three-lenders

Stephanie and the Three Lenders

So often I am on the go and rarely do I have time to sit and think about what just happened and why. However, after a recent 24-hour trip to the offices of three lenders, I got that chance. Each of the three lenders was strikingly unique, in very different stages of the business lifecycle, with differing approaches to business. And after the meetings, for a couple hours in the airport with my e-mail muted, I pondered what had taken place.

I found myself thinking about the classic fairy tale of the girl and the three bears, the one who found bowls of porridge, chairs and beds that were “too cold,” “too hot,” “too large,” “too small,” and “just right.” And I thought how, in business, particularly in the lending business when it comes to technology, we tend to peg ourselves as “too small,” “too large” or any number of other “too’s” that we can let get in the way of making effective change. In reality, we all have the ability to make things “just right.”

My business is ‘too small’

During the trip, I first met with a client who had just opened a brand new office. His business is not funded by private equity money; he’s just a guy building a business. When he signed up with defi SOLUTIONS nearly a year ago, he almost didn’t, because he believed his business was “too small.” But he was an entrepreneur with a passion for getting the right tools and the right people.
He stood in front of his team members, his dealers, and his business partners, and told the company’s story. The humbleness in his voice was inspiring and I smile even now thinking about it.

It’s tough when your business is small. You need to convince partners that you are different, you will grow, and that you are worth spending time and money with. And you need the right technology to help you.

After working with many lenders that felt their business was too small, I say this: don’t sell yourself short. Set your sights on the technology and the partnerships that position you for growth while letting you operate the way you want to operate. Whether you stay small or expand, you add value to our industry, to your customers, and to your dealers. You and they deserve good technology and the resulting good processes and efficiencies.

My business is ‘too fast’

On my second visit, I met with a client that is growing rapidly. It is 100-fold bigger than the “too small” client. This business is backed by PE money; it has easily doubled in size since I last visited. The company has big dreams and has to balance dreams with reality.

The company had made a pivotal decision, early on, to switch its lending technology systems. They put money and resources into their technology in the belief that their business would grow into the technologies they were investing in. And now they are running as fast as they can and making certain their technologies continue to keep up with their business.

As the client walked me around their offices that day, my long-time colleague mentioned how nice it was that that the business was all finally starting to come together. It didn’t happen overnight. And it didn’t happen without a lot of work and a lot of guts. Team members popped out of cubicles to say hello. They were excited. Happy to be part of something that is growing and successful. And I was grateful to have played a little part in it.

Scaling a business as quickly as they did requires balance — keeping investors happy, staffing a great team, and making hard choices about what to work on and what not to work on.

For the lender whose business is growing quickly, I say this: continue to put money and focus into your technology and automated processes, and don’t be afraid to step off a wrong path. You can’t get to the right place on the wrong path. Don’t pull back on projects and efficiencies. It may be hard to believe, but I often see lenders going hard at it and then stopping dead in their tracks. While it’s tempting to try to work your team harder in the manual processes or thinking you can live without improvements for a while, keep a clear picture of where you are and where you want to go and conquer the delta one step at a time.

My business is ‘too old’

The third lender in this series of visits was a business with a well-established history, with processes that were working and, more importantly, with which all had become comfortable. They had recently undergone a notable change in leadership and the new leader questioned: Why do we do this? He made it clear that “because we always have” or “because it’s what we have” was not an acceptable answer.

When things have been going well for a long period of time, there can be a lot of fear about shaking things up. That’s especially true when you are making changes that impact the core of the business, what people know and feel comfortable with. There is a risk that the team, the investors, and the board will only have so much patience with your efforts, and demand you go back to what they know. But fear can’t get in the way of progress.

This lender’s technology was old. But it was held together with enough duct tape that it was working for the time being. And they were concerned that ripping it out could have an impact of a magnitude that they could not possibly imagine.
For lenders whose technology and processes are too old, I say this: life is too short to sit in a too small chair, sleep in a too hard bed, eat too cold porridge, or operate with duct tape.

While there are no fairy tale steps to perfect technology, in today’s technology world you have choices. Technology is designed to be a table at which everyone has a good chair, regardless of budget and expertise, and a partner enables access to the broadest array of technologies to all lenders, regardless of size. A partnership is an investment in your success, and can help you create the things about your business that make you “just right.”

Stephanie Alsbrooks is the CEO of “just right” at defi SOLUTIONS, the most configurable loan origination platform on the market. E-mail Stephanie at salsbrooks@defisolutions.com or visit defisolutions.com for more.

Will a Data Warehouse Solve My Data Problems?

A two-part series to help you identify and solve your data needs

Have you seen the funny YouTube video, It’s Not About the Nail? It starts with a close-up of a woman talking about this relentless pressure she feels and how she’s afraid it’s never going to stop. Then the camera angle changes to reveal she has a big nail coming out of her forehead. Her boyfriend patiently listens and finally states the obvious solution. Remove the nail.

Too many businesses approach data problems the same way as the couple in the video. They have a data problem (the nail in their head), but they go about identifying symptoms (headaches, pressure) instead of just recognizing the problem and solving it. So they go down a rabbit hole chasing solutions that don’t address their obvious problems.

This week a customer called me in the throws of building a data warehouse. He was feeling the pain of the implementation process and wanted to know if that was normal. Like all of us, he just wants the data he wants at his fingertips to make faster and smarter decisions for his business. And, he wants the data to be accurate!

In my 20-plus years of experience, I have never seen anyone fly through a data warehouse project like it was as easy as making a PB&J. But I wondered why it’s so difficult. To find the answer, I posed the question to some of the smartest people I know. My team at defi SOLUTIONS. (Thank you Brandon Burns, Jose Salinas and Rob Dufalo for your input!)
So here’s what I learned. Data warehouses are difficult to build because they’re often the wrong solution. It just seems like the thing to do. Say you need some quick, accurate, operational metrics and your CIO says the solution is to build a data warehouse, because that’s what he/she did at another company. Or your colleagues at a conference tell you about their data warehouse projects, so you assume you should be building one too. This scenario can happen with any technology need.

The pain of data warehouses could also be the result of how it’s designed. A data warehouse can be over engineered out of fear or vague expectations. Businesses have to have a clear definition of success before they build a data warehouse.
Speaking of expectations, this article isn’t going to tell you how to know if you need a data warehouse or how to successfully implement one. That would be jumping the gun. I want to focus on the critical first step to creating any technology solution – step back and assess what you’re really trying to solve. You’ll save yourself a lot of pain if you do.

Now let’s dig in.

The importance of data is not a new concept. Neither is pulling data together and placing it at our fingertips. It’s old school. Really old. Ancient, in fact. Over 2,000 years ago, the Library of Alexandria was said to contain all the important data of the time under one roof. The very first data warehouse!

Data gives us the ability to learn from the past and the present so we can have a better future. A great example is IBM’s supercomputer named Watson. It gets smarter and smarter as it learns from the past.

I think we can all agree data is important. And it’s true that building or buying a data warehouse may even help you improve your use of data. However, before embarking on such a large project, first assess your pain points. Here are six examples of typical pain points. Please don’t limit yourself to this list. Make it your own.

1. Operational metrics
• Are you missing operational metrics? Why aren’t you getting them? They’re not available? No one has time to get them? They don’t exist anywhere? For instance, the other day I asked for a piece of data. My team said we didn’t have it. I might infer that I need a data warehouse to get it. But in fact, we just had never spent the time to calculate the numbers.
• Are you getting all the metrics you need, but you’re constantly dealing with inaccuracy?

2. Scalability
• Do you have tons of data and maybe you can find it all, but it’s just not in a place or in a way that will scale as you grow? For instance, I used to keep defi sales data in five spreadsheets. I knew exactly where to go to get it, but I couldn’t easily pull it together. There was no common format and if I sent it to anyone else, they wouldn’t be able to make heads or tails of it.

3. Timing of getting data
• Are you on old legacy systems that don’t allow for near real-time data access? Are you always trailing behind? Maybe you have the data and it seems accurate and built in a way that scales, but it’s only available at a certain time during the day, week or month?

4. One system of record
• Do you struggle with getting data across departments to match? Does every team have its own version of the truth?

5. Reporting vs. analytics
• Do you have data housed in a format that’s conducive to reporting, but makes data exploration a challenge? Do you have an environment that can efficiently mine, explore, and quickly present/visualize (if needed) data elements, which may not be currently used for reporting, etc?

6. Self-service business intelligence
• Don’t want everyone on your team to have to put in requests to get analysis and data? Need the data exposed so various users can visualize and construct their own report? Our team faced a similar challenge, but our data warehouse wasn’t built for it.

Seriously, write down your pain points. Don’t assume a data warehouse is the answer or the answer right now. What are you trying to solve or fix? Ask your team to compile a list of the true problems you’re facing and prioritize them. You want it all and you want it all now, but you should figure out what is most important and why.

defi just went through a similar analysis to build out our configurable reporting platform. For us #2 and #6 were key factors. We had to spend a lot of time really honing in on what we were trying to solve. We didn’t start with the assumption that the configurable reporting platform would need a data warehouse. We started with pain points we needed to solve.

Once you have your needs identified, hold on to them and tune in next time as we dig into potential solutions (including data warehouses) and go through an exercise of scoring each pain point against the solution. We’ll also layout a smart implementation approach to minimize your pain, assuming your analysis says the data warehouse is the right path for you.

Stephanie Alsbrooks is the CEO, founder and chief data evangelist of defi SOLUTIONS, the most configurable loan origination platform on the market. Email Stephanie at salsbrooks@defisolutions.com.

Will a Data Warehouse Solve my Data Problems?

Part two – The answer revealed

Have you ever completed a word search puzzle by first attempting to find all of the words, and then comparing your list of found words with the one that was provided? Of course you haven’t.

The same simple approach applies to solving data problems. You have to truly know what the issues are before you go about fixing them. (Hint: Building a data warehouse is not always the right solution.) Do your homework. Understand your problems before looking for the answers. This is what defi CEO Stephanie Alsbrooks challenged you with in part one of this article in the January/February 2017 Non-Prime Times issue.

We often hear about how a technology solution is doing wonders to fix someone else’s problems. However, their problems may not be your problems. Even if they are, you should ask yourself, “What’s the ROI? Is the existing cost of my problem greater than the implementation, maintenance, and operational overhead costs of the solution I’m considering?” If not, then you may be solving for the wrong problem or attempting to solve the problem with the wrong solution.

Hopefully, you took Stephanie’s advice and did your homework. What should you do next? Well, it involves prioritizing the problems you identified, evaluating potential solutions, and determining which solutions, if any, to implement.

I recommend you start by changing the way you see your problems. When you’re looking for technology solutions to fix business problems, it’s really helpful to think of your problems as the absence of a capability.

Let’s say one of the problems you’ve identified is fragmented, siloed and disparate data being utilized by different groups across your organization. Marketing’s reporting tool may have Metric X coming from Database A, while Customer Care’s reporting tool may be pulling the same metric from Database B. This can cause a clear problem when various business units are operating from business metrics with potentially different values. These data discrepancies are typically caused by differences in load or transformation logic between the two databases or reporting tools. To fix the problem, you may, for example, simply force Marketing to use the same reporting tool as Customer Care. Fixed, right? Sure, unless Finance begins using that same metric in a third and different way next week. But what if they do?

In this example, you ultimately want to address your lack of a single source of truth, a practice of defining a single, trusted, universally agreed upon version of all key data points that are driving business insights. By viewing the problem as a potential capability absence or gap, you focus on defining single sources of truth for each key data point across your enterprise, not why Marketing’s metric X is different from Customer Service’s metric X.

Now, let’s go back to the task of prioritizing your problems, or what we’re now calling capabilities. We’ll use something called a Capability Maturity Matrix. Sounds complicated, but it’s simply a way to visualize capability gaps relative to one another. A Capability Maturity Matrix will help you:
1) Visualize the current state of your capabilities, relative to one another.
2) Visualize the desired state of your capabilities, relative to one another.
3) Visualize the largest gaps between current and desired state.

 

In the matrix shown above (Graph 2), the biggest pain point is the single source of truth capability. Why? Because the capability doesn’t exist today and it has the farthest to go to reach the desired “Tomorrow” state. In this example, scalability is also a capability that doesn’t exist today.

Data Warehouse Solve my Data Problems 2

However, since there might be a relatively shallow volume trajectory, there’s not an immediate need for this capability to be fully mature.
Once your capabilities have been prioritized, solutions come into play. Solutions can be simple, complex, or everything in between. This is where a knowledgeable and trusted technology vendor might be of help. And with any technology solution, the decision to implement almost always boils down to Impact and Benefit versus Initiative and Effort — Cost versus Benefit or ROI.

How does a solution like a data warehouse address the Capability Maturity Matrix we examined? Does having a data warehouse address a single capability, several or none? Of the capabilities the solution addresses, what will the matrix look like after we’ve implemented it? Evaluating where the solution falls on the scale of Impact and Benefit versus Initiative and Effort becomes easier when you consider potential solutions this way. (Graph 3)

Data Warehouse Solve my Data Problems 3Whether you’re bolstering your operational reports in Excel or building out an enterprise data warehouse, understanding how to view your data problems, the root capabilities behind your problems and how the proposed solution is expected to mature that capability is paramount to success. You need to accurately quantify the benefit of maturing a given capability as well as the costs of implementing and maintaining the solution that furthers that capability.

A data warehouse might be the right solution for you. It might not be.

But what’s important is that you know how to measure and evaluate problems, capabilities, and solutions relative to one another, and ultimately quantify implementation success, instead of searching for a problem to the solution you already have.

In other words, you need to check the word list before you begin the word search.

Brandon Burns is the director of data and analysis for defi ANALYTICS, the new flexible analytics and reporting platform from defi SOLUTIONS. Founded by Stephanie Alsbrooks, the defi platform now includes defi ANALYTICS, defi SERVICING, defi DIGITAL, and, of course, the popular defi LOS. Email Stephanie at salsbrooks@defisolutions.com or Brandon at bburns@defisolutions.com.

Technology Partners – Blissfully Ignorant or Painlessly Aware

One of my favorite books is The Book of Questions by Gregory Stock. It’s a tool for improving relationships. It poses hundreds of questions on random subjects and gets people to explore and explain how they feel about things they may never have thought of. In my experience, there is one question that people always seem to choose. It is something like “if your significant other was out of town and had a fling that meant nothing to them and you would never ever find out about it and it wouldn’t impact your future, would you want to know?”

Technology PartnerThe responses are always varied and they always get a reaction—from “heck no, you did it, you deal with it” to “100% yes, a relationship is built on total trust and complete honesty.”

Would you care? Or have an opinion on which type of person you would want to be in a relationship with?

I believe that picking a technology partner is a little like picking a personal relationship partner. Choosing someone you are on the same page with might be critical to you – whether you prefer Beyoncé or Bach, first-class or coach, vegan or paleo. Or, it might not be an issue at all. Preferences are neither wrong nor right. What’s important is that you understand your partner’s preference. It’s the same with transparency and which a person prefers.

Here’s the top 10 from My Technology Book of Questions that I think you might want to explore when considering company transparency and your vendors.

1. If your vendor offered you a SOURCE CODE ESCROW would it matter to you?

The source code escrow requires the vendor to regularly deposit their code with a third party, so if certain trigger events happen you have the option to take the code and keep your business going. It may give you peace of mind that they aren’t going to walk out on you tomorrow and that you won’t be forced to jump before you are ready. But if you know you will never really take the code and use it, if you feel the company was unlikely to trigger an event that would cause this, or if you would rather just move on to another partner if they did, then you might not care.

2. Is it important that your vendors, even privately held companies, release their FINANCIALS to you?

If FINANCIALS are a requirement of vendor management, this may be critical for you. If you are unsure about the management of the company, you may care. Without the pressure of vendor management and if you are comfortable with the company’s history, and more importantly its future, this may not be an issue.

3. How important is it that your partner makes their OWNERSHIP STRUCTURE clear – if it’s the founders in charge, or private equities or venture capitalists that have majority ownership?

The company’s structure could give you insight into any positive alignment, or conversely, the likelihood of any future potential conflicts of interest. (Or the possibility that the people you trust will be booted out.) However, you may firmly believe no one can predict the future and knowing the ownership structure won’t give you that ability either.

4. Every vendor’s system has uptimes and downs, and challenges with internet providers or integration partners that could impact the system’s health. What if your vendor doesn’t clearly share the HEALTH OF ITS SYSTEM to keep you updated and you are always wondering – does that matter?

If you like looking at data and information, and being in constant communication, then seeing a vendor’s Status Page might be critical to you. But you may already have too much to focus on. Or you may be comfortable with calling the support line if there’s a problem or relying on your vendor’s technical team to call you if something should happen. In these situations, this type of information might be too much for you to deal with.

5. PRICING can be a sensitive topic. Which do you prefer: a vendor that gives transparency about their pricing, with everyone receiving similar deals? Or a vendor that negotiates to the point that the next company that comes along might be paying substantially more or less than you?

For some, the negotiation is all important and the deal other companies receive isn’t relevant. For others, knowing there’s a basic pricing structure and that other clients are paying similar prices gives them the assurance that the price is fair in the marketplace and they can set a budget and achieve their goals.

6. Every company has a ROADMAP. Some are more fluid than others. Is your vendor partner’s roadmap documented and shared with you? Do you care how they create their roadmap and do their planning?

Insight into planning and roadmaps may show how a company’s leadership thinks and prioritizes. But, if the system “as is” meets your needs and you don’t see those changing, then what the roadmap looks like and how is was created might not be that important.

7. Do you have great IDEAS and want your vendor to listen to them? Do you care about what other clients are thinking? Or if your vendor and their clients might agree with you?

For some, the transparent sharing of ideas and receiving feedback on them can give valuable insight into what others are doing and finding important. But you may get the answers you need in another fashion and not be concerned that anyone else sees or agrees with you.

8. Does the vendor have a COMMUNITY you can take part in for full transparency of questions related to system functionality?

If constant improvement is important. If having a place to ask questions and get details matters and you’re involved in making your business better each day, then a community might be key for you. However, not everyone wants or relies on community. If you’re not going to get involved, search for articles, look for ways to improve and actively engage, maybe this isn’t a critical item for you.

9. Does your vendor reveal RELATIONSHIP CHALLENGES? When something goes wrong, do they hide it or try to avoid telling about it?

For some, the past is the past and what’s important is how the company is going to deal with challenges in the future. For others, the past is an indication of the future, and they want to be completely aware and fully informed of both the good and bad that has taken place.

10. Do you want to hear your vendor talk about their STRENGTHS? Even when maybe it seems they go on and on and on about what they’ve been up to and what is going really well.

For some, a vendor’s happy stories are an indication of their confidence in their ability to deliver a product that contributes to their success and yours! But maybe you’re not one to dwell on your vendor’s other successes and would rather judge their strengths solely on their contribution to yours.

Stephanie Alsbrooks is the CEO, founder, and c-through specialist at defi SOLUTIONS, the most configurable loan origination platform on the market. E-mail Stephanie at salsbrooks@defisolutions.com.