Conventional wisdom is prevalent in the business world. As we all have seen and even experienced in corporate life, conventional wisdom assumes that old ideas always work and that these assumptions should not be challenged. While conventional wisdom may hold true in some circumstances, it does not hold true in changing situations. Eric Romero, Ph.D, a management consultant and author of Compete Outside the Box aptly notes that “while conventional wisdom may be a valid assumption in situations that don’t change, it’s unlikely to hold true in a changing situation. Old methods often don\’t work, and stubbornly using them can lead to major problems including bankruptcy and liquidation. Examples include K-mart, GM, Borders Books, Sears, Kodak, Circuit City, etc.”
Romero further contends that “conventional management wisdom dictates that companies should focus on what they know.” He cites the rise of Apple as an example of bucking that trend. Instead of focusing on computers — which is what Apple knew —Steve Jobs led Apple’s expansion into mp3 players, music distribution (iTunes), cell phones, tablets and retail. Now, Apple is one of the largest capitalized companies in the world.
How does conventional wisdom apply to mortgage banking? The conventional wisdom says that a mortgage company can’t originate purchase money mortgages through a centralized approach; that a mortgage company can’t hire rookies and make money; and finally, that not having the lowest price is fatal.
Every day, I hear senior managers tell me why they feel they can’t implement changes. Many are hesitant because “they need volume now and can’t risk rolling out a new business model.” I mention that Quicken has done it and now is the number one originator of FHA purchase money; Quicken is really one big rookie program and they do not have the lowest price in the marketplace.
While some may argue that their company’s circumstances are different from Quicken’s, this simply isn’t true. What is different is that their company is living in the past and they are invariably comfortable with the conventional wisdom business strategy. On the other hand, Quicken isn’t settling for the status quo.
A good place to see where your firm stands is to ask at your next manager’s meeting or better yet survey your entire sales force: “Are we a company that tries out new ideas, takes risks and handles failure when it happens?” I think that you may be shocked by what your employees say. If conventional wisdom dominates, it’s time to rethink your strategies.