(This article written by Scott Nelson appeared in NEFA Newsline March/April 2024 Conference Issue)

How many times have you heard, or even said, one of these “we don’t need to change” axioms?

What we have works — don’t break it!

What we have is good enough — get back to work.

I am embarrassed to say that I have used both. I was taught early the mantra: “If it’s not broken, don’t fix it. You will probably break something else.” Similarly, I have told software and product development teams that they must be able to identify “good enough” so that we can release a product or application and start making money. A tech-stack that works and is good enough is at the heart of every successful business.

But for design thinkers it works is table stakes and good enough is a barrier to innovation. Equipment finance service leaders today face this challenge. Good enough on a tech-stack that works can establish and even sustain success, but good enough won’t grow a business. When the only way to book and fund more deals is to apply more labor or work harder, growth will be out of reach. When new products or offerings, new market initiatives, and even new customer engagements become a challenge due to a fear of change, then enterprise management has been seduced by and is comfortable with good enough. When leadership becomes comfortable with what they have and do not demand growth, the business becomes at risk of falling behind more aggressive competition.

New ideas and digital products that are designed to help these leaders use their data better and leverage new data-driven technologies like AI often encounter the resistive comfort of good enough. The Venn diagram below of processes, technology stacks, and decision making shows the challenges of the good enough comfort zone. Companies can live with techstacks that work with processes that are good enough but if they want to grow, they have to move to the sweet spot by innovating with data.

What innovation looks like within an organization is just as unique as their goals and their data. For this article, we spoke with three organizations that are innovating with data.. These design thinkers are using data to leverage customer empathy, build deeper relationships, and use data in new ways to get past good enough and grow their businesses.


Data cultivating empathy: Dakota Financial

Dakota Financial is known for serving a credit-challenged part of the market. Dakota’s website tells vendor partners to “bring us your customers who have prior bankruptcies, tax liens, judgements, repossessions, or slow pays.” Founder and CEO Michael Green has built an Inc. Magazine “Best Places to Work” culture while engaging one of the more difficult borrower segments in the industry. How do they do this

Erin Smith is the customer relations manager for Dakota. Erin knows that some of Dakota’s customers can be difficult; many have had some bad breaks or fallen on tough times. But she comes to work every day believing two things – those customers want to do their best to meet their commitments and “I am one life-event from being in the same position.” Erin has deep empathy for her customers – both external and internal. She believes everyone deserves respect and that sharing critical information is a form of respect.

Good enough processes, tech-stack, and decisionmaking can only grow the company at that sweet spot called innovating with data.

Good enough processes, tech-stack, and decision making can only grow the company at that sweet spot called innovating with data.

“Our customers are usually on the road working hard to transport goods across the country, so having access at their fingertips is vital for them. We were excited to launch the portal at the end of last year to offer our customers the ability to view their account information whenever they want or need it. This reduces our inbound call volume, allowing us to support customer needs that are at a higher level than basic account status. We are also looking forward to adding the new platform enhancements that will allow for financial documents to be uploaded for added ease of service. This will help our customers and our internal support team.”
—Erin Smith, Dakota Financial

Any design thinker will tell you that empathy is critical to innovation because it brings a deeper understanding of customer needs. Dakota has used empathy to build a best-places-towork while serving credit challenged customers. Dakota embraces risk with data, but they don’t use data to avoid customers. They use their data to better understand customers and to better serve them. Erin Smith and her Customer Relations team have found a new way to use their data to help their customers. She and Dakota believe their customers want to meet their commitments and they are helping them do so.


Building deeper relationships through data:
KLC Financial

Randy Myhre is the director of collections at KLC Financial. His job includes the sometimes-difficult communications with funding partners that comes with delinquency. But Randy could see good news in the performance of the portfolios of his funding partners via his broader portfolio views in KLC’s DataConsole. He could see that many lenders had much less trouble than others in the market – good news. He wanted to share that bigger, better picture with them, so he took a chance. He exported dashboard views of a lender’s portfolio and used his ExportPro tool to include detailed row-based data.

“They really appreciated all the additional information I provided. Several told me that they never see some of this. They thanked me for the “special” treatment and have become more excited about their partnership with us. I send the extra reports to all my partners now.”
—Randy Myhre, KLC Financial

Randy joined KLC about a year ago. As a long-time collection specialist, he found the access to data at KLC gave him new ideas on how to manage and build relationships. CEO Spencer Thomas has been an innovator with data for years and has created both a data-centric culture and a state-of-the-art digital tool set for his team.

“As KLC evolves we are continually looking for efficiency in our business to drive faster conversions, elevate our customer experience and improve profitability. Our business intelligence and AI tools are our go to resource to find which levers to pull and when.”
—Spencer Thomas, KLC Financial

Spencer is a natural innovator. He is not afraid to try new things to achieve a vision and he is a business leader who has made the use of data central to the KLC culture. Friends of Spencer will tell you he often uses his iPhone to look at dashboards. He “walks the talk” of both digital transformation and innovation – while carrying his phone.

One digital transformation myth is that it is counter to human relationships. That fact is it is sometimes used as a reason not to move to online and automated technology in equipment finance – “We are a relationship-based business.” Randy Myhre and KLC have “busted that myth.” They innovated with data by extending KLC’s data-first culture to lender partners and strengthened some of their most important relationships.


Managing risk at speed with data:
Northland Capital

Northland Capital is a midwestern-based, national lender that prides themselves on being “industry specialists” for their customers. Northland has grown their business by over 40% in the last 18 months. They did this during the fastest rise in interest rates and longest “recession is imminent” period in U.S history. Yet Erik Anderson, Northland’s Chief Credit Officer, and his underwriting team maintained sub-1 percent delinquency throughout the expansion. How does a company grow 4 to 5 times faster than the industry average while maintaining best-in-class credit quality and avoiding the hazards of economic uncertainty?

Like KLC and Dakota Financial it starts with a data centric March/April 2024 NEWSLINE 37 culture. Erik cited a favorite saying of founder and CEO Willis Kleinjan: “People will do what we measure and monitor.” Northland’s operating and underwriting culture is built around measuring and monitoring everything – built on data. But another tenant at Northland is “be better” in everything we do. As the underwriting “point of the spear” at Northland, Erik and his team start every day looking for ways to be better using the technology, processes and skills they possess. Northland’s team of analysts, whose tenure runs from 8 to 18 years, found that they could use the data they had and their experience to increase the precision with which they evaluated deals and built their portfolio.

“Farm Producers are true entrepreneurs. They find ways to make money and are always seeking out ways to be more productive. Like every other industry, some do it better and more consistently than others. We needed to stratify our portfolio and we found we had the data to do it. We have constantly evaluated our credit models going from 5 variables to over 50 and then back to 10-15. By placing constant scrutiny on our decisioning models and leaning heavily into the hard-earned lessons we’ve had during Northland’s tenure, we’ve been able to handle the growth in volume. We feel confident in our ability as an organization to identify those deals which truly are a good fit for us.”
—Erik Anderson, Northland Capital

But the Northland team didn’t think just scrutinizing their credit models was good enough. The North American Industry Classification System (NAICS) codes are an industry standard for classifying market segments. They are good, but not good enough. Northland had more expertise and enough data to innovate. They built more precise classifications that enabled them to find their best industry sub-segments. They don’t just evaluate a trucking business by its asset type and industry, they look at what the trucks haul and when.

“We feel the industries that we operate in are core industries that produce goods and services that are necessary under all economic conditions. Because those industries are core industries, the competition for the business is quite fierce. We know we have to differentiate ourselves from the competition and we do that by constantly looking for ways to be better in every aspect of our business.
—Erik Anderson, Northland Capital

Northland’s analysts innovated by building new tools and decision-making criteria to take advantage of their experience and their data. As a result, Northland’s portfolio is built on smaller but stronger customer groups. They reduce risk by diversifying investments at a finer granularity supported by more precise models. If a sub-segment classification does go bad, it can’t hurt the overall quality of the portfolio because it makes up too small a part. Erik says the team “iterates” quickly when they see a trend they don’t like. “Live to play another day” is another favorite saying at Northland. Engage every risk smartly and appropriately – with data.

So, in 2022 when rates began going up and some lenders stepped away, Erik and his team leaned in and applied their higher precision, data-driven underwriting process. They increased their deal throughput without sacrificing the quality of their credit analysis. They maintained sub 1 percent delinquency and captured market share. They innovated by finding new ways to use data to put their experience to work identifying better customers and providing the financing those customers needed and could afford.


Thank you innovators

For any business making money, the status quo can be seductive. But if a business wants to grow, then good enough isn’t enough. Equipment finance leaders need to find people who are not comfortable with good enough and help the company innovate with data to grow. The companies and people above found new ways to innovate and grow their businesses by leveraging the data from their operations and existing technology stacks. They use data to embrace risk more precisely with expertise and discipline. They use data to enhance their relationships with partners and customers. They use data to cultivate empathy and to help their customers be better. They use their data to serve their company missions better and grow their businesses.

They don’t settle for good enough. They are innovators with data.

Written by

Scott Nelson

President & Chief Technology Officer, Board Member

Scott Nelson is the president and chief technology officer of Tamarack Technology. He has more than 30 years of strategic technology development, deployment and design thinking experience working with both entrepreneurs and Fortune 500 companies. Nelson is a sought-after speaker and contributor on topics related to IoT and digital health. His involvement in technology in the local and national technology community reflects an ongoing and outstanding commitment to technology development and innovation.


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