Going Against Conventional Wisdom

Here is a good piece about going against the conventional wisdom of an industry, and how it can lead to nice profits.

People who work in a specific industry often don't see, or respond to, the changes taking place around them, according to Richard Fairbank, chairman, president and CEO of Capital One Financial. That's because the industry's conventional wisdom is so embedded in their brains that they don't notice how stale it has become. "There's an old Will Rogers saying that sums it up," said Fairbank, who gave a talk on leadership this fall at Wharton. "It ain't what he don't know that scares me. It's what he knows that just ain't so."

Narrow-minded attitudes within the financial services industry created the opportunity for Fairbank and his then-partner, Nigel Morris, to create Capital One. Fairbank stumbled upon the idea for the company while a management consultant in the late 1980s. Today, Capital One, based in McLean, Va., is one of the nation's biggest credit card issuers, earning $1.1 billion on sales of $4.4 billion in 2003, up from $900 million and $4.2 billion a year earlier. It has 47 million accounts, offers numerous financial products and is always experimenting with new ones. Fairbank said his company does about 64,000 product experiments a year. Over the five years that ended Oct. 27, its stock returned 59.4%, more than twice the return of the Dow Jones Diversified Financial Index.

It amazes me how often I read about corporations who are more interested in forcing the views of executives on customers than in having open discussion to figure out what customers want, then offering it to them. Markets and industries change all the time, and some businesses never keep up. It reminds me of my favorite Warren Buffett saying, that conventional wisdom is often long on convention and short on wisdom. How true.

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