MBA Insights Tech All-Star Nima Ghamsari: Champion of Disruptive Innovation
By Mike Sorohan
April 17, 2018
The most influential business idea of recent years, The Economist declared in 2017, is Clayton Christensen's theory of disruptive innovation.
It refers to an innovation that creates a new market and value network that eventually disrupts an existing market and value network, displacing established market leading firms, products and alliances. Christensen, a professor with the Harvard University Business School, developed the concept in 1995 as he observed technology creating dramatic changes in manufacturing and services.
Disruptive innovation also explains why so many technology companies seemingly come from nowhere to revolutionize their industries. Which brings us to Blend, San Francisco.
"It's no secret that the mortgage process is broken," wrote Nima Ghamsari, Blend's charismatic CEO and co-founder, in a company blog. "Ask anyone in the industry, and they'll nod in agreement; mention the phrase ‘stare and compare,' and people cringe with recognition. Start trying to explain the problem and consumers and lenders alike will finish your sentence with all the reasons things aren't working."
Blend (which stands for "Better Lending") began in 2012 as a digital platform designed to automate speed up the mortgage processes. Since then, the San Francisco-based company has grown exponentially. Over the past year, Blend's customer base grown by nearly 350% percent. The company now works with lending organizations that control 25 percent of the total U.S. mortgage market, which includes Wells Fargo, US Bank and Movement Mortgage. And it's forced competitors and other industry players to play catch-up.
That Blend and Ghamsari could disrupt the multi-trillion dollar mortgage market comes from Christensen himself: he says disruptive innovations tend to be produced by outsiders and entrepreneurs, rather than existing market-leading companies.
This fits Ghamsari, a 2018 MBA Insights Tech All-Star, to a T. Prior to co-founding Blend in 2012, he worked with some of the largest financial services institutions following the 2008 financial meltdown. Prior to co-founding Blend, Ghamsari and his team worked directly with major banks and agencies to develop and implement analytical software enabling tens of thousands of underwater borrowers to avoid foreclosure.
It was during this stretch of work, Ghamsari said, that he realized the significant role the decades-old technology powering the mortgage industry's paper-based processes played in the industry's biggest challenges. And he set out to do something about it.
"When we started the company, we didn't' know all the things that were going to happen," Ghamsari said. "We saw the company with little understanding of the industry. We came in as outsiders. Early on there were a lot of skeptical people. So the first three or four years of our existence was spent developing a good understanding of the system."
Ghamsari used that outsider role to Blend's advantage. "My background is pretty much 100 percent software," he said. "The realization we had was that for an industry that was so large and so vital to the economy, there wasn't a lot of software being invested. There was a lot of opportunity. I also believed that part of our job in the industry is to push the boundaries of what is possible. More friction is not a good thing."
The result, Ghamsari said, was a product "that really works." By transitioning the industry from a paper-driven process to become more data-driven, Ghamsari and the Blend team are providing lenders with the ability to glean better insights on borrower risk. Additionally, aggregate data collection will enable policymakers to shape regulation to actual, on-the-ground conditions. Additionally, Blend's technology helps extend homeownership opportunities to those that have been historically underserved and unbanked, including low-income and disabled populations. And with the ability to instantly pull validated borrower data, Blend is streamlining a process that typically involves over 400 pages of documents and can take up to 90 days.
Ghamsari doesn't consider himself to be a "disrupter." The word he prefers is "friction"--or, more to the point, the lack of friction.
"In our case, our mission is to drive a frictionless home lending ecosystem by taking friction out of the system," he said. "That involves changing things the way they are currently done. When you take out friction more things flow through it. By removing friction you get more done and with a better results."
And while many companies work at bringing new technologies to disrupt home lending from a vertical standpoint, such as Rocket Mortgage and SoFi, Blend's is successfully transforming the existing industry through partnerships with lenders across the country. Blend is also helping lenders take steps to boost accessibility. Specific shifts in the industry triggered by Blend include: focusing on the consumer experience; leveraging high-fidelity data to reduce risk; and employing technology to lower origination costs.
Under Ghamsari's leadership, Blend has had the opportunity to work closely with GSEs, including Fannie Mae and Freddie Mac, in addition to steadily establishing Blend as a role model for best practices within the highly-regulated financial services space. The partnerships have been key to Blend's growth, Ghamsari said, as well as to greater efficiencies within the industry.
"We recognize the complexity involved in creating a simpler financing process for consumers," Ghamsari said. "However, by working together with groups like Fannie Mae and the MBA, we're leveraging each other's strengths to build an affordable, sustainable housing ecosystem that works for everyone."
As Blend continues to grow, Ghamsari sees continued opportunities. "First and foremost, we are working with customers to broaden the existing customer base," he said. "We want to make our customers better--that every loan that goes through our product is quality. There is a real growth opportunity here for our technology."
However, Ghamsari notes that the mortgage technology industry can't be overhauled overnight. "Instead of trying to make the industry truly digital all at one, we're doing it piece by piece," he said. "Creating a true digital process is going to take time--the industry is too big and there are too many people involved."
"We don't need to solve everything at once," he added. "We need to take one step and make it 10 times better."