One of the accepted truths of business is that success attracts competition. The spectacle of a flourishing company or arena inevitably encourages new market participants to seek a piece of the action, says Steve Andrews, CEO of Novia Global.
This is how we keep the world spinning in any capitalist system. Without the constant tension between start-ups and incumbents, we would be on a slippery slope towards monopolies and the lack of innovation and progress they’re known to engender.
According to economic theory, increased competition is likely to erode established players’ dominance over time. By extension, it’s also likely to eat away at their profits.
This should be bad news for me, because the international platform space is currently witnessing a notable influx of entrants. They’re portrayed as smaller, nimbler, cheaper and more cutting-edge than the companies they’re taking on – which just happen to include the one of which I’m CEO.
Yet economic theory doesn’t always translate into practice. There are plenty of instances of competition consistently producing the same winners over significant periods.
Microsoft is an obvious case in point. It has ranked among the biggest hitters in one of the most fiercely contested spheres of all for nearly 50 years. It’s a classic illustration of “beating the fade”.
Ultimately, this kind of protracted pre-eminence boils down to two dynamics. Let me explain what they are, why I think they’re likely to apply here and how they might shape our industry.
The emperor’s new clothes
New market participants have to differentiate themselves. They can’t expect to make serious inroads if they enter the fray with the same offerings and the same prices as the companies they hope to unseat. They have to come out swinging, talk a good game and gain attention.
The preferred head-turners for international investment platforms are novel features, greater functionality and reduced charges. This is a combination guaranteed to catch the eye of many advisers and their clients.
It’s vital to remember, though, that emerging businesses aren’t always what they appear. As in The Wizard of Oz, a peek behind the curtain often reveals a reality substantially removed from the spectacular image that’s presented.
For example, a new platform’s number of employees might be surprisingly low – even alarmingly so. Its support infrastructure could be inadequate. It might lack expertise and experience, especially in complex fields such as cross-border regulation.
There might also be limited management information and reporting tools. The available investment universe could be relatively constrained. All those seemingly attractive headline costs may hide additional fees further down the line.
Last but by no means least, the company might be trading at a loss. After all, the early stages of almost any business’s life are notoriously fraught and fragile. This could call long-term viability into question.
Of course, it’s possible to have a clean bill of health. That’s why some new companies survive and even thrive. But would-be stakeholders should exercise caution and perhaps even demand assurances, because common shortcomings like these are a key reason why incumbents are able to preserve their ascendancy.
Inspired to improve
All this might give the impression that larger, proven platforms have nothing to worry about – that we can simply shrug our shoulders and assume we’re untouchable. This is far from the case.
Just as success attracts competition, competition breeds success. It prevents complacency. It compels every business to improve. If forces us to keep asking what we need to do to stay ahead of the curve.
Regardless of whether they genuinely disrupt the status quo, newcomers merit our attention. They may well do some things more effectively than we do. They may well be capable of teaching us a trick or two. They may well have a few bright ideas.
Equally, they might remind us how not to succeed. They might underline that we’re on the right path. They might dramatically highlight one or two problems we’ve overlooked and ought to factor into our longer-term thinking.
In 2015, when Novia Global was launched, this was anything but a crowded market. It’s now becoming considerably more congested, as we knew it would – which means we have to keep getting better in order to maintain an edge.
To that end, I welcome competition. I welcome it because it’s natural, because it’s healthy and because it drives innovation and improvement. I also welcome it because it should provide more choice. And I welcome it because I like a challenge.
The challenge for us is to remain at the forefront. The challenge for our aspiring successors is to displace us – and to first stick around long enough to have a chance of doing so. The challenge for advisers and their clients, crucially, is to choose wisely.
By Steve Andrews, CEO of Novia Global
