In his book “Zero to One”,
Pieter Thiel (one of PayPal’s founders) writes about how difficult it is for
companies to compete in completely commoditized industries, Thiel calls it
“perfect competition” – where there is little, if any value proposition or
differentiation between competitors. This is true across many industries, for
example in the field of computer networks, where the 1990’s where dictated by
companies like CISCO selling network infrastructure to enable communication.
However, these days we take the infrastructure for granted and focus on what
value we can get from the data that flows over the infrastructure – hence the
rise of the term “big data”. Companies like IBM have transformed themselves –
they no longer sell hardware, they sell value-added services.
In the same light, BDs and
IBs continue to promote “tight spreads”, “fast execution”, “excellent service”,
but are quick to forget that all their competitors are saying the same thing.
Traders take these “value propositions” for granted, and therefore discount
their value. In fact, with the mass-market availability of high end trading
platforms, “tight spreads” and “fast execution” are now the new norm, not a
benefit.
Perhaps it’s time for BDs
and IBs to start changing the status-quo, and start adding more value to their
customers. I met an interesting group of guys at the July meeting of the NIBA
that are trying to do just that, change the status quo and value proposition of
BDs and IBs. They represent and company called Delkos Research, and their tools
got me thinking about the possibilities – that perhaps it is time to start
changing the way in which BDs and IBs interact with their customers, and start
coming of age with new marketing and customer retention techniques.
Delkos is trying to create
a value-added product for use by BDs and IBs through provision of
identification of support and resistance levels (which after a quick Google
search reveals this is the primary strength of their parent company). But one
cannot help and think how this idea of value-added service can be applied in
many different ways in our industry. Sure one can start with
support/resistance, but this can quickly grow to other areas of technology,
maybe sentiment analysis, news analysis, who knows!
The bottom line is this,
it’s time to start differentiating.
Once of Delkos’s founders,
Ilan Azbel will be at the September conference in Chicago; he certainly is an
interesting guy to speak to; so meet him there, give him a call on 5127058482,
or email him: info@delkos.com
An example of a
support level identified by Delkos on Nasdaq 100 E-mini future