The case study runs through some of the history around Goldman Sachs' switch to thinking like a tech company, some of the tension it has caused, and some of the payoffs.
Goldman Sachs' effort to become the Google of Wall Street is now being taught in MBA classrooms.
A Harvard Business School case study on the bank's digital strategy was presented as part of the executive MBA program last week. (It's worth noting here that Marty Chavez, Goldman Sachs' CFO, is a Harvard alumnus, and spoke to Harvard Institute for Applied Computational Science earlier in the year.)
The case study runs through some of the history of Goldman Sachs' efforts to switch to thinking like a tech company, some of the tension it has caused, and the payoffs.
In a talk at the Harvard Institute for Applied Computational Science earlier in the year, Chavez referenced his relationship with Eric Schmidt, chairman of Google's parent company, Alphabet. In that talk, Chavez said, "Goldman is for risk what Google is for search." And the Harvard case study references similar sentiments from Chavez:
"Imagine if Google were closed and proprietary. You would call your Google sales representative to do a search, they would come back with results, and then you would call them back to refine or redo the search. This is how our business was done—we would go back and forth with our clients on the phone until they were satisfied with the product we developed for them. Why not give them direct access to our platform and our tools?"
This model is based on taking in data, pushing it through analytics engines, then making it available to internal and external clients through Marquee, the Goldman Sachs digital platform that Chavez has championed.
Goldman Sachs' has faced skepticism as it has opened up its data to clients. And moving to a strategy where the firm thinks in terms of applications, rather than specific financial products with individual P&Ls, has caused some tension. The HBS case study cites Adam Korn, a senior trading executive:
"Our shift from financial products to applications is organizationally complex to manage. What business are the people building these applications aligned with? It’s easy for product-specific applications, but if I am building analytics for the entire firm, where do I sit in the organization? How do I get paid? How do I know what value is being generated? These are very complicated issues."
The HBS case study cites SIMON, Goldman Sachs' structured notes platform. In 2016, the firm shifted to a multi-seller approach, opening SIMON up so users were able to buy structured notes from rival banks as well as Goldman Sachs. Paul Russo, global co-chief operating officer of the equities franchise, said:
“We realized that growth of the single dealer model had reached capacity. To continue to grow we need to add more issuers. Clients also like competition. Having multiple issuers allows clients to mix and match credit risk against payoffs effectively.”
According to the case study, the number of SIMON users had jumped to 15,000 by the end of 2016, up from 2,400. Goldman Sachs' structured note sales increased 4x from 2013 to 2016, the study said.