Nasdaq CEO Adena Friedman’s 3 Lessons For Dealing With Disruption

Nasdaq is one company that understand disruption. As the first electronic market in 1971, it launched as a disrupter of trading. But by the late ’90s, Nasdaq found itself the dinosaur among scrappy startups that were able to adopt new technology more quickly. Not knowing quite how to respond to the new competitive climate, Nasdaq lost ground. “I was there at the time, watching our market share go from 97 percent to 14 percent in trading,” Nasdaq’s president and CEO, Adena Friedman, told attendees gathered for Chief Executive Group’s CEO2CEO Summit. “We didn’t weather that well.”

After Friedman’s predecessor, Robert Greifeld, bought its nearest competitor, Instinet, Nasdaq began reinventing itself as a technology company. Friedman continued on that path, and today, the company provides underlying trading technology to 100 different markets around the world. Nasdaq reported record net revenues for third quarter 2017 of $607 million, up 4 percent from the year before. The market is still highly competitive, but Friedman sees that as an opportunity. “The U.S. capital markets can handle a lot more competition than other markets around the world,” she said. “We’re a better company and a better market because we have to compete.”

“Complacency is the killer of every great company.” – Adena friedman

Friedman offered three lessons for dealing with disruption:

1. Live in reality. “You can’t look the other way and pretend it’s not happening to you. We had to understand that this was the new world, that the guys competing with us were the best technologists in our space, and we had to change the way we did things.”
2. Don’t place all your bets on one killer app. “Instead of being incremental and solving problems one at a time, we had this big project that we thought would solve everything. Don’t assume there is one panacea.”
3. Regulation is not the answer. “We went to the regulators to get them to solve our problem for us by complaining,” Friedman said. But in the end, the only way forward was to compete to prove Nasdaq was the best at what it did. “As a country, we value competition and the idea of allowing free markets to force everyone to up their game.”

In that environment, no company can afford to be overconfident because there will always be a competitor around the corner waiting to eat your lunch. “Complacency is the killer of every great company,” she said. “In the blink of an eye, things can change around you. Be ready for the change and embrace it.”