Com 546 Reading #1

Posted: January 20, 2010 in Com 546

I’m not going to lie, when I started reading Christensen’s Seeing What’s Next, I was a little concerned that it would be dry. As I dove deeper into chapter one, however, I realized that his ideas directly applied to my current line of work, and I was sucked into his world of innovative theories.

I am currently working as a Marketing Coordinator at a real estate appraisal management firm. With consideration of the recent housing crisis, one point in Christensen’s book really stood out to me. He talked about how automation and integration can make things faster and easier, but we may be sacrificing quality for quantity. When the credit system was established in 1954 the algorithmic formula allowed for “less skilled” people to make lending decisions. Unfortunately, times have not changed; in fact, this issue has gotten worse. As we have witnessed throughout the past two years foreclosure rates and refinances have soared because borrowers found out that lenders approved them when, in fact, fluctuating rates and economic conditions made their home ownership unfeasible. As a result, our entire economy is suffering. Like Christensen said, establishing standards can be a positive thing, but in many cases establishing a system with greater efficiency can lead to a reduced quality of operations.

I appreciated the fact that Christensen touched on the need for regulation in innovative markets. He mentioned that a common look at regulation is that less regulation is good, whereas more regulation is bad. He then went on to express that this thought process is not universally applicable. Nonetheless, this is the current view in the lending industry. In 2009 a new law was passed called the Home Valuation Code of Conduct (HVCC). HVCC was established to prohibit loan officers who are commission-based from directly ordering appraisals so that there was no way they could influence an appraiser’s value. As a result of HVCC credit unions and wholesale lenders are now required to order their appraisals through an automated interface, to maintain “HVCC Compliance.” This ticked off a lot of lenders, who are still blogging avidly about their hate for HVCC and how the control to pick and choose their own appraisers was taken out of their hands. They think less regulation is better because they are so accustomed to and comfortable with their traditional methodologies.

This new “HVCC Compliant” ordering system is very similar to the Dell example Christensen gave, in how they decided to implement a direct online ordering process to make the process easier for their customers, and also offer customized products. Only in our case order automation was motivated by regulatory laws, rather than potential profits. (Although at this point my company is developing more interfaces to turn higher profits.) With our new integrated ordering process we allow credit unions, mortgage bankers, and wholesale lenders (brokers cannot order at all after February 15 due to another regulation) to order from us in a custom interface that applies to their specific needs. This automation has now been an excellent marketing point for our company as it is a regulatory requirement for most lending scenarios. Like Christensen said, motivation for innovation takes place within specific contexts.

Overall I enjoyed the readings this week and learning about the way innovation integrates into the business community. Being able to analyze these developments in my professional life is very rewarding.

  1. […] Danielle (link to lending), Elizabeth (Winston!),  Erika (link to netbooks, MSFT), Inge (think audience), Marc (Winston!), Nicole M (radio), Scott (start-ups) Shelby (questions, interviews), Stephen (Winston!) […]

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