.
- How the Direct plans have impacted their business.
We will elaborate on both points in future blogs. Stay tuned with us. If you haven’t subscribed yet, do it now.
What is stopping MFDs from becoming a limitless Adviser?
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