Hey All,

A quick one to keep this ticking over, lest I miss two weeks and end up off the rails.

I’ve opened the last two board meetings with this slide, the “Strategic Compass” or “constitution” around how we think about running a Capital Markets technology business (see attached).

Why you might ask? .. doing so provides a set of guide rails for any deeper discussion on strategy.

As an executive or manager its incredibly powerful to define what you’re about and set down guidelines for decision making in key areas. Do it right any you’ve defined a very useful framework for strategic decision making, which can be very time consuming otherwise.

For example, when I worked at First Derivatives, Kx and NYSE the executive teams spend a great deal of time focussed on where to open offices. The First Derivatives strategy was to pretty much stick an office in every city where there was a financial firm (dozens of them), NYSE Euronext already had an office in every city with a financial firm, with development and engineering teams across twenty countries globally. Every project became as geopolitical war as the different country teams competed for the work. We got a lot of traction around the idea that Belfast would be the key centralised engineering centre. The day after I left this strategy fragmented with other centralised engineering centres popping up in Lisbon and Raleigh. There were a very determined group of execs who liked spending a lot of time in the Philippines who succeeded in spinning up a 3rd key centre in Manilla. You would not believe how messy this stuff became, and how hard it is to unpick as the teams in each of these now 23 centres get expert at staying sticky. This problem is by no means a NYSE phenomena, the IPC COO mentioned that they have offices and engineering teams in 68 cities globally. Tibco were slightly more pragmatic, they only opened an office in a city after they’d closed enough business for the office to have a strong positive P&L from day one.

The Options strategy reflected this.. we set out to keep things very simple leveraging the concentrated market by setting out to dominate London and New York, with small customer centric field offices in the top Capital Market’s centres, and let the other vendors fight over all the small cities. The only real decision we’ve had to make in the last decade was spinning up Auckland due to the new 24×7 nature of the business. The dark spot between 5pm ET and HK morning is a huge challenge for may financial firms.

The point of defining this stuff: any debate is cut off immediately because we know what our plan is so can focus on execution.

Over the years I defined the constitution underpinning our decision making (the slide only covers about 1/3) leveraging what I considered the best insights and practices across a raft of companies Gallaher the Big-Tobacco company where if did my scholarship, FD, Tibco, NYSE, Kx, lots of trading firms and the Sell-Side powerhouses as well as a lot of the material available on the operating models in firms like Google. As you can tell by the office example, some of the guidelines are there to avoid costly practices and mistakes a lot of firms seemed to make. There was a lot of input from people like Jon Lambert, as well as sector greats like Larry & Duncan from NYSE. Finally, some of the rules were based on analysis, for example, 80% of the client spend in Capital Markets technology comes from the top 50 or so firms and is controlled from either London on New York. It makes a lot of sense to put the lions share of sales focus in those cites, ideally walking distance from the majority of customers.

One piece of advice to any young exec with aspirations to be a CEO or progress along a specific life or career path would be to start documenting this stuff to form your own constitution or operating guidelines. The act of putting your thoughts to paper will sharpen up both your thought process and powers of observation.

Hope this helps.

Happy to have a call to do a deeper dive into the Strategic Compass slide if that would be of interest?

Cheers,

Danny

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