58 CHAPTER ◆ 4 Managing Design and Development
system idea generation is having in place a new product strategy that defines areas of
strategic focus relative to the organization ’ s core competencies. For example, where mar-
ket research reveals significant demand for a particular classification of risk, manage-
ment develops a strategic focus on that area. In the end, though, ideas come from people,
including:● Customers
● Traders
● Programmers
● Financial engineers
● Management
● Competitors
● Reasearch journals, trade publications, the Internet
● Software and data vendors
● Sales/marketing staff
● Universities
● Research vendors.So many new and different ideas and technologies exist these days that bringing peo-
ple together often generates unexpectedly positive results. Management can foster inno-
vation by getting traders or financial engineers from different product teams together at
meetings, conferences, or committee meetings, creating an environment where employ-
ees feel free to seek out input of others from different parts of the company and where the
individuals contacted are ready to share what they know.
More concretely, management can foster innovation by setting ambitious, quantifiable
targets, for example, 30% of revenue must come from new trading/investment systems
this year. Nor should management be afraid to deliver do-or-die ultimatums; such threats
force product teams to move ideas through the process and into working systems.
Of course, not all new strategies get built. For some the timing is wrong, others are
not sufficiently developed, for still others the resources simply are not available or they
do not match with the company ’ s current priorities. For this reason, some firms have set
up trading/investment system idea libraries.A top stock picker and portfolio manager was rumored to have in his basement nearly every article ever
written on stock picking. A top options trader made it a habit to visit business schools in Chicago once or
twice a year to talk with the faculty.A trading/investment system innovation strategy is a master plan that guides a busi-
ness ’ new trading/investment system development efforts. It includes: the goals of the
development efforts, the role of product development, areas of strategic focus includ-
ing markets, processes, products, technologies, identification of core competencies, and
research and development spending allocations in a portfolio framework. These plans
incorporate information from trading/investment systems already in the market, systems
under development, and systems planned for the future, taking into consideration product
life cycles. This integration enables a longer-term view of the resource requirements of
planned trading/investment systems and allows product line plans to be realistically bal-
anced against expected development capacity.