the
innovative LEDGER
An e-Newsletter from The Innovative Edge™ Inc.
Vol.
8, No. 2 - February 2008
* * * * * * * * * * * * * * * * * * * *
Subprime Innovation
By Jeff Govendo
It
is common among business consultants to avoid using the R word, as
conventional wisdom suggests we are less likely to be hired during
hard times. We just don't like to talk about it. So forgive me, colleagues,
but whether or not it becomes officially labeled as such, it looks
like we may in fact be heading into a reces... er, R.
While
sophisticated economists could, I'm sure, give us lengthy and detailed
explanations as to how and why this has come about, the spate of
subprime mortgages over the past few years is generally seen as the
major impetus for our current situation, which now has global implications.
We may go back and forth over who is primarily at fault - the buyer
or lender - but few would argue that the mortgage industry has managed
to come up with some, shall we say, highly creative products over
the past 15-20 years. A lot of brainpower has been applied to thinking
up, marketing and selling mortgage products that gave home buyers
the illusion they could afford property they had no business looking
at.
History
is littered with examples of creative practices instigated by smart
people to enhance the bottom line through questionable means. The
way in which these schemes are dreamed up and enacted possess all
the earmarks of an admirably innovative thought process.
Often,
they begin with a creative idea:
"Say, what about a mortgage rate that starts out attractively
low, then CHANGES?"
Next,
instead of letting the more objectionable elements derail the idea,
they build on it:
"Instead of calling them teaser rates, we'll say we’re
making home ownership available to more people!"
Then,
as the idea begins to take form, it is further tweaked and refined:
"We'll develop a marketing campaign that talks only about
getting what you deserve, not what you can afford."
And,
voila! A new kind of mortgage product is born!
But
is this innovation? To some, perhaps. After all, it does meet
two key criteria for an innovative concept: it contains an element
of newness (at least when first introduced some two decades ago),
and it is practicable; i.e., within the law.
For
me, however, it lacks a key ingredient: adherence to a higher purpose
or mission. And by this, I don't mean the kind of mission that
comes out of a semantic exercise, led by a facilitator armed with
a thesaurus. Rather, a set of guiding principles which are meaningful
and, well… highly principled.
Now,
some may argue, "We did have a higher purpose! It was to enhance
the bottom line for our shareholders." (a phrase often included
in company mission statements; read: "make money")
But
this is NOT a higher purpose. It’s a means to an end.
When
it is mistaken for an end in itself, we don't get innovation; we get
the subprime mortgage fiasco. And now, it is triggering a downturn.
At
this writing the House has just passed a stimulus package designed
to increase consumer spending. Most economists think it's a temporary
fix at best. They are calling for more structural, long-term changes
and (depending on where one falls on the political spectrum), improved
oversight.
A
company that clearly envisions and lives by a highly principled core
purpose does not need "make money" as their end game. Live
it, execute well, let employees exercise their innate creativity,
and the money will follow.
It’s
called doing what’s Right.
...
another R word.
