Four Foundations of Natural and Nurtured Innovation

I hopped on an international flight recently with the intention of getting through the backlog of books that had been stacking up on my desk. I opened one. It was about innovation. And another. Also about innovation. And a third. Well, you get the point.

Innovation is such a hot topic. You might ask 10 people for a definition and get 10 different responses, but most agree it’s about revolution, upheaval, transformation, breakthrough, and relevance, and so it can be easy to talk about. But innovation also has plenty of potential for pain and failure associated with it, and it can be difficult to accomplish.

More and more, innovation has become tightly coupled technology. It seems, in this day and age, that everything innovative has a technology component. As I’ve been up to my eyeballs in technology my entire career, I began wondering a few things on that flight:

Are we born innovative? Is it something we learn? Or something we can fine tune and develop? Am I innovative? What does an innovative culture look like? And how can it stimulate true innovation versus a few great ideas?

Here’s what I came up with. Let me know what you think!

Are we born to innovate?

I’ve always tended to side with the nature camp in the nature versus nurture debate. Starting way back when I was in junior high, I believed that a sound 70 to 80 percent of our traits were nature given, based on nothing particularly black and white, just my opinion.

So, what about innovation? After reading article after article I found, not shockingly, there is no consensus on this issue either. In the nature camp, certain advocates believe that some of us are born to constantly question the status quo, to see things differently and have less fear of failure. In the nurture camp, the advocates believe you can create environments conducive to creativity and innovation and can teach people to innovate, sparking them to get out of their day-to-day mindset and admit to ideas that they might otherwise bury.

Both sides have merit. So, where did I end up? First, I’ll tell you a little bit about myself.

I don’t observe and wonder about things. And it’s difficult for me consider someone else’s perspective. However, my perspective doesn’t always line up with what others are thinking. Against advice, I pursued an online MBA when it wasn’t yet accepted. I was a single mom and it was the only way I could take care of my kid, work 70-plus hours per week, and get the degree. I make decisions with my gut 100 percent. I even refuse to play poker by the book and instead just do what I want to do because it’s more enjoyable – even when I lose. I have very high risk tolerance and the end result to me is not as important as the journey.

I have seeds of innovation and I might do an average job at being innovative in a non-innovative culture. But, put me in a culture that encourages innovation and surround me with people that bring fresh perspectives, and my personal innovation-quotient rises.

So, what should technology companies, lenders, and business owners do?

1. Hire people that twist naturally toward innovation.

2. Create an environment that gives your innovation-twisted people the best chance to succeed.
The less time you spend getting the unnatural to feel natural or the uncomfortable to feel comfortable, the more time you have for the fun stuff. Hire a base of people who crave brainstorming and implementing new ideas and give them permission and a firm foundation on which to shift the future.

What are some of the traits of innovation-twisted people?
• They tend to observe. They ask questions. And wonder why.
• They make decisions with their gut or data that doesn’t quite exist, not with ducks that line up perfectly in straight rows.
• They get jazzed by the process of creating, regardless of the end results.
• They often don’t necessarily care what the masses say and are usually NOT risk averse.

Creating the advantage

While certainly, start-up companies have certain innovation advantages – they can move quickly and see big results – mature businesses have advantages as well – namely, a bottom line with a healthy number of digits between the dollar sign and the decimal point. It’s in that in-between “junior high” state of being – not quite start-up and certainly not mature – where a company may struggle to maintain processes and deliver well on their core products while innovating, remaining relevant, and making an impact.

So, again, what should technology companies, lenders, and business owners do?

1. Make a plan. Include innovation in your budget and your roadmap. Recognize everyone in your company who creates and delivers an innovative solution, but dedicate at least one team, maybe two, to your emerging products. We did this recently at defi SOLUTIONS and I admit there were times I caught myself thinking we should move these valuable people back into our core. But if a company only supports its existing products and clients, what will happen to its future?

2. Experiment. While a project is expected to succeed, an experiment is given more latitude. Like a project, an experiment has specific goals with steps and results that are documented and tracked. However, sometimes at the end of the experiment the only thing you walk away with is learning. Dedicate X percent of your work week to experimentation and, as difficult as it will be, honor that time. If you have two teams, give them head-to-head challenges to see which experiments are the most fruitful.

3. Actively watch and listen. But to whom? I love our clients. But one thing I know (because I used to be the client) is that the client can’t always tell you what your next innovation should look like. Sometimes they don’t know until they know. So instead of asking – observe. Observe what they are doing and what you are doing to make things more complex for them. While your internal support team should have the best view of your client, sometimes they are too close to the processes of today to make the right decision for tomorrow. So actively watch and listen to your clients, your team members and industry network, and to what others – inside and out of your industry – are doing and are not doing.

4. Figure out your industry orthodoxies. And then challenge them. Every time you hear someone say something cannot be done and never will be done, consider whether that is your next opportunity to innovate and defy the status quo.
Whether you choose to do 1, 2, 3, 4 or all of the above, do something. Because not innovating is no longer an option.

Stephanie Alsbrooks is the Chief of Twisted Ideas at defisolutions.

Never Say Never: Confessions of a Woman in Technology

In the car the other day my kids started listing all the things they would never do. “I will never smoke a cigarette. I will never drink a beer. I will never get my nose pierced.” And the lists went on until I told them, “I have learned to never say I will never.” I’ve found that somehow, some way the act of saying “I will never” seems to propel events into happening.
They asked for examples.
1. “I’ll never have less than 10 kids” (I did).
2. “I’ll never be divorced” (shocked me).
3. “I’ll never get remarried” (twice).
4. “I’ll never move to the suburbs” (I did).
5. “I’ll never move specifically to one particular Texas town” (here I am).
6. “I’ll never get fired” (did that, too).
7. “I’ll never go back to school” (it’s now on my bucket list).

And then one hit me: “I’ll never think that men and women in the workplace think or act differently.” (I do now.)
I’ve been incredibly blessed with amazing mentors my entire career – men and women. But everywhere I turn lately – from Magdalena Yesil to Mary Barra to Hollywood scandals and corporate messes – people are talking about women and men in the workplace. It made me sit back and ponder. Why do people care so much? Why is it such a hot topic?

In business, we all believe in hiring the best person for the job regardless of gender. But if it’s just about hiring the best person for the job, why are so many organizations working so hard to get women in leadership positions? Do women get different results or is it just a matter of balance and fairness?

In the general business place, 57 percent of women versus men hold professional positions. In technology that isn’t the case. Technology is all about process, efficiency, improvement, and organization – all aptitudes of women. These numbers vary from report to report, but here’s what we found in looking at the National Center for Women & Information Technology, USA Today.
• 25 percent of women work in fields related to computing/technology
• 18 percent of software developers are women (higher than I thought as we can’t seem to find any!)
• 14 percent of women were named to the boards of tech companies

Interesting facts, but not reasons that compelled me to think or do anything differently.
And then one day, I discovered what, for me, was the missing piece of the puzzle, the one thing that helped me pull it all together and realize the importance of diversity.
I recently went to a private equity conference attended by many venture and private equity firms and companies like ours. There were, I think, over 100 people and I was one of only two females in attendance (both from our company). The guy leading the conference was great – you couldn’t help but like him. Nice. Down to earth. Helpful and smart. He stood in front of the group, talking during one session and made a comment that virtually everyone in room agreed with and laughed at. And I did not. And the reason I did not was largely due to my gender.

In this moment, it hit me why it’s helpful to have both male and female voices leading organizations. Diversity of opinion leads to better discussions and better discussions lead to better results

I thought about our own company. Our initial board of advisors was half women, half men. Our current executive team is half women, half men. I didn’t plan it that way. I didn’t go out and seek that balance. I did seek to balance out the types of people and opinions. For the board of advisors, I sought out an expert in operations, in marketing, in risk and in technology. For the exec team, I looked for people with different skill sets than me. In hindsight, the varying perspectives have helped remarkably.

I will continue to consider the importance of different perspectives in the workplace, because in all fields – related to technology or not – diverse team members working together and challenging each other get to the best results.

Stephanie Alsbrooks is CEO of defisolutions.


2030 Auto Time Travel – Take the Survey, Drive the Future

Right now, any one of us might reasonably and accurately predict the future. Say we are talking about paper statements. One day, very soon, they won’t be an option. We see it coming. Getting bill reminders texted to our phones. Typing YES and bills are paid instantly. At some point, service providers will move 100 percent away from the once genius paper statements to the now near standard electronic reminder. But in 1980, most of us wouldn’t have predicted that.

When I sat in my ’82 Chevy Beretta with my first bag phone, I didn’t see how that device would invade all aspects of my life, and certainly couldn’t see the future of paying bills from it. When I got my first text reminder, or even as little as a few years ago, I didn’t dream that I would one day click a PAY NOW button and take care of a bill without even logging into a portal and providing a username and password. We might have been saying “computers will rule the world,” but we didn’t really have an idea of what that meant.

Little by little and by leaps and bounds we are making progress. The closer we get to something, the more real it seems.

I’ve spent nearly my entire career in the auto finance industry, thinking and talking about “what is” versus “what should be” and “what could be” and “when.” We all feel powerless at times, dictated by the needs or whims of dealers and other factors outside of our control. Whether it’s perception or reality, feeling controlled can lead to a state of complacency. Complacency can slow our forward motion. And now is not the time to slow down.

Change is coming – especially in the auto industry. It’s just a matter of what and when. So, I thought it would be fun to try something.

Take a look at the list of questions below and predict what you think will be affecting our industry in the future. If you are reading this in the print magazine, clip it out, write in your answers, and photograph or scan it and email to me at If you are reading this online, click the link below and take the survey, and watch for a follow up blog at

What do you think 2030 is going to look like?
1. What will be the average age to get a driver’s license? (In 2014, just 24.5% of 16-year-olds had a license, a decrease from 1983 when 46.2 did.)
2. What percentage range do you think is most accurate in the year 2030 for each of the bulleted questions below?
• What percentage of cars on the road will be self-driving?

Experts today predict autonomous vehicles will help curtail the number of lives lost in accidents. But can Americans give up control?
• What percentage of Americans will own a car?
Currently it’s over 90 percent.
• What percentage of cars will be sold through a traditional dealership?
According to Autotrader, car buyers spend 59 percent of their time researching online; the majority use third-party sites. While 81 percent of car shoppers give the test drive portion of shopping an 8-10 on a satisfaction scale of 1-10, after an average of three hours spent at a dealer, the customer satisfaction rate drops to 56 percent.
• What percentage of prospective first-time buyers will actually purchase a vehicle (not just lease or rideshare)?

Millennials currently own fewer cars than previous generations, but some say they were simply late bloomers or impacted by the Great Recession or school loans and are now buying cars in big numbers.)
• What percentage of prospective first-time buyers will lease (not buy or rideshare)?

According to Edmunds, “Over the past five years lease volume grew by 91 percent and in 2016 accounted for 31 percent of all new vehicle sales, up from 29 percent of sales in 2015.”
• What percentage of first-time buyers will rideshare (not buy or lease)?

According to Kinsey & Company, Lyft and Uber accounted for 30 million vehicle miles travelled (VMT) in 2013 and 500 million VMT in 2016. Still only one percent of overall VMT.
• What percentage of cars will be electric?
According to “The Economist,” in 2018 the electric car will be cheaper to own and operate and as “hip as the miniskirt once was.”
• What percentage of loan documents for auto will be fully 100 percent electronic, never printed?
For auto loan documents, current technologies make it possible to prepare, send, sign, and maintain all loan documents digitally. While the true percentage of total is unknown, according to Jeff Belanger, RouteOne’s senior vice president of Business Development, 40% percent of overall eContracting eligible contracts are booked electronically. Ford and Toyota lead the industry at a much higher rate.

3. In 2030, how many lenders will a dealer’s system send one application to?
Currently one app is reviewed by 2-3 prime lenders and 4-5 sub-prime lenders.

4. Innovation pushed Blockbuster out of the brick and mortar movie rental business. Which auto related lines of business will be the next “Blockbuster”? (Rank from most likely to least likely to survive.)
5. Forget about cars – self driving or not – what will be the next mainstream mode of transportation?
6. Would you mind telling us the year you were born?

When you sit back and do the math, you realize that 2030 is a mere 12 years away. How much can we change in one decade? A lot. We’ve seen it happen. We’ve made it happen. Let’s continue to work together to predict and drive what “what could be,” “what should be,” and “when.”

Stephanie Alsbrooks is CEO and chief soothsayer of defisolutions. E-mail Stephanie at


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 or visit for more.


What’s New is Old Again

In 2010, the subprime auto loan market began to grow once more, returning from a near complete decimation to where it was pre-crisis. As far as the media is concerned, all growth was the product of a universal collusion to throw underwriting standards out the window. The following represents just a fraction of the stories that have been published since that time, sounding the alarm on risky auto loans and predicting another subprime crisis:

• 2010 – The Subprime Lending Business (auto) Survives, Even Thrives – Time Magazine
• 2011 – Ally Financial Bets on Risky Subprime Car Loans – Reuters
• 2012 – Subprime Auto Loans Grow as Lenders Charge a Premium – Forbes
• 2013 – How the Fed Fueled an Explosion of Subprime Auto Loans – Reuters
• 2014 – The Next Subprime Bubble to Burst: Auto Loans – New York Post
• 2015 – The Next Crisis, Subprime Auto Loans, Won’t End Well – Forbes
• 2016 – Significant Concern in Subprime Auto Loans – Investor’s Business Daily
• 2017–‘Deep’ Subprime Car Loans Hit Crisis-Era Milestone – Bloomberg

Nearly all of these stories reference subprime bond data, which is about $23 billion out of $250 billion in annual subprime originations. Of the roughly 10 percent that is put into bonds, about 60 percent comes from three companies – none of which are blowing up.

What has yet to become headline news is that subprime auto finance has been in a mild contraction for the last year now, with major lenders pulling out of the deepest paper and others limiting originations due to capital costs (otherwise known as rational lending). The real risk in auto finance comes not from conventionally structured auto loans, but from auto leasing.
Reviving the past

The oil crisis of the 1970s, along with a slew of regulations from the Environmental Protection Agency, pushed Americans to drive smaller, more fuel-efficient cars. Gone were the 428 Cobra V-8 engines and Mopar 400 blocks. Powerful muscle cars were soon replaced by aerodynamic wedges with better mileage. It was kind of like going from Sean Connery to Pierce Brosnan, for you 007 fans.

Fast forward 30 years, and we see that fuel prices have come down, technology has improved – and what is old has become new again. Camaros, Mustangs and Challengers roar down our streets once more. Retro on the outside, but substantially improved on the inside. However, not all historical revivals turn out this way. In some pockets of auto leasing, something is being passed off as new that is nothing more than a resurrection of the bad practices that caused a meltdown in auto leasing nearly 20 years ago.
In 1999, the market was saturated with leases, which accounted for nearly 26 percent of car sales. In order to make their product offering more attractive to dealers, lessors got into the habit of “enhancing” (i.e., inflating) residual values. This, among other bad practices, resulted in a near collapse of the leasing market and left many investors wondering how they were so exposed.

The mechanics of leasing

The terminology related to lease financing is different from an installment loan, but the components of how the lender makes money are essentially the same. The lender/lessor acquires a vehicle, and structures a note with the customer designed to produce a certain return on the capital that is put to work. The risks come in the form of customer non-payment and the costs associated with re-acquiring and disposing of the collateral.

In leasing, the amount financed is referred to as the net capitalized cost. The net capitalized cost minus the estimated residual value is the gross depreciation fee, which is divided by the term to form the basis of the customer’s monthly payment. A finance charge (referred to as a money factor) and sales tax are added to comprise the total monthly payment.

For the lessor to make money, they must fit all of their expenses into the finance charge plus whatever return they need to make. Some of the key costs they must account for are:

Residual loss – This is the difference between what the lessor estimated the value of the car to be at contract, and what they actually receive for it.

Turn-in rate – In prime leasing, approximately 10 to 15 percent of consumers buy the car. This equates to an 85 to 90 percent turn-in rate. The higher the turn-in rate, the higher the residual risk.
Non-payment – A certain portion of consumers will break the terms of the lease. The early payoff penalty is equivalent to the net loss on a standard installment loan.

If the lessor does not accurately account for these costs, they risk the stability of their entire platform – and anyone who has their money tied up in it.

Unconventional lending

I often get incensed at the lazy comparisons made between the subprime mortgages that led to the last downturn, and traditional subprime auto lending. With the exception of longer terms, the auto loans today look the same as they did 20 years ago. Likewise, performance has fluctuated within a very consistent range across multiple credit cycles.

The toxic mortgages, on the other hand, were the result of twisting conventional structures into forms that had never been seen before. No docs, adjustable rates and inappropriate credit risk were justified based on a false estimate of what the collateral would be worth. Proforma yield estimates appeared tremendous, and Wall Street could not get enough of them.

Today, leasing accounts for over 30 percent of vehicle sales, summing to over $200 billion in annual originations – much greater than the saturation point in 1999. While the overwhelming majority of leases are to prime consumers on new vehicles, Experian reports that 35 percent of non-prime and nearly 27 percent of subprime consumers are choosing to lease. That figure equates to over $50 billion, a number significantly larger than what is held in subprime bonds.

Several headwinds in the market make these statistics a cause for concern. First, vehicle demand has leveled off and dealer inventories have increased. Second, used vehicle values are declining and they are likely to continue to do so as a record level of off-lease vehicles flood the market. Finally, lessors have to work harder to maintain or grow volume, which opens the door for the stretching assumptions on lease economics.

Who is at risk?

Prior to the great recession, there were trillions of dollars in mortgage originations. Nearly $700 billion of that was subprime, and more than 75 percent was securitized. When these loans imploded, they took the banks and the rest of the economy with them. In contrast, the auto lease market is significantly smaller.

While a spike in lease defaults will send negative signals to the capital markets and regulators, it is unlikely to disrupt the broader market. The exposure is largely limited to companies that predominantly originate auto leases, their equity investors and debt providers. Executives, investors and credit committees will want to look for three red flags that signal potential performance issues. These are:

•    Credit creep – Every credit default carries with it certain costs for the lessor. These costs go up exponentially as credit creeps down the spectrum. Unrecovered early termination fees, collection expense and lost collateral value (repossessed vehicles are worth far less than market for a similar unit) all must be paid for by the finance charge. When lenders and lessors in higher credit tiers feel pressure related to volume, it is not difficult to dig deeper in a way that cannot be detected by looking at credit score alone. Missed credit assumptions can easily take a budget of 100 basis points in annualized default expense to 300 or even 500 basis points. Many will point to the fact that a lease allows the customer to get in a lower payment than a loan, which suggests they default less frequently than loan customers do. That might be true, except for the fact that consumers are sold on a payment size, and typically pack as much into that payment as possible. The payment-to-income ratios for loan and lease customers are very similar, so that argument does not hold water. Investors and debt providers should look to early payment default rates, and 30 plus days past due delinquency in the first six months on books. These figures should be compared to delinquency rates of loan portfolios with similar credit score distributions to ensure that the credit assumptions line up with reality. Make sure that if the business model calls for near prime consumers, the portfolio is not filled with consumers who are near prime in score only.

•    Collateral mismatch – The biggest miss lessors have historically experienced comes from playing games with estimates of residual values. There is a moral hazard present in that a higher residual estimate means a lower customer payment, which makes it easier to get volume. The increase in the number of nonprime and subprime leases may indicate another issue, that there is a complete mismatch between the vehicle and the financing instrument. For a lease to make sense the vehicle has to be worth something at the end of the term; otherwise, the customer would be financing the entire vehicle without ever owning it. A collateral mismatch occurs when the quality of the vehicle must be inflated to fit a lease scenario in the first place. To make matters worse, those contracts are usually laced with out-of-market incentives to dealers in order to get them to close mismatched deals. Not only are the losses on such leases unsustainable, but they also create serious compliance issues related to predatory lending. To protect against collateral mismatch, capital partners must have a direct line into the vehicle values. This goes beyond merely acquiring periodic data files from the company, but running independent outside checks by submitting vehicle identification numbers to third party data providers like ALG, Black Book, NADA and others. Those vehicle values should be compared to the statistics of other lease portfolios in similar credit tiers (available from credit bureaus and other marketing data sources). If the company’s collateral and lease structures do not line up with what should be considered the peer group, there may be a problem with collateral mismatch.

•    Pseudo controls – Credit creep, collateral mismatch and other serious problems are borne by companies lacking real controls. Great leaders maintain proper controls and foster a culture committed to supporting those controls. Bad leaders simulate a tight control culture, and can go on at length citing many checks and balances that do not actually exist. Bad operators see controls as a nuisance that prevent them from having the latitude to properly run the business. When portfolio performance becomes a problem, a poorly controlled entity turns to cooking the books. In those types of organizations, it is not uncommon for the internal auditor, compliance manager, risk manager or other control person to be overpaid, and several levels above what their resume would warrant – in other words, a patsy. Investors can protect against this by having activist board members with direct connections to the control functions. Regular control audits must be conducted from independent parties. For debt providers, do not rely on covenants to protect you, or you may be surprised at how weak your security interest is. Make certain that the numbers in the system were not fabricated in order to fit something into the warehouse facility. Insist on periodic I.T. audits, conducted by independent forensic data specialists.


Unlike the steady stream of articles on subprime auto, I am not predicting a time bomb waiting to go off in the auto leasing space – nor am I grouping all operators together. There are many excellent auto lease originators, particularly among the captive finance companies. The latter are usually run by strong leaders with excellent control cultures. Furthermore, they have vast amounts of data that show how their vehicles hold up in a variety of economic environments. There are also many independent companies with long histories of proven performance. That being said, the practices that led to problems in the past still exist today.

In the subprime mortgage crisis, assumptions meant for conventional loans were applied to highly atypical structures. Investors fell for it, and consumers flocked to it – sold on the idea that they could access financing that was formerly only available to the top tier. In some pockets of auto leasing, the same thing is happening today. What the market will find is that what is pitched as new is actually the same old song and dance. By keeping an eye on credit, collateral and controls, capital partners can make sure they avoid seeing history repeat itself.

Daniel Parry is co-founder and CEO of TruDecision Inc., a fintech company focused on bringing competitive advantage to auto dealers and lenders. He is also co-founder and CEO of Praxis Finance, a portfolio acquisition company, and co-founder and former chief credit officer for Exeter Finance Corp. For questions or inquiries, please email or through

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

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 or Brandon at

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