Imagine the reaction a chief executive would get if he or she suddenly delegated all executive hiring decisions to the human resource director.

What would regulators think if a CEO refused to attend senior loan committee meetings and, instead, entrusted major credit decisions to a vice president in credit administration?

How would a board of directors respond if a CEO empowered "Frank" in the facilities department to select a site for a new multimillion-dollar headquarters?

Sound crazy? These are all critical functions a bank CEO is expected to understand and manage. One can therefore question why technology decisions, with their huge monetary and strategic impact, are commonly seen as the responsibility of a management information systems director.

Indeed, the executive suite's ability to effectively manage technology may be the most critical issue facing the banking industry.

The emerging competitive environment of the 1980s is presenting a grave warning to bankers everywhere: failure to effectively deploy information systems that support the bank's business strategy can destroy shareholder value as swiftly and profoundly as the worst raw land deal in Texas.

This is not an alarmist warning, for there are recent examples throughout corporate America that illustrate the sweeping destruction of technical obsolescence and a failure to address new competitive realities.

Just ask Wang Laboratories, which recently watched its $1 billion in capital quickly disappear into $20 billion or 50% of its total market value.

The relentless pace of technological change will continue to redefine how banking services are delivered.

In speed, flexibility, and integration, the competitive bar will continue to move higher and higher each year.

These issues are discomforting to most bank executives because their exposure to new technologies has been limited. Most are not PC hackers who enjoy "surfing the Internet" on weekends.

Widespread Misconceptions

How, then, can CEOs better manage their information technology? First and foremost, bank executives must overcome the most prevalent misconceptions about strategic technology.

Misconception: Technology decisions should be delegated to the individuals within the organization who understand technology.

Wrong! Banks are essentially in the information business. Technology professionals can implement the tools to provide information, but activities such as defining customer information needs, designing how information should guide business decisions are the jobs of management, not technicians.

This is not to say that executives need to become computer programmers.

Instead, they should develop a basic understanding of what technology can and cannot do, and they should challenge themselves to apply technology in an entrepreneurial fashion to every business issue.

Misconception: Competing with technology will require banks to "bite the bullet" and implement sweeping and expensive systems initiatives.

Probably not. In fact, grand aspirations and a big budget are often a recipe for disaster. Technology will only bolster profitability and competitiveness when it is closely entwined with the people, processes and strategy of the bank.

Consequently, competing with technology does not necessarily require video banking smart cards and voice recognition systems.

It can mean simple thing like getting on-line real estate information for portfolio management activities, or sharing competitive, procedural and training information between branches over a computer network.

A certain level of "bullet-biting" may be required to update the antiquated operating platforms that most banks still use. But, besides this infrastructure, banks should identify leverage points, where targeted systems expenditures can create a significant business impact.

Monolithic banking systems with huge developement teams and catchy names usually become obsolete before they are completed.

The emerging competitive environment is emphasizing speed, flexibility, and focus. Bank information systems need to be developed and deployed in the same manner.

Misconception: Banks with outdated technology can compete on other strengths such as personal service, competitive pricing or unique risk management skills.

Not for long. Competitors are aggressively using technology to reshape the banking business and redefine customer value.

Just observe the market pressures that exist today. It's hard to stack a simple checking account and a courteous smile against the Fidelity Ultra package.

It's almost mind-numbing to compete with Countrywide's mortgage pricing and rate-lock options. It's nerve-racking to take interest-rate positions against the highly analytic and information-rich investment banks.

Even highly profitable banks that do not address the competitive pressures of technology will begin to feel like the Polish cavalry retreating against Hitler's blitzkrieg. It won't be pretty for shareholders.

Misconception: The best use of technology is to automate processes and reduce costs within banks.

No way. This focus on technology is myopic and dangerous. The greatest potential of new information technology lies in a bank's ability to rethink and change the way it does things.

Productivity will be a huge windfall from these new technologies, but this productivity will not come from a "slash and automate" strategy. Instead, new technologies will allow banks to break the rules that antiquated technology has created.

With new information systems, enforcing control is no longer a function of physical centralization and armies of auditors.

Customer responsiveness does not require an expensive branch facility on every corner. Loans do not always require a human to underwrite them.

The promise of new technology is in its disruptive potential. It presents unlimited opportunities for innovation instead of mere automation.

In many ways, these common misconceptions have stifled management's ability to achieve a satisfactory return on their technology investment.

How can CEOs make technology work for their organization rather than against it? To address this issue, we have developed the "10 commandments" of information technology. They are:

1. Create an information strategy plan that aligns the bank's technological environment with its strategic plan.

To determine how well a bank's technology supports its business objectives, organizations must translate their strategy into clear operational goals and measures.

Before analyzing systems, critical success factors should be identified that answer simple but telling questions such as, "What drives customer satisfaction in this area?" or "What will our competitive advantage be in this market?"

For instance, a bank may have a strategic objective or increase small business loan production. CSFs to support this production goal may be to provide 72-hour loan decisions and to maintain origination costs below 1.5% of the loan amount.

Specific lending processes and information requirements can then be defined, and information systems may be purchased or developed to enable the bank to achieve this strategic objective.

When done in conjunction with strategic planning, information strategy planning provides a disciplined way to boil a bank's lofty strategic objective down to concrete operational processes and systems solutions.

2. Frame all information systems investments around business requirements rather than technology requirements.

The key to effective information strategy planning is to stay focused on the business and not the technology. Too often, organizations begin technology planning activities with specific, preconceived hardware and software recommendations.

Technology planning should not begin with conclusions like: "First Bank needs to deploy a Windows-based branch automation system to compete in our marketplace."

Rather, the plan should first identify business issues, such as: "Our ability to respond to consumer loan requests in the branches must be significantly improved."

3. Demand that organizational change accompany all technological initiatives.

Every technological initiative a bank undertakes must be viewed as an initiative to improve competitiveness.

Technology in isolation does little to make an organization more competitive. It is unwise, therefore, to implement new technologies with the sole intent of minimizing user impact.

The implementation of any technology without changing business processes and aggressively training those using the new systems will invariably fail and waste precious bank resources.

4. Set measurable performance improvement goals for investments in technology and hold managers accountable for making these goals

CEOs have rightfully become skeptical of technology's potential to improve their bottom lines. Too many exaggerated predictions of increased sales, headcount reductions and heightened service quality have quietly dissipated while the expenses for these systems have not.

Every investment in technology should be justified with concrete revenue and expense commitments. These commitments should be incorporated into the bank's operating budget and its long-term financial plan.

5. Focus on creating an information infrastructure.

The constantly changing competitive and technical environments make it difficult to select specific, rigid systems that will serve a bank's business needs for any extended period of time. Markets change too fast, competitors change too fast and technology changes too fast to make any individual system "strategic" for very long.

To seize rapidly changing competitive opportunities, banks will need to develop and information infrastructure that allows them to implement new strategies and processes quickly. Defining a technical architecture for the bank and maintaining standards throughout the organization are paramount to building this infrastructure.

A well-designed and well-implemented architecture can give banks the following capabilities:

* The ability for systems to easily communicate and integrate with each other.

* The ability to access all information systems in the bank through a single PC.

* User-friendly access to all data and applications throughout the bank.

* Strong user tools to manipulate and analyze information.

To maintain an integrated and flexible information infrastructure, CEOs may occasionally need to twist the arms of a few division managers, who will often push for specific systems that are inconsistent with the bank's architecture.

6. Stagger and diversify investments in your technology portfolio.

Building a flexible information infrastructure will allow banks to manage their technology assets like any other investment portfolio.

The bank can stagger the investment and eventual obsolescence of its technology. It can even diversify between product providers to avoid betting the bank's technological future on one company.

With an information strategy plan, banks can reduce the volatility of their investment in technology.

A CEO can avoid being economically cornered into maintaining old, ineffective systems or being faced with the embarrassing admission to a board that the organization needs to undertake a costly retooling.

7. Actively manage your outsourcing vendors.

The rising popularity of vendors who provide service bureau, facilities management and resource management services has bee a very positive trend in the banking industry. However, bank executives must never lose sight of the motivations and economic realities of these companies. These vendors can provide low-risk, cost effective account processing by minimizing the amount of customization and specialized service they deliver to clients.

If banks want to be truly strategic with systems, they cannot rely on a service bureau provider to take the lead.

Banks should outsource all systems they they view as nonstrategic, but maintain control and invest in those technologies where the organization can develop a competitive advantage.

Customer information and management information are two areas where banks will want to rethink their outsourcing philosophy in the future.

8. Redefine the role of your MIS department.

New technologies are putting the accessibility and responsibility for information back into the hands of users.

This shift will require a new mission for the traditional MIS department.

Traditional task, such as programming, report generation, software selection and hardware maintenance are quickly being decentralized to the business areas.

The new role of MIS is to develop and maintain architectural standards - in hardware, software, data, and communications - that allow the bank's information infrastructure to develop continuously.

In this new environment, business analysis, systems/network integration, data security, and disaster recovery have become an MIS area's most valuable roles.

MIS professionals will thrive if they play the role of internal consultant. Technicians should work closely with banking professionals to define business issues, identify critical success factors, and implement new processes/systems to address these problems and opportunities.

9. Increase the technical knowledge of all executives and employees.

The payback from technology will always depend on the people who implement it. From a leadership perspective, executives have a fairly daunting challenge to better understand emerging technologies.

But denying the importance of this challenge is akin to believing that Henry Ford and Alfred Sloan made millions because they understood farming.

New periodicals and seminars are beginning to emerge that focus on executive-level training in technology.

As a first step, an executive should install a PC on the desk, gulp down a scotch, and hold a few private' training sessions with the systems director. This will be a symbolic way to start bridging the gap between the executive suites and the MIS department.

PC training should be a requirement for every bank employee. Certification programs tied to employee evaluations and promotions can be effective in boosting the technical knowledge within an organization.

10. Think cross-functional at all times.

The ultimate payoff from emerging technologies will accrue to banks that dramatically renew and redefine their organizations.

A great deal of the change efforts and new service delivery models in banking will require unprecedented levels of cross-functional coordination. Information technology promises to facilitate this task.

The CEO will ultimately be responsible for orchestrating this change and for delivering a responsive and highly efficient organization to both customers and shareholders.

To successfully lead this change, CEOs must emphasize their primary role as "chief alignment officer," ensuring at all times that the bank's strategy, technology, processes and people are well synchronized.

Next: Commonly asked questions.

Ms. Seymann is president and chief executive of M One Inc., a Phoenix-based consulting firm. Mr. Williams is the firm's managing director. This is the first of four parts. Subsequent articles swill appear in the Technology/Operations section.

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