Alfred P. West Jr. sums up his company’s ongoing challenge in one sentence:
“You can’t stay still, you have to continually innovate or you’ll die.”
West is the chairman and CEO of SEI Investments Co., a wealth management solutions business he founded more than 40 years ago. He has grown the company entirely through organic methods, meaning he has relied solely on the intellectual fuel of his employees to power his company’s engine. Organic growth has lifted SEI to $900 million in 2010 revenue, after posting revenue totals in the billions prior to the recession. But the recession’s effects, coupled with an ever-changing industry, has driven home to West and his team that SEI needs to remain responsive to client needs — and to do it, they need to stay a few steps ahead of industry trends.
“We always have to be watching where our clients’ problems are coming from,” West says. “We really have to stay ahead and keep track of emerging needs, and be able to sort out today’s needs from the needs that are going to be emerging, because most of the time, a client or somebody in the market, if you ask them, they’ll tell you what they need right then and there. But usually it’s not much that you can build on. By the time you get the product developed and built, particularly if it’s a technology product, the need is no longer there.”
West has needed to make innovation a key component of the culture at SEI by promoting the development and exchange of ideas, but also ensuring that new ideas stay true to the mission and vision of SEI by managing the innovation process on a macro level. The balance between freedom and setting boundaries is something that West has needed to master over the course of decades.
“We seem to innovate every 10 years,” he says. “We’re in an innovation phase right now, which has lasted longer than 10 years, thanks to the external environment that we are going into. It’s a much bigger change at the end of the day than we probably anticipated.”
Manage the process
When it comes to innovation, and innovating to serve customer needs, West says companies tend to do four things — and three of them are bad.
Companies will do the right things right, the right things wrong, the wrong things right or the wrong things wrong.
“When you do the right things right, you’re doing the things that are really critical to get done, and the right thing to do, and doing those things correctly,” West says. “You can also have the things that really need to get done, but maybe you don’t do them so well. That’s doing the right things wrong. Those are the tasks that you’re continually trying to get into the ‘right things right’ category.
“Then, you can do the wrong things right, where it just kind of creeps up on you. Maybe it was the right thing to do at some point in the past, but times have changed and whatever you were doing doesn’t fit anymore. You have to continually work to find those things out.
“Finally, doing wrong things wrong is the worst. You’re doing something you don’t need to be doing, you’re doing it poorly and you’re upsetting clients and customers.”
Innovation is all about taking the intellectual power of your team and harnessing it in a way that propels your business forward. At SEI, West encourages his team to think beyond the prescribed procedure for how to arrive at a solution to a problem, to challenge themselves to create new concepts and come up with new, more effective and efficient solutions that will allow the company to better serve its clients.
“A good example of questioning the process was when we had this very large report for one of our largest clients,” he says. “It took two hours a night, one night a week to run the report. It was so large; we were running out of space to finish all the rest of their work and get everything up and running by the morning. So finally we went back to our source and said ‘Can we do something about this report?’
“They said, ‘We don’t need that report? Who are you even doing that report for?’ And yet, they were receiving this report on a weekly basis. It illustrates how you need to figure out the things you really need to be doing for your clients, and how you might be taking up resources on a needless task. That is the biggest source of doing wrong things right.”
You can promote innovation in the form of new products and solutions, but often, the best innovations weed out inefficiencies inside your own organization, which has a direct effect on the service you can provide to your customers. West says you need to follow the chain of where your resources end up. As a business with finite cash reserves and a certain number of employees, you have a set amount of resources from which you can draw. Designing new processes that improve your company’s performance has a cascading effect that can carry your ability to improve the products and services your customers purchase from you.
“You follow that chain of where your resources are going,” West says. “If something is wrong, you do an analysis. We call it a root-cause analysis. Sometimes, the analysis will come back and show us that we don’t need to be doing the task in question anymore. Sometimes it comes back and shows us that we’re not doing it as right as we could be, and there are some changes that we could make.”
Ultimately, managing the innovation process comes back to effective change management. You want to position your processes and your people to move quickly and produce ideas that will help your company take advantage of business opportunities when they arise — which can be a hard-to-predict game.
“It all starts with the culture, because most things do start with the culture,” West says. “A big part of it is pushing collaboration, which starts when you hire an individual. A collaborative mindset is one of the most critical characteristics we look for because creating new innovations is a process that takes more than one person. So you start there and set the ground rules that everybody’s ideas are the same and have the same value. You tell your people that you need to have these ideas come forth, no matter where they are in the organization.”
West promotes the idea of collaboration leading to innovation through, among other things, the structure of SEI’s offices.
“We have no offices and everyone sits at the same desks,” he says. “I sit in the middle of the floor at the same type of desk as everyone else. You cannot tell hierarchy in the company by just looking around. It sends the message that you don’t have to go into this big office to tell someone your idea, and you don’t have to be intimidated by someone who is higher up in the organization than you are. It sends a message that everybody here is equal in terms of their ideas.”
Listen for innovation
Managing the process of innovation is only part of the equation for building an innovative culture that can leverage the brainpower of your team members to meet customer needs. You also need to create opportunities for dialogue with your employees and customers.
At SEI, West and his management team use multiple channels to spur everyone to talk about, and listen for, innovative ideas.
“We recently produced a site called ‘SEI Ideas,’” West says. “It is a social media site that has so far been very successful in ferreting out a whole lot of ideas, and then having people pick up on those ideas kind of virally. We are getting a lot of traction on ideas with methods like that. It has been far more effective than comment boxes or simply pushing for ideas through team leaders.”
The use of social media is part of an overall philosophy of collaboration that West has fostered. Because the best innovations often come as the result of multiple employees putting their heads together, West tries to ensure that employees are meeting and sharing ideas on a regular basis.
Ideas often cross-pollinate throughout the organization when someone with an idea and the passion to promote the idea is able to connect with others who are open to new ideas but might bring a different perspective to the table that allows the idea to be further shaped and refined.
“When we organize groups, we usually go through the process of finding people who are keen on the idea, and they bring it forth,” West says. “We have multiple segments or business lines with all of them trying to grow their business, and in doing so help to inspire innovation. So through that, we’re pushing for innovation on an everyday basis.”
Listening to customers is another key to a well-built innovation strategy. To know how you can best leverage your ideas to serve customers, you should talk to the people who will be using the products and services that are spawned from your employees’ initial ideas.
It’s an area that West says SEI needs to work to improve.
“We don’t do as good of a job as I would like to do on that,” he says. “We certainly get our clients involved in the prototyping stage. But it also helps that, if an idea is initially marketed, that you do have clients who are innovators as well. We call them ‘early adopters,’ and we usually take things by them.
“But what is even better than that, and what we haven’t been able to do, is actually put a client on the team. You can talk to them, but if you can take it a step further and actually have them put a representative on the innovation team, that way, if something goes a little wrong and you need to correct it, you can do that sooner rather than later. A lot of times, things go wrong during the process because you didn’t understand what the customer wanted as well as you could have. That is a concept we are working on.”
Building customer representation into the innovation process can help you, as West calls it, fail quickly. If there is a mistake in the design or implementation of a new product, you can find out and correct it in short order.
“Innovation really is a process of learning by failure,” West says. “A fear of failure is often what squashes an innovative culture. That is why you want to promote the idea among your people that it is OK to fail, and fail quickly. You push it, fail quickly, fix it, fail quickly and fix it again. If the failure is the result of trying to do something, you learn from your mistakes.”
Learning from mistakes, and doing so in rapid-fire fashion, is the best way to speed the process of turning wrong things done right, and right things done wrong, into right things done right.
“The reason you want to fail quickly is if you drag a failure out, it costs you a lot more,” West says. “You probably found out it was a failure pretty early. The people who hang on do so because they are afraid that this was their only chance to prove themselves, so if they admit failure, they basically feel like they’ve lost their job. You can’t allow people to feel that way, or you’ll never have any innovation.”
How to reach: SEI Investments Co., (610) 676-1000 or www.seic.com
The West file
Born: Brooksville, Fla.
Education: Aerospace engineering degree from Georgia Tech; MBA from the Wharton School, University of Pennsylvania
West on what it takes to build an innovative culture: You first have to be dedicated to it. We only grow one way, and that’s organically. We really have nothing that we can hide behind so by definition in our business, we have made it a very important thing to do. I know there have been other organizations, 3M has always been, as has Google — and Apple was probably No. 1 — that are held up as great innovative companies. And it is all about doing things that have never been done before, but meeting a need.
Apple is a great example. They met needs that people didn’t even know they had. That is the definition of emerging needs. If you innovate properly, you end up doing that. We’re doing things that are much more mundane with investments and investment technology, but we still have to look out and ask where is all this going. Most of the time, people won’t know that it is a need.
What you’re doing in marketing terms is creating a new category. And new categories are tough to bring out. Because we can come up with a new category, people didn’t know they needed it, but once they tried it out, it really does have an exponential curve if it is a successful innovation. It turns out we have successful innovations every year, but we have a major innovation about once every 10 years.
West on predicting the future needs of customers: We look at industry trends. They’re usually predictive of some major changes. When it looks like something new is coming, that is when you gear up to design new products. You have to keep your ear close to the ground in one sense, but also looking out for good ways, and you are definitely looking at trends.
One big trend we caught in the ‘90s was advisers who were moving from commission to fee-based visits. That changed an awful lot in that industry, and we came out with an offering that moved in to fee-based, and we did very, very well for a period of time. That was the case of a big industry trend where you could see the handwriting on the wall, but a lot of the people doing day-to-day business were not willing to give up a commission-based business model. It wasn’t until later when they had to give it up.