I happen to work in the mortgage industry, a space dominated by large, buttoned up, bureaucratic competitors. And over the past five years I’ve realized that most of these large companies have a tough time getting out of their own way.
The idea that the large company’s suffer from their own inertia began to bubble up about three years ago as we worked in partnership with one of the industries largest organizations. (For confidentiality reasons I’ll call this company AIG). My partner and I developed a business process that could effectively replace the need for physical appraisals, yet guarantee that the value of the residential real estate collateralizing a mortgage loan equaled the sales price. Without getting technical, suffice it to say we used fancy mathematical formulas that could measure risk – and then price an insurance policy accordingly.
It’s a simple, strait forward concept. Why use an appraisal, which after all is simply a personal opinion of collateral value, when you could get an insurance policy guaranteeing the value in seconds. When you consider that it costs only 50% of typical appraisal prices, that there is no cost unless the loan actually closes, and there is no valuation risk it seems like a no brainier.
I then set out to find a large, well connected company to sell this product for us. After several phone calls and preliminary discussions a division of AIG known for selling mortgage related insurance products signed an agreement to become Cogent Road’s sales agent. As a small mortgage technology firm, I believed we needed AIG to get an audience with the large mortgage securitzers which would be most concerned that the collateral backing up their investments was properly valued. I believed large companies only buy from large companies.
We came to AIG with a turn key business process, and the complete software solution needed to execute. All AIG had to do was sell it. Instead, they began ooze bureaucracy into every nook and cranny of the project. Its not their fault really, its simply that they were doing what big companies do…which is cranking out an endless stream of meetings. And meeting meant more interal work (called “action items”) and pages of unnecessary documentation (called “business case studies”). Before they could sell they decided the software should be modified a zillion different ways – and everything integrated with their own client billing system. Ok, fine. We did all that.
Then we had to have more meetings with additional (more senior level, presumably) managers who had no idea what the product even was. However, they knew enough to demand more changes to the software that again we believed were baseless and entirely unnecessary. But fine, we agreed to that too.
And we spent almost a year ironing out a contract with nary a prospective client in sight. AIG demanded what large companies demand and we conceded what smaller companies concede. In the end we had a one year sales agreement and an equitable financial distribution. AIG would get the product introduced to the many different lenders they assured us were practically tripping over themselves to get started. Cogent Road would provide all hardware, software, billing and collections. It was time to sell.
But the selling never happened. In fact, nothing ever happened. During our initial couple of conference calls we realized the big company didn’t really understand what the small company was offering. Slowly, it dawned on us that if they didn’t understand it they couldn’t sell it. And they didn’t. The year came and went and we never heard a word from them. In the end, they never even called us.
Perhaps its my fault because I picked the wrong partner, who knows. But, as I write this I am sitting on a plane en route to a sales meeting with one of the nation’s largest mortgage securitzers. My advice to the smaller company with a good idea; think twice about enlisting a partner to sell it for you. If its your idea, you can communicate its benefits better than anyone. Be confident and start selling.
