Investments in technology, like virtue, are expected to be their own reward. The sheer fact of having the right technology is supposed to yield a return on the investment.

Just as values reflected in today's acquisitions beg a new core competence in customer and market management - as we wrote in our previous installment - only market-competent banks will reap technology's rewards.

Each year in the banking industry, we spend more on technology. We do so even though we are a mature industry fighting for survival against leaner, more-focused, less-regulated competitors.

We spend enough that analysts are increasingly asking if bankers have the competence to employ the technology productively enough to recoup their huge investments.

It's not that we don't need technology. And it's not that technology shouldn't be capital-intensive. After all, our customers want bank access on an anywhere, anytime, any way basis. Besides branches, they want telephone banking, smart cards, and automated teller and loan machines. They want data via home personal computers, interactive television, voice response units, and worldwide access via the Internet.

Meanwhile, corporate, investment, trust, and cash management bankers are all finding that many of their best customers increasingly prize technology-based services. And internal needs for better, faster, cheaper information fuel such innovations as artificial intelligence, data base management systems, customer profitability systems, and image processing, to name just a few.

So, what's the problem? If we're buying technology that lowers our delivery costs, satisfies customer preferences, and increases our knowledge, who's complaining?

Nobody, as long as we are also developing the corresponding competence that will make them pay. And as long as we remember that, although enhanced information can aid the development of competence, it often doesn't.

For example, when we install alternative delivery technology, we need to be able to answer these questions affirmatively: Do we know how to integrate the new technology so that it will replace, not duplicate, traditional delivery costs? Have we made our front-line people sufficiently market-competent so that they can judge which customers can be profitably served through the new channels and which we risk losing by attempting toshift them to the new channels?

Thomas K. Brown, senior banking analyst for Donaldson, Lufkin & Jenrette, draws a telling comparison between two large banks that recently developed customer profitability systems. One reportedly spent $80 million. Does that give it $80 million worth of customer-profitability competence? Sounds like more saddle than horse.

The other bank spent only $2 million on the technology itself. And they installed an ongoing customer and local market management program to ensure that the information the system provided could indeed be employed to substantially improve customer profitability. They developed the local market competence to retarget, redeploy, and change the customer mix.

When we invest in customer profitability systems, we need to ask at the outset:

*Will our customer-contact people develop the right insights and draw the right conclusions from the data?

*Will the information indeed stimulate the appropriate actions directed toward the appropriate customer groups? That is, will it help our sales people sell the right product to the right customer through the right delivery channel at the right cost?

Whether it is customer profitability systems, sales force automation, smart cards, or automated loan machines, we have to manage technology investment with a targeted return. Analysts are telling us that if we fail to get the most out of the technology, we are doubly defeating our purpose. We will have stacked additional cost on top of the already costly branches. And we will have diminished our contact with and access to crucial customer segments.

When it comes to technology and competence, there is an irony at work. It is often assumed that you have be big to afford cutting-edge technology, even though there are many examples to the contrary. But the bigger you are, the harder it is to manage change - especially change as rigorous as developing market competence.

So when we look to secure the value of the customer franchise, the challenge is not how fast we can acquire technology or information. After all, information develops rapidly; competence develops slowly. Many of us are already developing information that represents the next opportunity for breakthrough organizational performance, for example: Contribution of current customer segments; potential of current and prospective customers in a defined trade area or vertical market; the buying motives and switching propensity of key target groups; channel preferences of key target groups; estimates of likely share-of-wallet relationships in key target groups; event-based triggers in target group segments that represent optimal selling opportunities (e.g., retirement, annual bonus dates, birth of child); net present value of income streams of different groups.

These are not new data sets. They are the parlance of sales and marketing executives and the basic stuff of marketing plans. Everybody knows the importance of market segments and customer profitability. So, "If everybody knows the Ten Commandments, how come we've got sin?"

The answer is the competence gap. The rapid pace of technology advances widens the gap between what our systems can do and how well our customer- contact employees are prepared to employ them.

Peter Drucker says, "The output limits of any process are set by the scarcest resource." That is, an organization seeking to introduce change must identify its scarcest resource and then optimize it to maximize output. For us, good strategy is not scarce - we've spent a lot of time and effort to develop strategies that are, not surprisingly in this mature, homogeneous industry, notably similar.

Nor is our scarcest resource technology. You can buy the technology you need, and every day it gets cheaper.

The critical scarce resource is competence - to execute the strategy, to use the technology. You can't buy it in the marketplace. You have to instill it one step at a time, one level at a time, throughout the organization, and then continually refine it. This ability in many nonbanks is what distinguishes the market leaders. Most of us know this; we simply are not clear on how to develop the competence at the front line.

Mr. Hall is chief executive of ActionSystems Inc., a Dallas-based customer and market management company. Ms. Bird is chief operating officer of Roosevelt Financial Group, St. Louis.

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