Butterflies and Caterpillars: Exploring Major Themes from Converge
by Phil Neuffer Monitor 100 2023
One of the key components of Monitor’s Converge event in June was a Future-Focused Workshop designed to spark transformation in the equipment finance industry. Throughout the day-long conference, many themes emerged, including new business models, outside disruptors, bringing the customer along and, yes, artificial intelligence.
Phil Neuffer, Senior Editor, Monitor
When building out the branding for Monitor’s two-day 50th anniversary celebration, the Monitor team wanted to make sure what the event was called reflected its purpose as well as the current moment in equipment finance. Converge emerged as the perfect name, highlighting the event’s intention to celebrate the past while leading its future evolution.
Equipment finance’s transformation, however, is not as far off as some may think (or want to believe), and that was readily apparent during Converge’s Future-Focused Workshop. The day-long conference was held on June 15, sandwiched between Converge’s welcome reception on June 14 and gala and awards ceremony the night of June 15.
Utilizing a unique format never before seen in the equipment finance industry, the workshop featured an opening keynote address from John Hagel, futurist, best-selling author and founder of Deloitte’s Center for the Edge, who then facilitated a panel of equipment finance professionals, including Bill Verhelle, founder and CEO of QuickFi by Innovation Finance USA; Linda Redding, managing director and head of equipment finance at JPMorgan Chase; Eric McGriff, senior vice president and chief credit risk officer at Wintrust Specialty Finance; Nicole Torraco, president of FITTLE, a Xerox Company; and Bridget Lindner, chief information officer at DLL. The themes that emerged from Hagel’s address and the subsequent panel provided fodder for the remaining sessions of the day. If you weren’t able to attend Converge (or just want to relive the experience), let’s dig into some of the most prominent themes, questions and insights that emerged from the full-day workshop.
Zooming Out and Zooming In
Hagel’s opening comments clearly resonated with a large swath of the nearly 300 attendees at Converge’s Future-Focused Workshop. During his remarks, he discussed one particular strategy he recommends to all businesses: the zoom out, zoom in. Breaking it down simply, Hagel argues that instead of focusing on the standard five-year plan, business leaders should “zoom out” and determine the market opportunity that will emerge 20 years down the line before “zooming in” and planning out six-month initiatives that can accelerate a business toward that far-off destination. Throughout the entirety of the Future-Focused Workshop, numerous panelists kept returning to this idea, and there was even a breakout session dedicated to the topic by itself.
During the specific breakout session about the zoom out, zoom in approach, attendees discussed the actual mechanics of executing such a strategy, including evaluating how your products and customer base might change, considering the perspective of newer generations and determining how to handle the conflict of short-term incentives with long-term objectives. As one attendee asked, especially during an era of increasing consolidation, in an industry like equipment finance where companies are often built and sold in increasingly shorter timeframes, how can a 20-year time horizon even be incorporated?
Aside from its dedicated breakout session, the zoom out, zoom in discussion permeated many of the Future-Focused Workshop’s other assemblies, especially in the context of broader conversations about innovation. Several attendees brought up that equipment finance is filled with people focused on risk, which can oftentimes equate to fear. Of course, that fear looks different for every employee and being wary of risk alone isn’t what can halt innovation in its tracks.
During a breakout session on scalable learning, another approach introduced by Hagel, there was a discussion about whether the equipment finance industry is more interested in expertise or exploration, essentially suggesting that it’s not enough to be an expert. Instead, it’s important to give your company and employees the space to experiment and explore what else might be possible, ultimately aiding in the development of more curious and innovative team members. Creating that change in mindset could help a company overcome some of the primary resistance points to change rather than forcing it to wait for unit economics to alter business models.
New Business Models
Speaking of new business models, whether due to regulations, customer preferences, advances in technology or anything else, the business model of equipment finance is changing before our eyes, but watching something transform and leading said transformation are two very different things.
Verhelle mentioned during a breakout session that many companies are investing in technology that perpetuates and optimizes existing business models and that new business models can end up cannibalizing old models. However, the entrenchment of existing business practices and delivery models will not lead to the breakthroughs needed to employ emerging technologies to avoid disruption.
Drilling further down, changes in how equipment finance companies deliver their services was a pressing topic of discussion throughout the day-long conference, with borrower self-service and subscription models both highlighted in multiple sessions.
On the self-service side, attendees and session facilitators alike emphasized the need to consider the customer perspective when implementing such a model and to evaluate the purpose of providing self-service, as it can serve to both empower and/ or control customers depending on your implementation. During one breakout session, an attendee brought up that creating a level of uniformity in how self-service is delivered across the equipment finance industry could go a long way in combatting confusion and easing the customer experience, although other attendees pointed out the necessary hurdles to implementing full self-service, including the impact of Section 1071 regulations and different implementation needs across various company and ticket sizes.
When it comes to subscription models, Converge reaffirmed the prevalent notion that such an approach is the future of the equipment finance industry.
“We’ve seen over the years subscription services just come to dominate so many different ways of life,” McGriff said during the event’s opening panel discussion. “I’m pretty certain the same is going to be happening for us.”
Beyond specific and more easily understood new business models, the discussions at Converge also urged attendees to think beyond the seemingly inevitable changes on the industry’s doorstep, with some attendees and panelists wondering if the sector will even be financing the same types of equipment in 20 years or if there will there be a transition to even more radical asset types, with one attendee even suggesting the idea of “financing time.”
Bringing the Customer Along
Maintaining a customer-centric viewpoint was not just brought up in the context of creating new business models, although it was a significant point of emphasis during those conversations. Throughout the day, as attendees discussed how to innovate and change the equipment finance industry, there was a repeated mantra of “bringing the customer along.”
Lindner led a breakout session focused specifically on the customer, building off a notion mentioned earlier in the day about avoiding the pitfalls of making all business decisions by looking internally. During Lindner’s session, attendees were encouraged to test tools before introducing them to the public and to start small with new processes to allow customers and employees to get used to new ways of operating. The session also challenged attendees to consider whether customers are more interested in deciding rather than being sold to and to always balance automated and human outreach with customers.
Lindner’s session also brought up the question of how to meet customers’ needs even if they don’t know what those needs are yet, building off an analogy Hagel made during his opening remarks about true transformation.
“The metaphor I use for transformation is the caterpillar moving to become a butterfly, totally unrecognizable from what it was before,” Hagel said. “If you’re just making the caterpillar walk faster, that may be very helpful to the caterpillar, but that is not transformation.”
Extending Hagel’s metaphor, part of bringing the customer along is making them see the exponential benefits of transformation (turning into a butterfly) rather than the incremental progress of minor improvements (making the caterpillar walk faster).
The Next Big Disruptor
Looming over many of the conference’s discussions, particularly about changing business models, was the notion that there will be a big disruptor company in equipment finance that might not come from the pool of firms represented at Converge or even in the industry overall. Denis Stypulkoski, founder and principal of Reimagine Advisors, led several sessions at Converge. During one, he presented an example of an unexpected disruptor in Rocket Mortgage, which changed the mortgage industry overnight, causing banks to stop originating and become mortgage servicers only or leave the sector altogether. Despite being a more than $1 trillion industry, equipment finance has a “mote of complexity” that has kept the proverbial big disruptors at bay, but that won’t last forever, according to Stypulkoski.
As the equipment finance industry waits to see who actually makes seismic disruptions, there are already some potential applications from the consumer world that could revolutionize how end-users acquire equipment. Attendees and panelists suggested examples like Amazon’s “buy now” button and buy now, pay later providers like Affirm which could eventually make their way over to equipment finance in some form. What these disruptions, both minor and major, will mean for vendor relationship will be particularly important to watch, with one attendee arguing that the power dynamic is shifting and that equipment utilization rates may become more impactful than default rates, if such a shift isn’t occurring already.
As much as long-term planning, innovation, new business models and potential disruption were top of mind throughout Converge, there was no topic that garnered more attention than artificial intelligence. It’s easy to see why, as in the last year, AI has become a more widely accepted part of society, and the proliferation of natural language processors like ChatGPT is just the beginning. For example, Disney’s Secret Invasion series on its Disney+ streaming platform (speaking of changes in business models) features an opening credit sequence generated by AI, calling into question how studios will approach production in the years to come, especially as the screenwriters’ and actors’ strikes wage on. Many lenders claim to utilize AI in their models, but could an even more drastic AI-fueled evolution be on the horizon for equipment finance?
In a breakout session specifically focused on AI at Converge, Jeff Bilbrey, CEO of Leasepath, asked attendees to brainstorm some of the potential uses of AI in the equipment finance world. The list the group accumulated was lengthy and included document ingestion, email marketing, fraud prevention, customer experience and journey personalization, document reviews, code development, underwriting, graphic design and more.
The discussion around AI at Converge did not solely focus on the potential benefits. As with most discussions of the technology, attendees also brought up some of the potential dangers and drawbacks of AI, including its potential to eliminate jobs and some of the legal implications about how AI models can access and protect data, leading to another important topic of the conference: data.
“AI is stupid without data,” Hagel said during the conference. “Those with more and more access to private data will be at a greater advantage.”
“Underlying all of it is data,” Lindner said.
“What comes first, the chicken or the egg? A digital self-service experience or data readiness. Companies that have internal and third-party data sources that are accurate and reliable have the keys to delivering on a robust digital solution for their customers. Data is underpinning all of these conversations.”
ABOUT THE AUTHOR: Phil Neuffer is senior editor of Monitor.
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