Understanding/using technology, like writing, math, and deductive reasoning, is a skill set that one must possess in the 21st century workforce to succeed. It is no longer a function, and banks will fail miserably in the increasingly competitive world of financial services and payments unless they figure this out.
On a recent strategic technology planning engagement for a large mid-size bank client, I dutifully sat through a couple days of executive one-on-one interviews with the heads of the various lines of business – Retail, Commercial, Wealth Management, Small Business, Cash Management, etc., as well as the back office areas including Operations and Information Technology. The most common theme that arose in the interviews is one that the team at Cornerstone Advisors [1] hears time and again, which can be summed up as follows: “What is the proper role of IT in an increasingly complex and fast-changing banking industry where practically every project has some type of technology component?”
At this bank it was clear that the right “balance” had not been struck and, to put it bluntly, the interview process turned into a “Blame Game” between the lines of business and IT on who should be responsible for what.
Interview comments from the lines of business:
- IT can keep the lights on and help with a password reset, but they just aren’t providing any vision or leadership.
- IT always seems to have too many projects on their plate and mine seem to fall to the bottom of the list.
- They tried to help with requirements gathering on a major CRM project but just couldn’t ever seem to understand or document exactly what we were looking for, so the whole thing was a flop.
- I got so fed up waiting for help from IT that we just decided to go out and find a system on our own.
- IT just doesn’t understand our line of business.
Interview comments from IT:
- The lines of business can’t prioritize projects within their own areas let alone between the different LOBs. That always leaves IT between a rock and a hard place with too many competing projects.
- The business areas are great at identifying what doesn’t work but piss poor at helping devise solutions.
- We never say “no” to a project.
- There is next to zero executive interest, especially from the CEO, when it comes to prioritizing what our big corporate initiatives will be and where we will focus our money and resources.
- Business is great at punting things over the fence and then waiting for us to come back to them with answers.
- The LOBs just don’t understand technology and what it could or should be doing to help their businesses.
What is at the root of the “Those dweebs in IT don’t understand our business area… Yeah but those starched shirts don’t understand technology” divide that exists at so many banks?
First, technology is changing our industry faster than at any time in the history of banking. Second, understanding how technology is impacting products and delivery for our customers is vital to survival. Third, understanding how technology can be leveraged to make the business area more efficient, improve turnaround times, and handle more volume with less headcount is especially vital to survival in a commoditized industry. Fourth, the Blame Game between the LOBs and IT is getting banks nowhere, and, quite frankly, it’s getting a bit tiresome.
In Cornerstone’s experience working with banks and credit unions on both business and technology planning, it is fair to say that IT comes out on the proverbial short end of the stick in the Blame Game. Despite the undisputed truth that technology plays an incredibly important role in banking, it is still far too common for the CEO or the executive team to let the head of Commercial or Retail or Operations “punt” on a key product, delivery or process issue by saying something like, “Well I’m not really sure what the answer is because that’s a technology issue.”
In this day and age, that retort should be met with a swift glare and an invitation to start floating your resume on LinkedIn. Imagine the group executive at Mercedes saying, “I don’t really need to understand how our cars work, that’s a job for the engineers.” Or imagine Steve Jobs saying, “I think I’ll leave that product design/customer experience thing to our product team.” I’m wondering why “punts” such as these are so readily accepted in banking:
- The Commercial exec who knows nothing about commercial loan origination systems and is content to run a complex line of business on spreadsheets, Access databases, and Word docs – none of them integrated.
- The Operations exec who thinks the imaging system is great for signature cards and document archival but doesn’t have a clue on how imaging can be used to automate repetitive processes to become more efficient.
- The Retail exec who can’t explain why she spends 80+% of her time on branch related issues when 90+% of the Retail transactions are done through remote channels and the bank still doesn’t have an Alternative Delivery Channel Plan in place.
It is time for CEOs to hold their line of business executives accountable for understanding ALL parts of their respective businesses, including technology – not just the parts the execs were comfortable with 25 years ago when they first started in banking and technology meant knowing how to insert the pass book into the machine.
So many bank executive teams are asking Cornerstone about the “proper role of IT” because they are wed to a completely outdated notion that the “skill set” of understanding technology needs to reside in some separate group on the org chart. This is like asking, “What roles do critical thinking and communication have in our organization?” Duh! These are skill sets all managers need to have – just like understanding and using technology.
Today, Walmart isn’t in competition with supermarkets as traditional “retailers” on who has the lowest price on diapers and paper towels. Walmart is now in a slugfest with Amazon. They are technology companies in the retail sector competing on their business models – distribution, logistics, ease of access, and how technology impacts the customer experience. Similarly, banks have to morph into technology companies competing in the financial services sector on their business models and use of customer information and analytics to offer compelling products and offers.
It is time to blow up the traditional bank “IT group.” If one accepts the premise that in today’s world “technology” is impacting not only the delivery of bank products but also the products themselves more profoundly than ever in the history of banking, one simple question illustrates why our business model is so in need of revamping:
As a line of business executive tasked with producing revenue and staying ahead of the competition, why should I “outsource” all or a portion of business, product and technology knowledge to an internal IT group that has to juggle infrastructure, security, desktops, compliance, hardware, operating systems, the helpdesk, vendor management, project management, upgrades, and a host of other important issues?
If I were to bet on the success of a business model, the short answer is “I wouldn’t!” Don’t look to an IT “group” to be your “business partner” in accomplishing your objectives. Instead you should be developing deep business, product and technology expertise in your line of business.
Is there a role for an “IT function” in the 21st century bank business model? Absolutely. But it is best focused on the types of areas mentioned above: infrastructure, security, data and architecture standards, helpdesk, telecom, and keeping the lights on. It is naïve to think that in this age of complexity an IT group that has to hire the skill sets to accomplish all of those infrastructure related tasks can also simultaneously develop deep knowledge of Commercial, Cash Management, Retail, Private Banking, Small Business, Wealth Management, etc., etc.
Wake up banks and credit unions! Time to change. As long as you let a legacy organizational model separate technology knowledge from business knowledge, you can be sure the Blame Game will continue.
All for now.
-SAS
Get Out of the Blame Game
A Cornerstone Strategic Technology Plan [4] provides your organization with a clear picture of its technology vision, helping you better prioritize technology initiatives, analyze system payback, invest appropriately in new systems, and ensure your employees and support staff are prepared for the company’s emerging technology environment.
Contact us [5] today to learn more.