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Big Tech, Small Budgets

Editor’s note: This feature originally appeared in the September issue of MReport.

Let me ask you some questions.

Is Amazon a technology company or a marketplace retailer?

Is Uber a technology company or a taxi cab service? Is AirBnB a technology company or a hotel business?

Is Netflix a technology company or a media company?

If you answered “both” to all of the above, then you’d be right. The truth is, the days of being in a consumer business and not also being a technology company are over. To relegate technology to something that just the “IT Department” does is to ensure failure.

“Adapt or perish, now as ever, is nature’s inexorable imperative.”—H.G. Wells.

We are now fully underway in a Digital Revolution that history may judge as being greater than the Renaissance or the Industrial Revolution. The field is littered with the remains of those companies that failed to adapt quickly enough. Consumers demand a new level of service and convenience. And even the largest players are not safe from disruption: Blockbuster, Circuit City, Toys R Us, Nokia—where are they now?

In 2007, Forbes published an article about Nokia, entitled “One Billion Customers—Can Anyone Catch the Cell Phone King?” Later that year, Apple released the iPhone and changed the world. I keep this issue framed in my office to remind myself that the entire world can change overnight.

Reimagine Everything 

What does that mean for the mortgage industry? First, it means we have to reimagine our business and embrace change. It’s easy to say, but it’s hard to do. We all like consistency, but the phrase “we’ve always done it this way” is the surest path to extinction. The best way to ensure your success is to disrupt yourself before someone else does. To challenge the status quo. And work tirelessly to improve every single part of your business.

You may not think of yourself as a technologist simply because you’re not the one writing the code. But every time you propose a way to improve your process or automate something in your department, you’re furthering your growth as a technology company.

Big Tech, Small Budget 

With so many larger competitors spending hundreds of millions in technology, how are smaller monoline and mid-sized banks supposed to keep up and stay competitive? Well that’s the million dollar question (pun intended). It’s easy to be intimidated by the sheer size and scale of industry giants. Once upon a time, technology was so expensive to build that most of the innovation came from colossal institutions with the wherewithal to do so. But the landscape has changed drastically in the last few years, and now the bulk of the innovation is coming from small, scrappy startups. Rupert Murdoch said it well, “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.”

This is one of the big reasons why we decided to launch the Flagstar Mortgage Technology Accelerator; the first FinTech Accelerator in the country focused exclusively on mortgage technology. It helps early stage FinTech startups with mentorship, access to equity investment and debt financing, and the ability to test their technology in live lending environments.

It’s tough to compete head-to-head with larger competitors who already have the high ground. The good news is that the ground is always moving. Like Wayne Gretzky famously said, “skate to where the puck is going to be, not where it has been.” There is much to be gained for those who can get there first. Either as an innovator or as an early adopter. In being agile, quick responders, and early adopters, we can actually turn our small size into our biggest advantage.

I spent 10 years of my career at two of the largest and technologically sophisticated banks in the world (JPMorgan Chase and Capital One) where resources were never in short supply. There was adequate capital at all times for us to pursue anything we thought made business sense. And the inevitable misfire of investing in a technology that did not produce the desired results was not a severe blow to the business. Neither of these things are true of smaller companies. On the contrary, resources are often in limited supply and bad investment can be devastating to the business. Since joining a mid-sized bank, our team has had to push our thinking from a new perspective.

Here are 10 thoughts that have helped us succeed in pursuing an ambitious technology agenda with limited resources.

  1. Know where you’re going. Have a vision. And take the time to formalize that vision into a documented roadmap. It’s okay for the vision to change, but it’s not okay not to have one. Not having one is the surest way to a “Frankensystem” of technologies that will cause more problems than they solve. I typically like to have a have a three-year roadmap with quarterly milestones, which we update every three to six months.
  2. Stay focused. There is a difference between agility and being undisciplined. Commit to seeing through phases of your roadmap to completion. It’s easy to get distracted by NSTS (New Shiny Toy Syndrome) and want to quickly pivot your roadmap to adopt a newly discovered technology. Resist this temptation. Keep the bar for new additions to your roadmap for the coming three to six months extremely high.
  3. Focus on technologies that deliver near term, tangible ROI first. It’s easy to get caught up in “whiz-bang” We all like consistency, but the phrase “we’ve always done it this way” is the surest path to extinction. But companies with limited resources need to be ruthless about prioritizing technologies which have a measurable financial impact. Down the road, those returns can be used to finance technologies with longer term ROI horizons.
  4. Obsess over the details. The pitch decks always sound good. Ask 10,000 questions and use real life scenarios to probe for answers. It’s critical to know not just the “what” but the “how.” Also, remember to carefully consider upstream and downstream cost implications. The sticker price may seem reasonable until you realize how much needs to change in order to integrate the technology.
  5. Give the deployment and adoption phases as much attention as the build and implementation phase. This is one of the most frequent reasons for not achieving ROI targets. So much effort went into discovery, vetting, and build out phases. But then the new technology is tossed over the wall to a group of unsuspecting users, who see it as an unwelcome hindrance to their existing processes. Strong leadership, change management, and even internal marketing is required to realize the full potential of these investments.
  6. Look ahead. The ground is always moving. Choose a point in the future to cut off the competition when the playing field is more level.
  7. Don’t try to do everything. First, it’s impossible. Second, by the time you did it, everything will have changed and you’ll have to start over. It can be tempting to add something to your roadmap because “everyone else has it”.
  8. Negotiate. Sticker prices are more like guidelines. And by negotiate, I don’t mean the discount they put in the proposal where the MSRP is marked up and they’re giving you a 20% discount. Truly negotiate. Be creative. You will also find that smaller, early stage vendors are more willing to be creative with terms. Especially if you’re willing to serve as a reference to other potential clients.
  9. Look for vendors who are willing to take on some risk. If they’re confident in their product, then they can put their money where their mouth is. But have an abundance mentality about it also. If their technology is helping you win, they should be feeling like winners too. Grow together.
  10. Don’t let consultants build your roadmap. Consultants have their place, and we have some of the finest in our industry helping us with critical items. But this is not an area to delegate your future. If you don’t have the expertise to do this, then develop it. Or hire for it. But bring it in house.

High Tech, High Touch 

Despite the need for technological solutions, customer satisfaction surveys tell us that human interaction is still a key component in providing excellent service. Customers want to engage with a human being they can trust during the mortgage process. It is still the single biggest financial transaction that most people will have in their lives and they want a trusted, personal advisor to guide them. Remember that technology should empower your team to provide world class, personalized service to every customer. Let technology do what technology is good at, so your people can do what people are good at—creating lasting relationships and crafting customized solutions, one customer at a time. Now, let me ask you one last question. Is your company a technology company or a lender? Do everything you can to ensure the answer is both.

About Author: Rocky Stubbs

As Head of Consumer Direct & Digital Mortgage Lending at Flagstar Bank, Rocky Stubbs leads a world-class team on a mission to completely disrupt the mortgage industry with high-tech digital tools while delivering a high-touch, personalized service experience. With over 15 years in the mortgage industry at both privately held and Fortune 100 companies, Stubbs enjoys a strong industry reputation as a strategic thinker and bold innovator who is highly skilled at leading rapid growth agendas, attracting top talent, and creating a white-glove, customer-centric service culture. Prior to joining Flagstar, Stubbs led the Direct & Digital Mortgage channel for Capital One Home Loans. Under his leadership, the business achieved record volumes and profitability and developed multiple proprietary consumer technologies, all while delivering industry leading customer satisfaction.
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