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 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:
Interview comments from IT:
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:
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
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Great article Scott I liked the line, “What roles do critical thinking and communication have in our organization?” Spot on. Too often I’m confronted with a bank executive who “doesn’t have time” to learn how to use some vital software tool that’s critical to their organization and wants to fob it off on the IT group. Today’s successful banker will have an aptitude for trying to understand the technical concepts of what is possible. Then they can assimilate the banking know-how with the technical resources and dream in terms of what is possible rather than having outlandish ideas of what the IT group can accomplish when the project is punted over the wall. (this really is true in so many industries today not just banking)
Scott,
Truer words have never been spoken. As a credit union/banking vendor we see this all too often. IT’s project list is typically a mile long. Most technology companies have similar challenges between sales and product development (meaning the folks that actually write code). Most smart technology companies bridge that gap with an office of Product Management. Product management has the ability to speak both languages. Executives must still prioritize resources but maybe it’s time for banks and credit unions to bridge the IT/business line gap with an office of Product Management. In prior companies we used a great process/methodology called Pragmatic Marketing and coupled it with the Agile/SCRUM development philosophy/process. The result? We got a lot done with a little.
I agree Tim that Product Management can help bridge the gap. In my experience, the Product Management function tends to be very immature, even at some of our larger bank clients.
Scott, I think your article points out the clear necessity for a contemporary product management organization within banks. Larger banks seem to understand the discipline of product management, however, the majority of mid sized and smaller banks do not. In the context of this article, I see three pillars…..Line of Business(Commercial, Retail, etc), Product Management (Treasury Management, Emerging Payments, Consumer, etc., and IT/Operations. Product management should be held accountable for the “horizontal view” of the competitive landscape and crafting product/marketing solutions that enables the Line of Business to win in the market, with concurrence from IT/Operations on their ability to “operationalize” that strategy. Ultimately, however, Product Management drive the decisions here and is held accountable, not IT.
I like your comments David and hope you are doing well. My question might be: Why not have product managers in the LOB? Do the advantages of creating a separate group on the org chart outweigh the advantages of having product management sit with, meet with, report to the LOB?
Getting technology people near/in the LOBs is definitely the key.
1. Can this need be met by Business Systems Analysts and Business Process Analysts assigned to a particular LOB? Or does it need to be something like a product manager?
2. In this new paradigm, whose job is it to understand mulitiple systems and how they integrate? Who handles maintaining and preserving integration best practices, data integrity, etc?
3. With whom should the expertise regarding what the existing systems are capable of reside?
I am intruiged by your ideas and I would love to see some more detail describing how this could or should be executed.
The Product Manager, Business Systems|Process Analysts approaches are nice, but how does a small organization, without room under the salary cap to fill these positions, get the same result?