What can Equity Research learn from JIT?

Just in Time (“JIT”) is an operations management process developed in the 1950s by Toyota of Japan to compete effectively with US automakers. The JIT philosophy is simple – inventories are expensive to carry  – so don’t hold them unless they are required.  The Just-in-Time inventory system focuses on having “the right material, at the right time, at the right place, and in the exact amount”, without the safety net of inventory.

Within the Equity Research department, your inventories are the building blocks of reports or models or presentations (“sections”, if you will) to be written or built by your analyst and associates. The research product is then a carefully assembled view of a senior analyst, who has considerable knowledge in their domain, along with able support from seasoned associates. However, just like a sophisticated automobile, each report consists of complex components (engines) as well as simple “nuts and bolts”.

Value of a dedicated resource

Clients and prospects often request us to provide a dedicated associate resource, who, then are assigned to a single senior analyst team in a particular sector. In other words, this is a live one-to-one inventory (or machinery, if you will) with carrying costs.  While the cost of such a resource itself may not be significant and can still provides significant savings compared to additional internal hiring, there are several known issues, in our experience, that come up:

1. Quality and consistency: How is the quality of the research product delivered by this dedicated resource monitored by both you and the outsourcing partner on an on-going basis?
2. Day-to-day management: Would a day-to-day management of the resource by the team be a significant additional burden to the senior analyst team or their associates?
3. Outsourcing Employee Churn: What should one do with the natural churn, training of the resource?
4. Long-distance relationships: Is your analyst team spending considerable time “training” the resource, making sure that appropriate work gets assigned on a daily or weekly basis?
5. Time Criticality and Additional resources: What if I need the task to completed faster and need to use more resources?

The answers to all the above questions are highly favorable to the outsourcing partner and causes additional work and resource management tasks for the client teams.

Instead, we ask you as a top decision maker, to think of JIT. After all, your sophisticated research product still needs to be finally assembled and polished by your senior analysts and associates. Therefore, simply consider an on-demand research resource from your outsourcing partner that engages with you for that particular report, product or project. Period. This will provide a great shell product to begin with, that require minimal maintenance from your side.

In most cases, we believe that a project-based resource provides the best solution to our equity research clients.  Sector specialization is great, but you already have that in-house. If needed, shouldn’t  your outsourcing vendor train the resource adequately and not you? Second, by asking your outsourcing partner to provide on-demand research, the quality of the report or project delivered by your outsourcing partner becomes the ultimate barometer, rather than your own analyst teams worrying about the skill sets of a particular outsourcing partner’s individual and utilizing him or her effectively during the critical research production process.  Smart outsourcing partners, will then, on their own, hire and train employees that will begin to specialize in a particular sector. Indeed, that is how we began our learning and evolution.

Single versus multiple outsourcing partners – either way, use them on a project basis

Finally, a few of our prospects tell us – “we are all set – we are happy with our current outsourcing partner and are not likely to change” or worse “our experience with outsourcing partners have been dismal – the moment the contract is signed, then the quality is all down the drain”. Again JIT shows the way – Should you be happy with only one partner or vendor? or Should your experience remain the same with all outsourcing partners? In either case, using (additional) your outsourcing partners on a project basis will provide robustness and more competitive research support product delivered to you – the end client.

Letting your outsourcing vendor figure it all out

Just like your analyst base, your outsourcing partner has several employees with distinct skill sets, who may be suitable for one kind of research product, sector versus the other. Let your outsourcing partner handle the resource issue – let your analyst team focus instead on the quality of product delivered…there are enough worries on your plate already!

If you need further insights from us on your research support solutions, please call us at +1-609-285-3701 or email: admin@valanglobal.com

DLR Report _07-29-2014-Final

Juno Report 01-13-2015 Final Reviewed

Caterpillar Report_1-9-2015 Reviewed

Box Report 02-17-2015

LOST IN TRANSLATION

This week, we note that the quality of investment research output does not depend simply on the academic qualifications of the outsourcing firm’s employees.  Rather, it is more a function of experience in a similar setting or at least simulated environment and most critically, a driven motivation to excel in what appears to be a mundane task.

Very often, research support is just that – support – not an intellectual research project, but critical, nevertheless. Some client projects involve simple data collection from the internet or free public third party providers and/or coming up with well formatted tables for a report.  Even in such “simple” projects, rework/edits often becomes necessary if the expected project context or how the support output is going to be used is not presented to the outsourcing provider. Clearly, in a fast paced setting such as Investment Research Out-sourcing,  the client themselves cannot be responsible for explaining how the output should be used.

How then can both clients and the outsourcing provider minimize rework , increase quality and motivate employees in a mundane task?

In a nutshell, two ideas emerge:

(1) Responsible and  Responsive Outsourcing Provider Project management – where a constant dialogue between the IRO provider associates and an experienced (typically, a Wall Street senior analyst type) project manager helps better explain the project situation and expected results to his/her employees in a client’s absence or urgency. Second, a continuous client engagement model helps better handle similar situations in the future, based on client feedback.

(2) Superior training or knowledge transfer – can help motivate KPO employees in understanding why and how their tasks fit into the Wall Street research process. Today, as an example, some senior equity analysts are still write entire reports, format excel tables and update/fine-tune earnings models. Why? The end product vision is clearly in their sights, so the grunt work is quickly recognized as a supporting pillar or the important means to the end of investment research, which is successful investment decisions.

At ValAn Global, we strive to differentiate ourselves, through superior Wall Street type training on an ongoing basis and US based project management by research, not pure marketing personnel. Contact us via email or the phone number below to find out how we can help you further.

See also our earlier blog on why IRO ≠KPO

IRO ≠KPO

Much has been written about the burgeoning Knowledge Process Outsourcing (KPO) market.  Yet, white papers and best practices on Investment Research Outsourcing (IRO) are rarely available. In our weekly blogs, we share our thoughts on IRO specialization. This week, we outline three key reasons why IRO may differ from the traditional KPO business models.

Short product turnaround/project shelf life: A traditional KPO project typically lasts  a few  months at least, resulting in a large client deliverable or product result. In sharp contrast, an IRO project is a week or two at the maximum, with lower shelf life before investment changing news changes its current value. Therefore, (1) numerical accuracy, (2) overall presentation, and (3) differentiation of the research product often becomes more paramount in an IRO setting, compared to design efficiency or thoroughness.  Conclusion: actual Wall Street experience and project management becomes highly valuable compared to an engineering based or typical IT based project management.

High Frequency of Client-IRO Provider Exchanges: Often, the best IRO projects  involve a high frequency of client provider exchanges, even within the critical short project timelines. While the clients may actually be busy in their investment world on other higher priority projects, IRO providers need to ask the right, thoughtful but brief investment questions to engage the client and “raise the bar” of the completed project. Such pro-active work often produces the best client satisfaction. Often, project mission, direction and priorities can change for the better on such intellectual exchanges. Conclusion: Proper qualification and training of personnel is paramount in this client setting. This can indeed provide the much needed differentiation in today’s investment research product even in an IRO setting.

Client Reputation and Emphasis on Security/Confidentiality: IRO involves an implicit understanding of the high client reputation damage risk in the event of vendor inaccuracies or breach of confidentiality. The IRO product delivered is a visible, readable result or report that both clients and clients’ clients (top decision makers) access. Therefore,  IRO vendors at middle management and analyst levels also need to fully understand the end use of their services in their client product and the damage caused by poor quality. In the initial stages, the client often engages in a thorough checking and re-checking of IRO delivered product. The lesser overall re-work and the higher understanding of client’s reputation damage will result in the highest quality product. Often, the client feedback loop is not closed upon project completion. Conclusion: Dispersed day-to-day project management of multiple projects/clients in distant geographical regions often compromises quality and understanding of client end use. Lack of Wall Street experience and/or training of project purposes also results in poor client satisfaction.

IRO is our sole focus: At ValAn Global Solutions, we understand these subtle differences and broader KPO type vendor categorization can cause a large deviation in an investment research client’s satisfaction level. We aim to differentiate ourselves through (1) active US based project management, (2) rigorous training and (3) proper employee education/qualifications.  Please let us know how we can help you further.