How Invesco is using strategic scenario planning to de-risk the future
Nicolas Steiner, Director, Strategy and Innovation at Invesco, explores the steps the company is taking to address disruption on the horizon including cryptocurrency and the rise of Web 3.0.
Nicolas Steiner, Director, Strategy and Innovation at Invesco POSTED ON 10/4/2021 8:57:59 PM
Innovation and disruption in asset management.
The rise of cryptocurrency and Web 3.0 presents an existential threat to the financial services industry.
For decades, traditional finance businesses have operated as trusted facilitators of all forms of transactions. But as cryptocurrency adoption increases, so does the use of smart contracts—and that’s given rise to a new paradigm called ‘programmable money,’ or money that automatically moves based upon algorithms.
Smart contracts have the power to radically disrupt our industry and change the role that financial services businesses play in society.
Invesco manages over $1.5 trillion in assets globally and has a presence in 25 countries. We recognized that we needed to gain a better understanding of these disruptive forces on the horizon in order to prepare for the future.
“The rise of cryptocurrency and Web 3.0 presents an existential threat to the financial services industry.”
Our executives tasked the Technology Strategy, Innovation, and Planning (SIP) team—the team I work in under the leadership of Dave Dowsett, Global Head of Technology SIP—to establish an early warning system to track emerging technologies and trends.
But understanding and exploring concepts like cryptocurrency and smart contracts wasn’t enough. Our team needed to determine which forces could exert the greatest impact on our business, assess how they might play out, and develop a plan to address them.
We engaged our partners at Silicon Foundry and together decided that the best way forward was to conduct a strategic scenario planning exercise designed to future-proof our business.
What is strategic scenario planning?
Scenario planning is a methodology that enables companies to plan for the future in the face of uncertainty. By imaging multiple possible future states in detail, and assessing how they might impact business, companies can work backwards and determine the actions they need to take today in order to prepare for the future.
Invesco and Silicon Foundry began by identifying relevant forces impacting the asset management sector and ranking them on a scale of impact and uncertainty. High impact, high uncertainty forces included technology acceleration, changing regulations, and the rise of cryptocurrency and token economics.
We interviewed leading entrepreneurs, researchers and subject matter experts to assess what might happen to the asset management industry as a result of those forces.
The team then developed a series of scenarios and analyzed how they could impact our distribution channels, workforce, and retail and institutional client preferences.
“High impact, high uncertainty forces included technology acceleration, changing regulations, and the rise of cryptocurrency and token economics.”
The most thought-provoking scenario explored the implications of uneven cryptocurrency adoption and shifting regulatory regimes across Invesco’s geographic footprint.
“Big ideas like blockchain and smart contracts can feel abstract and disconnected from the day-to-day realities of running a business,” explained Steve Gotz, Partner at Silicon Foundry, who spearheaded the scenario planning project.
“Scenario planning offers a way to create a narrative around those ideas that’s specifically tailored to your company. By going through that process, executives and board members can gain a deep understanding of what’s on the horizon and how it can inform their strategy.”
The strategic scenarios did more than just imagine the future—they were also a way to drive education, alignment, and decision-making across our internal teams.
We structured the scenarios to prompt internal dialogue and raise awareness of long-term disruptive trends. By taking a deductive scenario approach with defined drivers, we were able to lower the threshold for buy-in across the organization.
Putting scenarios into action
Scenarios aren’t just a one-time exercise—they need to be updated regularly to reflect changing market conditions and new technologies. Scenarios become richer and more nuanced when colleagues from different teams can apply their unique lens to the future.
We wanted to make sure our scenarios were as thoughtful and up-to-date as possible, so we assembled a cross-functional team from across Invesco to conduct a collaborative review of the scenarios in partnership with external experts each quarter.
Our scenario work catalyzed an internal strategic conversation at Invesco which led to the formation of a new Digital Asset working group focused on exploring new blockchain and cryptocurrency business models.
“We wanted to make sure our scenarios were as thoughtful and up-to-date as possible, so we assembled a cross-functional team”
“We’re helping stakeholders define a series of near-term activities to undertake in response to these different futures, while educating our Senior Managing Directors to highlight the impact of these trends,” explained Heather Wied, SIP Product Owner at Invesco.
We’re also using the scenarios to support Invesco’s product strategy in regards to asset tokenization.
“The goal of this program is to identify near-term actions companies can take to augment their strategy, reduce risk, and prepare for the future,” Steve Gotz from Silicon Foundry said. “That’s precisely what we’re seeing Invesco’s SIP team do.”
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