From dead data to living knowledge


Most of us are familiar with Adam Smith's parable of the pin, in which task specialization leads to greater productivity. Modern business has embraced this concept, organizing companies into specialized teams to improve efficiency. But all great innovations come with unintended consequences. More and more, software is designed and targeted narrowly at specific business functions, serving the needs of specialized teams performing specialized tasks. These teams, though, also need operational and informational links to the other specialized teams. This has led to significant duplication of data between applications, and the operational overhead of keeping information synchronized between silos. In short, we have a paradox: The improved efficiency of a specialized team can lead to reduced efficiency and greater risk in the organization as a whole.


This is why in my last article, « Breaking down the silos », I encouraged manufacturers and distributors of financial products to embark on a journey towards shared meaning and organizational knowledge. Shared meaning of information is the prerequisite to be able to share information across functional boundaries. Meaning and relationships need to be assigned for data to become knowledge. Preferably, organizations need to develop a shared dictionary of data or a company-specific data thesaurus, if you will. We could label this effort the “de-siloing” of information.


Why is information within organizations so important? One answer which I find particularly useful is that we need information to perform the tasks we are responsible for.

Information in a complex environment like financial products and their distribution is just too voluminous to be able to recall from memory. Therefore, information needs to be accessible, limited to what people need it for, unique and understood.


Updating a risk disclaimer in a fund prospectus is one of many tasks that define the complete fund prospectus update process. This entire process relies on information being available for individuals to perform their individual tasks. Furthermore, and this is key, this process will produce updated or new information. All is linked: processes require information and processes produce information. This is a cycle.


I believe that a way to reconnect both processes, people and information within financial organizations is to refocus on the lifecycle of the product. The product connects all the constituent parts of the value chain and the product is what is supposed to create value for clients and investors.

We can all agree that products have a lifespan. They are invented, prototyped, produced, altered, distributed, and finally retired. Some products are physical (e.g. cars) and some are virtual (e.g. financial products). Some have very short lifespans (e.g. bread) and others have much longer ones (e.g. a life insurance product).


The central point of this article is that a holistic product lifecycle approach would allow financial service organizations to de-silo all the information stuck in their best-of-breed software, in spreadsheets, and in their employees’ memories. One of the fathers of product lifecycle theory is Dr. Michael Grieves. He has written extensively on the subject and I recommend his two books on the subject. I will use the definition from his second book (“Virtually Perfect”):


“Product Lifecycle Management (PLM) is an integrated, information-driven approach comprised of people, processes/ practices, and technology to all aspects of a product’s life and its environment, from its design through manufacture, deployment, maintenance – culminating in the product’s removal from service and final disposal”[1].


Let me come back to data and information to argue why PLM is key for companies who seek innovation in all areas of their organization. Innovation here is used as a term comprising better products, efficiencies, sustainability and digitalization.


Products are what makes a company, they represent the key to liquidity. They are the beginning and end of all commercial enterprises. In consequence, the journey of innovation must start with the product. Product development, marketing, compliance, risk, sales, operations are functions that support the lifecycle of the product. The virtual nature and inherent complexity of financial services products, and the processes required to create, change, support, protect and distribute them in a changing regulatory environment, produce an exponential growth of information. Further, adding to the complexities of such a product, are the number of service providers and market participants who all play a significant role in the PLM process. They are not just suppliers. Their roles and responsibilities extend far beyond what is expected of a supplier in a different industry.


Why has the introduction of PLM in the financial industry been lagging compared to other industries? There is no doubt that other industries like consumer goods, automotive or even space are more mature in the introduction of a holistic PLM process. I believe that the virtual nature of the products has rendered the need for PLM in the financial industry less obvious. This may indeed mislead manufacturers, making them think that waste in the production process is negligible. But waste is very much a reality in the financial industry. It is the sum of all the countless hours of trying to understand what the data means, who changed it and why, correcting errors, repeatedly inputting the same information in different systems and managing personal information silos because users do not trust the golden source of information. Has the virtual nature of a financial product led senior management to neglect PLM as a real subject, to catalogue it as a part of the product development process and to ultimately dismiss the need for it, because something digital can be fixed in the blink of an eye?


I believe that the virtual nature of the products has rendered the need for PLM in the financial industry less obvious. This may indeed mislead manufacturers, making them think that waste in the production process is negligible. But waste is very much a reality in the financial industry. It is the sum of all the countless hours of trying to understand what the data means, who changed it and why, correcting errors, repeatedly inputting the same information in different systems and managing personal information silos because users do not trust the golden source of information.

Assuming one were to implement a PLM framework for the financial industry, it would then both be driven by product change initiated by the manufacturer but also increasingly by regulation. If you add the requirement to disseminate accurate, timely, structured, and consistent product information across the distribution network and data platforms the challenge is extremely significant. This point does not even consider the question of suitability and the subsequent assessment of the various products (liquid or illiquid) for different investor types. MIFID, PRIIPS and SFDR are examples of regulation that significantly impact the product lifecycle process.


This complexity requires a radically different approach. An approach that eschews silos of information and functional fiefdoms for people, processes and software that are aligned, integrated, and share a common understanding of information. I would argue that PLM has only become more necessary inside financial services organizations because the data universe describing the product, the oversight, and the distribution is growing exponentially.


The PLM approach[2] is a holistic framework and it transcends organizational boundaries within organizations. It requires integration with internal and/or external stakeholders. One of the key questions to answer when considering the introduction of PLM into an organization is, however, where does it start and where does it end?



Adapted from Michael Grieves[3]

Michael Grieves uses the illustration above to show the ambition of PLM. The graph encompasses all the key parts of the organization. It starts with ideation of the product, building the characteristics of the product, the suitability of the target client, the manufacturing process, distribution, and sales.


In the asset management industry, PLM would encompass the fund lifecycle from ideation to the closure. That process from birth to death involves a myriad of different stakeholders both internal and external with different responsibilities but one common input – information that is understood, accurate, unique, and connected.[4]


I acknowledge that a successful implementation of PLM in finance is not for the faint hearted. Building internal consensus on where PLM should start, and end will be a long and intense discussion. Sponsors of the idea will have to build common ground among all stakeholders. However, once fully embraced and implemented, a PLM framework will make the organization leaner and more innovative, leading to better products, more satisfied investors and higher revenues and profits.


[1] Grieves, Virtually Perfect, 2011, page 4 [2] Grieves, Virtually Perfect, 2011 page 41 – Grieves stresses the importance to understand that PLM is foremost an approach. A company can buy a software to support the PLM process but PLM is at its core not a software. Please refer to the definition of PLM in this article. [3] Grieves, Virtually Perfect, 2011, page 31 [4] I explained what I mean by connected data in my last blog post “Breaking the silos”