"Back
to the Future"
A CEO's Perspective on the IT Post-Revolution
Tony Comper, Chairman and CEO, BMO Financial Group, at IBM's Global
Financial Services Forum
San
Francisco, CA, September 08, 2003
(Please
check against delivery)
I
am genuinely honored to be addressing an audience like this on matters
as macroscopic as the future of financial services even though, when
first invited, I wasn’t sure how best I could add value to these discussions.
Having
been invited in my capacity as Chairman & CEO of the first and farthest
advanced Canada-U.S. transnational bank — something that is new under
the sun — I originally thought I might use this time to tell that story.
It
certainly speaks to the conference theme of “value creation for competitive
advantage” and it describes a very exciting time in the 186-year history
of my organization, which was actually founded to support cross-border
business between Canada and the U.S. in the friendly aftermath of the
War of 1812.
It’s
a story of substance as well, interweaving geography, history, de
facto economic integration and a truly remarkable compatibility
between two increasingly distinct peoples — and highlighting the roles
these all play in BMO Financial Group’s plans to grow our full-service
franchise in Canada while aggressively expanding in selected businesses
and markets in the U.S.
After
that it becomes the story of a successful growth strategy that has transformed
us in recent years into (based on assets) the largest Canadian bank
operating in the United States today.
But
as good as that story is, and as much as I like telling it, I think
I may have a better one for you, more timely and more useful and more
appropriate to the occasion.
It
is both an account of the end of technology as we’ve known it over the
past 30 years in our industry, and the beginning of technology as we
will know it in the new era that has already begun to unfold — what
I will call for the purposes of this discussion the IT Post-Revolution.
My
new way of thinking about the role of information technology in our
industry crystallized, innocently enough, as economic and market realities
forced me to tighten my focus on my company’s productivity challenges,
more specifically how to reduce costs when revenue growth was under
pressure.
I
recalled how often in the early years of the IT Revolution we turned
to information technology to improve productivity and IT delivered in
spades. And of how today, ironically, it is the enormous business demand
for IT that is helping to fuel our new productivity challenge.
So
it really is ‘back to the future’ for us at BMO, and for most of our
industry as I know it, and certainly not least, for our benefactor and
host today, which is already well into preparing itself for success
in IT’s post-revolutionary era.
It
seems already certain that the overwhelming demand will be for off-the-rack,
state-of-the-art solutions, buyable over the Internet from major suppliers
like IBM — solutions that work simply and flawlessly and cost next to
nothing.
I
did not realize the extent to which, by settling on the new future of
information technology as the subject for my remarks today, I would
find myself walking into the latest great debate of the information
technology age: Is IT headed for commoditization?
My
answer to that question is yes — in theory, at least. Certainly it is
a desirable goal for many aspects of our business. Realistically, however,
it will be a long time coming for organizations as large and complex
as mine.
That’s
because, in addition to requiring cost-effective solutions that both
employees and customers can readily use, we also need to be able to
integrate them seamlessly into our own platforms and systems as we tighten
our focus on using technology to simplify all of our work. This is a
tall order, as I’ll be making clear during the course of these remarks.
The
furor, the furor
I
should not have been surprised by the furor surrounding the commoditization
debate. After 30-some years of frontline and managerial participation
in the IT Revolution, I have long been aware of (and occasionally amused
by) the clashing academies of thought: IT as plug-in utility vs. IT
as philosopher’s stone.
In
fact, as I’ve often said in recent times, after I have my first heart
attack (and presumably survive it), what I plan to do is write a book
titled The Politics of Information Technology. (I’m thinking
of asking the guy who does Dilbert to handle the illustrations.)
Included
in my credentials for undertaking such a book (literary considerations
aside) is that one of my stops along the way to becoming CEO was as
the mid-1980s equivalent of chief information officer. And it was the
best job I ever had till I got the one I have now.
Fifteen
years earlier, not long after I’d joined the bank, I was tapped to train
as something brand new at the time called a computer programmer. Having
majored in English literature, and with little perceptible mathematical
bent, who else was better suited to this life among the microchips?
As
it quickly turned out the question was rhetorical. Not only did I develop
a level of computer literacy that has served me — and if I do say so,
my organization — exceptionally well to this day; right from the very
get-go, I really loved the stuff.
I
recognized it was my window (no pun intended, let me assure you) on
nothing less than a total revolution — technology’s most profound quantum
leap since mass electrification — and one way or another, I knew I wanted
a part to play.
It
was also, as I just indicated, no small chance to help build a career.
It was during my watch in the ’70s, I am pleased to say, that my organization
won the race to establish real-time banking across Canada’s nearly 10
million square kilometers and six time zones.
My
love affair with information technology continues unabated. I surround
myself with all sorts of wonderful, state-of-the-art gadgetry. And as
you may have gathered, I’m rather proud of the fact that among CEOs
(especially of a certain age), I am one of a very small circle who ‘speaks
the language’ fluently.
No
more sky’s the limit
All
that having been said, I am also a CEO who’s dealing with a productivity
crunch that won’t be going away by itself and that, unlike the good
old days, IT cannot cure.
I
am thus in the process, like most of my peers, of cutting the costs
of doing business by cutting back on expenditures large and small —
which by definition includes information technology, our second-largest
expense category, right after people.
Since
the revolution really kicked in about 25 to 30 years ago, IT has gone
from what was essentially a back-office function to an expenditure that
now, according to the U.S. Department of Commerce, takes up 50 per cent
of companies’ annual capital budgets in the United States.
We
all realize, I’m sure, that undertaking what amounts to the second coming
of IT is not exactly a walk in the park.
On
the other hand, we also know how frankly impossible such an undertaking
would have been 10 or even five years ago when both the industry and
popular media were crammed with sky’s-the-limit “strategic advantage”
stories that IT and IT alone would write — of systems that put you so
far out in front that the competition could never catch up.
But
the times have changed, and IT expenditures simply must be brought down
just like costs in any other business.
Perhaps
the most active proponent of this new vision of IT is Nicholas Carr
whose Harvard Business Review article, provocatively titled
“IT Doesn’t Matter,” got the proverbial sparks flying earlier this year.
Once
you get past the title, which does not do the article justice, what’s
left is a well-argued case — not for the death of IT but merely the
end of the Revolution.
Even
this, however, is far too much for Mr. Carr’s primary critic Dan Farber,
who, writing in Tech Update, argues that technology is still
(in his words) a “competitive weapon,” and who looks forward to a new
round of IT igniting “a new cycle of creativity and innovation.”
Another
rejoinder, in InformationWeek, insists that “the real impact
of technology on the shape of business is just beginning.”
Mr.
Carr, needless to say, had already begged to disagree: “There are many
signs,” he wrote, reflecting what many of us here at least strongly
suspect, “that the IT buildout is much closer to its end than its beginning.”
The
price of too much power
Prominent
among these signs — and one I can certainly testify to — is that, in
Mr. Carr’s words, “IT’s power is outstripping most of the business needs.”
Let’s
think about that for a moment. I’d hazard an educated guess that the
vast majority of the two main end-users in my organization — customers
and employees — actually utilize about 20 per cent of their computing
capabilities (and I’m being generous here). The rest of the investment
is mostly wasted.
How
many of you have colleagues who routinely use only a small fraction
of the icons available on their desktops? For that matter, how many
of you still work from hard copy most of the time?
While
it’s natural enough to covet and order up all the latest bells and whistles,
we have reached the point where there’s no other option but to impose
some harsh-reality user accountability.
For
starters, we need to hold ourselves accountable internally for using
what we have. This of course also costs money for training, as our people
go up a learning curve on using existing technology to understand and
serve customers better and to generate additional sales.
Equally
important, we need to hold ourselves responsible for delivering tangible,
measurable business benefits from every major IT investment, and I’m
not just talking about reducing costs or replacing stay-in-business
equipment.
I’m
talking about the need to demonstrate a direct and measurable connection
between technological investments and the revenues they are designed
to achieve — and then be held to account for achieving the projected
revenues. I will be returning to this key point.
This
leads to a greater truth about IT in 2003, which is that like most A-list
organizations, BMO Financial Group has just about all the basic technologies
we need to successfully compete right now.
In
our Canadian retail operations, for example, we have just finished rolling
out Pathway Connect, which (in my disinterested way) I consider to be
the finest retail platform in the banking industry anywhere.
The
myth of strategic advantage
Which
ironically brings me to yet another truth, one brought home to me a
long time ago: that strategic advantage based on IT is rarely if ever
going to be permanent.
I
mean it was a great kick to beat our rivals in providing real-time banking
to Canadians coast-to-coast, but I knew our competitors would all catch
up and they did, in typically short order.
The
same holds true for Pathway Connect today, just as it has held true
with every IT advantage in between; sooner, not later, the competition
catches up.
Nor,
let me hasten to add, have the scales just recently fallen from my eyes.
Five
years ago, in fact, I was saying pretty much the same thing in a slightly
different context as I worked to rally the troops around what I still
consider to be any retailer’s enduring advantage — the ability to get
it right and keep it right with customers.
We
couldn’t rely on technology to fill that role, I matter-of-factly pointed
out, because like everything else about the IT Revolution, technological
catch-up was also moving at warp speed.
My
thoughts on the limits of technology, at least as it might be useful
to my organization, go back much further than that, however.
I
have a prized book in my library titled Information Economics: Linking
Business Performance to Information Technology. It was published
back in 1988, about the time, you may recall, when IT — previously the
province of technicians and largely untouched by executive hands — took
on an exhilarating life of its own.
“Apparently
information technology is worth something,” the prescient authors open
their case on the first page of the book, “because companies continue
to invest money to install computers and create applications systems.
“They
must see some relationship between the costs of information technology
and the ultimate company economic performance. At least the benefits
received from computers, systems and programmers appear to exceed the
costs of those computers, systems and programmers.
“But
do they?”
Good
question. What’s more, it’s still a good question. I think the authors
of that book (one of whom worked at IBM, I should note) were really
on to something that we all lost sight of during the boom years: the
need to develop rigorous methodologies for measuring the economic value
of IT.
What
we don’t know does hurt us
If
the cost/benefit question was rhetorical back in the 1980s, for many
organizations is still rhetorical now. In a survey of 2,000 U.S. companies
earlier this year, including 80 per cent of the Fortune 1,000, it turns
out that “less than half … bother to validate an IT project’s business
value after it has been completed.”
In
a recent Computerworld study of more than 400 IT executives,
65 per cent said they had neither the knowledge nor the tools to do
return-on-investment calculations, three out of four had no formal processes
or budgets in place for measuring ROI; and even after six or more months
had passed, more than two thirds were unable to say whether a project
had created value or not.
There
is no great mystery, of course, to what has transpired since the authors
of Information Economics first urged the corporate world to
develop “a decision-making process that forces a shift in management
emphasis away from information technology to the effect technology has
on the business itself.”
Paul
Strassmann, CIO of NASA and former CIO of Xerox, Kraft Foods and the
U.S. Armed Forces, told the story briskly and well in his on-line Computerworld
column earlier this Summer:
From
1980 through 2001 in the U.S., he wrote, the typical IT budget grew
10 per cent to 15 per cent annually. “Each firm had to organize an IT
department, train managers, educate executives, develop most of its
software and integrate vendor offerings with disorderly legacy code.
It was easier to junk and rebuild than to accumulate and grow.”
As
a result of this confusion, and the unproven assumption that IT was
delivering more than it was costing, Mr. Strassmann said, “Vendors and
consultants thrived, with revenues growing faster than IT budgets.”
By the time total worldwide IT spending reached $2 trillion in 2001,
vendors and consultants were reaping 30 per cent of that amount.
While
my organization is fast becoming a leader in getting back to the future
of technology — as I will illustrate shortly — we found ourselves caught
up in the IT race as surely and fully as anyone else, convincing ourselves
(not inaccurately) that we had no choice.
Canada,
for those who may be unaware, has a financial services landscape dominated
by five large full-service banks, each of them managing an extensive,
coast-to-coast branch operation — and, after 25 years of massive IT
spending, a full range of 24/7 electronic channels and services.
Our
investments in technology were driven not only by competition among
ourselves but by an electronic invasion of cherry-pickers, most of them
mono-liners, looking to lure away our customers with overhead-free products
and services peddled exclusively over the Internet.
The
battle to just keep up
There
were those who were effectively writing us off, saying we were too old
and lumbering and mired in our quill-pen ways to cope with the digital
age. How wrong they would turn out to be.
Suddenly
all five big banks were aggressively recruiting the best IT people we
could entice, and creating first-class, competitive IT divisions that
were evolving into full-scale companies in their own right.
As
an industry, we quickly became and continue to be the second largest
spenders on IT in Canada, second only to the telecom and communications
industry and well ahead of manufacturing.
As
individual banks, operating in one of the most highly competitive banking
environments in the world, we all understood that falling seriously
behind in the IT race could and likely would be fatal.
Thus
the hundreds of millions of dollars each of us began to spend on IT
every year were not so much aimed at gaining dominance (even for those
who sometimes dreamed in Technicolor) but only at keeping up with each
other.
We
may not have subjected our choices, decisions and courses of action
regarding IT to the rigorous critiquing processes we are devising today,
and perhaps we did overspend on acquiring the hardware, software and
expertise we felt we needed to stay competitive — but I don’t think
anybody has to apologize for that.
I
certainly make no apologies for my organization being the first bank
in North America to offer customers a stand-alone, full-service e-banking
option. It was called mbanx, and we launched it in 1996 with lots of
ballyhoo — as well as a bit of controversy regarding the slogan and
theme song: Bob Dylan’s The times, they are a-changin’.
As
it turned out, the times had not changed as much as we’d hoped and calculated
when we experimented with mbanx. What we anticipated was a sizable demographic
of technology-savvy young people entering the economy with a predisposition
toward doing their banking in cyberspace.
There
was a demographic all right, but not a sizable one. In a few years,
mbanx, which we also introduced to the U.S. via our Harris Bank franchise
in 1997, would be quietly modified, rechristened mbanx Direct in Canada,
and integrated into the larger banking operation, one channel among
others.
When
winning isn’t everything (or even advisable)
I
thought of our now seven-year-old mbanx experiment when I was scanning
a sidebar to Mr. Carr’s Harvard Business Review story, in which
the author extols the virtues of not leading the pack in IT innovation.
He
cites Moore’s Law as guaranteeing that “the longer you wait to make
an IT purchase, the more you’ll get for your money. And waiting will
decrease your risk of buying something technologically flawed or doomed
to rapid obsolescence.
“In
some cases being on the cutting edge makes sense,” he goes on. “But
those cases are becoming rarer and rarer as IT capabilities become more
homogenized.”
While
agreeing with much of what Mr. Carr says about the virtues of being
second, I think it applies more to the present than to 1996, when “strategic
advantage” was still the prevailing mantra.
And
when it was still generally accepted that no matter what the challenge,
technology either had or soon would have a solution.
And
when precious few people were even wondering, never mind checking, whether
or not these solutions would ever cover their costs, much less pay for
themselves (as assumed) “many times over.”
That
said, our high-profile foray into “strategic advantage” territory was
hardly catastrophic. We had to develop a first-class, full-spectrum
electronic banking channel in any case, just as our rivals were doing,
and with mbanx Direct, that’s exactly what we’ve got.
Nor
were we at all discouraged from launching the first on-line brokerage
in North America. It’s called BMO InvestorLine in Canada and Harrisdirect
here in the United States, and it is one of the cornerstones of our
transnational operations.
Still,
I think it is fair to say (certainly based on my reading) that we have
emerged among the early leaders of IT’s post-revolutionary era, where,
in the words of Paul Strassmann, “businesses are done with mere technology.”
And where “future CIOs will have to cope with meager dollar growth”
and will survive only “by rethinking how they spend the money in their
budgets.”
The
person who performs the CIO role at BMO Financial Group is Lloyd Darlington.
Lloyd has led our IT operations for 15 years together with his right-hand
man Barry Gilmour, who is with us today. By Mr. Strassmann’s definitions,
they have put BMO on the cutting edge of the IT Post-Revolution.
Post-revolutionaries:
a head start at BMO
Lloyd
and Barry took the lead in helping our entire organization come to terms
with the reality that, like all good things, the IT Revolution was going
to have to end one day — and that we had better start getting prepared.
While
we continue to spend hundreds of millions of dollars a year to maintain
and strategically expand our IT capabilities, our Technology & Solutions
group has managed to improve the ratio of IT spending to revenue by
160 basis points over the past three years.
Now
as all here gathered can appreciate, this is no mean feat in itself
given the challenging revenue environment and the huge and ongoing maintenance
and upgrading costs associated with so much of our technology.
What
it has meant, in basketball terms, is employing a full-court press;
and doing so both relentlessly and dispassionately, reaching whole new
levels of discipline and rigor.
In
a phrase, we are reclaiming our technological destiny — which almost
exclusively means at this stage getting the most out of what we’ve got.
Let’s
start with centralization of the IT function to eliminate overlap and
duplication.
While
we have long held a centralized view of technology management at BMO,
the proliferation of technologies such as PCs and open systems over
the past decade has made it too easy for individual departments and
lines of business to invest in IT on their own. These decentralized
investments were not subjected to the same rigorous, disciplined management
as our centralized investments.
Correction
of this state of affairs is vigorously under way. So far, we have brought
more than 99 per cent of our IT people and well over half of our infrastructure
assets into a reconfigured centralized model, which, when completed,
should by itself reduce our overall costs by a projected 15 to 20 per
cent.
Holding
ourselves and each other accountable
I
note with interest that Mr. Carr is especially incensed by what he calls
a traditionally “sloppy” approach to data storage, which he says now
accounts for more than half of many companies’ IT expenditures.
“The
bulk of what’s being stored on corporate networks has little to do with
making products and serving customers,” he says. “It consists of employees’
saved e-mails and files, including terabytes of spam, MP3s and video
clips.”
He
quotes Computerworld’s estimate that “as much as 70 per cent
of the storage capacity of a typical Windows network is wasted” and
concludes that while “restricting employees’ ability to save files indiscriminately
and indefinitely may seem distasteful for many managers … it can have
a real impact on the bottom line.”
Let’s
face it: One of the biggest challenges we all face when it comes to
spending our IT dollars most effectively is our own limitations. The
simple truth is that most line-of-business leaders, intent on growing
their own particular businesses, have neither the technological expertise
nor the enterprise perspective to make the best decisions regarding
technology investments.
That’s
why it was so critical for Lloyd, Barry and the entire IT team to take
a much more active role in guiding the business leadership on these
matters. And why we are putting measures in place to hold every business
leader accountable for delivering business benefits from IT investments.
In
addition to this major shift toward user accountability, we have shifted
into a new and permanent “one-organization / one-set-of-processes” mode.
For example, we are deeply involved in the movement to impose international
standards and credentials on our IT processes.
This
will go a long way toward alleviating the huge challenge and very considerable
expense we have faced in trying to integrate myriad conflicting standards
used by vendors. It will also make it much easier and more cost effective
to integrate new acquisitions.
No
regrets, but also no problem exploiting the buyer’s market
Outsourcing
has been and continues to be an important part of the way we maintain
and enhance our competitive edge while reducing costs, but as I think
we have all discovered in the past, sometimes going out of house will
end up costing more rather than less.
In
short, the business case depends on where you start in terms of existing
technology, which is one reason the whole question of how best to utilize
outsourcing is, in my view, still very much an open one.
As
with every other potential cost/benefit action we at BMO Financial Group
pore over in IT’s post-revolutionary era, we are subjecting outsourcing
decisions to the most rigorous of critiques.
The
other new basis we’re working on is that whether you’re talking hardware,
software or expertise, the transition has already been made from seller’s
to buyer’s market. Prices have dropped to affordable levels, and the
capacity of the Internet has caught up with demand.
And
indeed, to borrow Mr. Carr’s words, “vendors are rushing to position
themselves as commodity suppliers or even as utilities.”
The
one thing that bothered me about Mr. Carr’s article, aside from the
title that didn’t fit, was what could be interpreted as blaming the
vendor.
This
is a position from which I would publicly like to distance myself, not
just because my host happens to be the largest vendor of IT in history,
or because some of my best friends have been vendors, but because we
were all adults in the Revolution together and in the end we buyers
did get what we needed.
That
we also got a lot more than we needed is attributable to the exuberance
of the times, as one of the greatest creative explosions in history
ran parallel to what many were saying was a never-ending bull market.
Are
we taking advantage of the newly evolved buyer’s market to negotiate
better deals with IT suppliers? Of course we are. Who wouldn’t be? But
are we recriminating? Not a bit of it. That would be looking backward,
and backward is not where we look in my organization — unless, of course,
it is for instruction and inspiration.
Giving
people what they want
Notwithstanding
the competitive advantages I have discussed so far — becoming a leading
transnational bank and moving quickly to identify and adapt to the IT
Post-Revolution — we at BMO still have at least one more make-or-break
challenge to deal with.
Human
behavior.
I
think that I can say without much fear of contradiction that the greatest
single hurdle to effecting successful technological change has been
and still continues to be our own woefully inadequate understanding
of what drives human behavior.
Consequently,
and to our considerable detriment, we have been slow in developing the
critical insights required to optimize our choice of technologies and
then put them to their dual purposes of controlling costs and creating
value that customers will happily pay for.
While
we are very good with machines, in other words, and (as I have demonstrated)
getting better all the time, when it comes to the emotional and intellectual
factors that drive customers’ banking routines, we as an industry still
have an awful lot to learn.
I
have already spoken of the mbanx experience in 1996, when we leapt ahead
with North America’s first stand-alone full-service electronic bank,
noting how we had misjudged the size of the demographic that would flock
to such a bank.
The
size of the demographic, however, was not our only problem. What really
happened was that, in the spirit of the times as I have already described
them, we let collective enthusiasm for the vast potential of Internet
banking overwhelm sufficient consideration of how flesh-and-blood customers
might actually respond.
In
focusing on the early adapters (like, for instance, many of us), we
temporarily lost sight of the fact that as a mass retailer, what we
really needed was an e-banking business model that worked for the broader
population.
When
we regained our sight, which happened in fairly short order, it didn’t
take long (as I said) to convert mbanx into one more full-spectrum banking
option available to all customers.
I
said no regrets before and I’ll say no regrets again. The absence of
catastrophe aside, that experience would provide both my organization
and our industry with an invaluable lesson in human behavior.
Creating
a bit of a monster
The
larger learning I will share with you today involves ingrained banking
habits of Canadian customers — the ones I know best — and the unchecked
revolution of their rising expectations.
The
people of Canada have become accustomed to uncommonly accessible, convenient
and inexpensive banking services — the result of a list of factors beginning
with the industry consolidation that was completed back in the mid-20th
Century, leaving the country with (as noted earlier) a small group of
extremely competitive national banks with nation-spanning branch networks
and (now) unsurpassed electronic access.
But
in fuelling this revolution of rising customer expectations, we have
created a bit of a monster for ourselves: a customer base that accepts
nothing less than the service to which it has become accustomed — and
will all but take to the streets at the hint that we might be thinking
of raising our fees.
And
yet, what choice did we have? In order to stay competitive with one
another (as I also mentioned earlier), all five of the so-called Big
5 banks were forced to make huge investments in technological solutions
to reduce per-transaction costs — solutions (especially e-banking) that
would succeed remarkably.
While
this enabled us all to keep our fees competitively low, it also gave
customers an expanded sense of entitlement to a vast range of high-quality
products and services at (to reach back for a useful old phrase) “fire-sale
prices.”
Now
perhaps what I’ve been describing here is peculiar to the Canadian experience,
where people look at banks not quite as public institutions, but not
quite as private businesses, either.
Having
kindled this vague sense of ownership — which has served our purposes
too — we are once again faced with consequences.
What
is not peculiar to Canada, I suspect, is the extent to which technology
has transformed customer behavior beyond where we hoped and intended
it to go.
If
it feels good, do it more often
We
were counting on much-reduced transaction costs as more and more customers
switched to increasingly convenient electronic channels rather than
go through tellers. And in fact our per-transaction costs have spiraled
steadily downward.
What
we didn’t count on, however, was the other way electronic banking would
transform customer patterns — that they would suddenly begin to undertake
more and more transactions at (let me remind you) fire-sale prices,
thus sending transaction volumes spiraling steadily upward.
Once
again we were asking ourselves, what’s a poor banker to do?
The
Post-Revolution in IT can only provide part of the answer to that question.
The out-outsourcing and consolidation of certain back-office operations
like check-processing, which Canadian banks undertook several years
ago, has played a part as well.
But
the enduring answer — and there is one — lies in a couple of other options,
both demanding the development of a significantly better understanding
of human behavior. To give these options context, let me take you back
to the introduction of the automated bank machine in Canada in the late
1970s.
We
tend to forget these days that the ABM (or ATM as it’s known here in
the States) was not exactly instantly embraced by the banking masses.
That
would take continuous improvement in ease of use, and it would take
time. A full decade would have to pass and a new, technologically literate
generation would have to arrive on the scene before this channel was
successfully customer-friendly.
The
old time/reward equation
What
I am saying is that even with the penetration levels of technology in
Canada today — and we are one of the world’s most intensely wired societies
— we must never lose sight of the fact that most people fear and actively
resist what they don’t understand.
And
that when you factor out that thin slice of early adapters, Canadians
(and most everybody else) readily and regularly discard new products
and services — or elements of new products and services — that demand
any more than a tiny amount of learning time.
If
customers decide a new technology isn’t worth the investment of the
time required to learn how to use it (the old time/reward equation),
or if it intimidates them (as is so often the case), then, however dazzling,
that new technology simply fails to do its job.
One
of the key reasons the national rollout of debit point-of-sale was a
runaway success in Canada was because it required so little adapting
on the part of the customer.
By
the end of the ’80s, Canadian consumers had fully mastered the basic
banking machine, and in Canada point-of-sale technology is built directly
on standard banking machine technology: same card, same personal identification
number, same basic device. Who could ask for a better time/reward equation?
Perhaps
the most important thing we have learned in Canada about human behavior
vis-à-vis banking is that it will be an exceptionally long time (if
ever) before customers accept any reduction in those levels of convenience
they now take for granted — anytime access through multiple electronic
channels and as much personal contact as they need or simply want.
Viva
la revolution, and post-revolution too
Arguably,
of all the measures we take to minimize our costs and prices while maximizing
our revenues and services, the most crucial and sustaining is effective
customer knowledge management.
Today,
thanks to the state-of-the-art technologies acquired during the IT Revolution,
we are at a point in our industry’s history where that insight is being
translated into a full, accurate financial services profile of each
customer — and where this profile becomes instantly available to any
and every employee who may be able to put it to use, in both the customer’s
and our own best interests.
That
said, even those of us in the lead are aware (more so than most others,
perhaps) that we have a long way to go before we make full use of the
technology we already have. We need to get a whole lot better at training
our people to use the technology at their disposal. And we need to get
a whole lot better at offering solutions customers can readily use.
Perhaps
the biggest question we now need to address is simply this: What is
the true business value of customer knowledge? And I’m not talking about
philosophical debate but a whole new level of user accountability.
As
I said at the outset, the IT Post-Revolution will be characterized by
a very pragmatic drive for productivity improvements, in particular
an accurate accounting of how each IT investment has paid off (or not
paid off!) in revenues.
I
have covered a lot of territory today, and I only hope that my observations
on the IT Post-Revolution from a working CEO’s perspective will be of
help in some small way to your own strategic thinking.
Most
of all, remember that despite all the change and complexity, it still
comes down to this:
No
matter where we set up shop and ply our trade, no matter how clever
our strategies or brilliant their execution, sustainable success comes
down to providing solutions that every employee can understand and get
behind and sell; and that every customer can understand and appreciate.
References
Tod,
M. and Duffy, J. 2003. “Charting a Course Through Stormy Waters: The
IT/Business Savvy Professional,” CIO.com (July 23)
Carr,
N.G. 2003. “IT Doesn’t Matter,” Harvard Business Review (May)
Farber,
D. 2003. “The End of IT As We Know It?” Tech Update (May 28)
Venkatraman,
N.V. 2003. “Other
Voices: The Real Impact of IT Is Just Beginning,” InformationWeek (June
23)
Parker,
M.M., Benson, R.J., Trainor, H.E. 1988. “Information Economics: Linking
Business Performance to Information Technology,” Prentice-Hall
King,
J. 2003. “Survey Shows Common IT Woes Persist,” Computerworld (June
23)
Pisello,
T. 2003. “ValueIT: IT Value Chain Management for CIOs and IT Executives,”
Alinean
Strassmann,
P.A. 2003. “Era of Expansion Ends: Time for Restructuring,” Computerworld
(July 7)