Step 1: Identify the true problem to be solved by defining it based on feedback from the investing public. The NAOI is uniquely positioned to do this as we have direct access to hundreds of NAOI members representing a comprehensive cross-section of the investing public. Input from our user group defined the initial goal-set to include a simplified trade decision process, higher returns with less risk, lower management fees and absolute protection from market crashes.

Step 2: Generate ideas for potential ways to meet these goals based on an examination of existing research and brainstorming innovative new approaches.

Step 3: Propose tentative solutions and build prototypes based on them. Test each extensively, incorporating feedback from individual investors, to identify the "best" proposed solution

Step 4: Document the solution in detail and establish standardized rules for implementing & managing it

It is important to emphasize that our research and development process was not one in which we took the initial goals of the investing public and came back later with a final solution. Design Thinking requires the continued participation of both users and researchers in an iterative process filled with feedback loops. Only via this ongoing, bidirectional information flow were we able to ultimately create a satisfactory solution that met the goals of the investing public.

Hortz: What was your core investment premise and where did that lead you?

Hevner: From the start I knew that any new approach to investing capable of meeting the goals of retail investors would need to be based on logic developed from the observation and analysis of historical market price data. As I studied decades of data I came to the conclusion that all we can know about equity price movements with a high degree of confidence is that they are cyclical - they move up and down over time. We also know that the prices of different asset classes and markets move up and down at different times. This led me to the premise that at all times and in any economic conditions, positive returns exist somewhere in the market. My task then became to build an investment type that could find and capture these returns in a rules-based, repeatable manner.

After extensive R&D we created a new investment type that validated the premise and met user goals. We called the new investing approach “Dynamic Investment Theory” (DIT) and the investment type that it creates, “Dynamic Investments” (DIs).

Hortz: How does a Dynamic Investment work?

Hevner: The Dynamic Investment structure is remarkably simple. It is a derivative investment vehicle that combines Exchange Traded Funds (ETFs), Mutual Funds, or any liquid investment vehicle in an intelligent, dynamic structure. It has three design elements. The first is called a Dynamic Pool into which designers place ETFs or other liquid vehicles that track the asset classes and/or market areas where they want the DI to search for positive price trends. The other two variables are a very simple: a Trend Indicator and a Review Period.