Why Successful Boards Are Embracing Technology
Jim Sizemore, chief information officer, Information Technology, Inc.

Competition and advancements in technology have created an opportunity for boards of directors to get involved in delivering products and services to market,whereas traditionally this process has been handled in the back office–by the IT department,which took care of and understood the process.Today, competition has created an environment where we need to be market innovators rather than react to what the competition is doing. If you look at where hardware costs are today, the total cost of technology continues to come down, which is a good thing.However, the time to market creates an environment in which IT spending at a community bank is typically its largest budget item, if not the number-one budget concern. It’s right behind labor. So even though hardware costs are coming down, the cost of technology still seems to be a great component of the budget,which is why boards must be focused on it.

How do we take advantage of the decline in technology cost as we look at where technology can take us from a competitive environment and bring that expense down? It’s a challenge, and it’s why boards are looking at more technology issues every month in their meetings.The answer should be in the strategy.What are the objectives that the board and the bank are trying to achieve? The kinds of products and services needed for their customers should be their focus, not on “How does the XML web.net framework service of SOA communicate back and forth?”Rather, it should be “How do I create wealth for my bank’s customers? How do I improve on the services I deliver to them in a way that differentiates me from the competition?”

Gaining the Competitive Edge

Technology has advanced today in such a way that banks can be innovative and lead the market in bringing products and services together, but the board needs to understand how technology becomes a tool in achieving that goal. If we try to understand the intricacies of the technology,we’re lost. Leave that to the experts within your organization to take care of, but do try to understand the framework of how the technology strategy works in order to be innovative in creating new products. For example, the recent phenomenon of small business merchant services creates an opportunity to be able to help them achieve the capturing of their deposits. In this case, the time to market will differentiate you from your competition, so it becomes key.Another good example is health savings and health banking–an innovation that offers health benefit products in the financial services environment.All these changes are related to the demographics of the culture, as the baby boomers reach more toward the retirement age and need financial services.

So how do I create an environment that can produce whatever delivery channel is needed–e-commerce, Internet banking, or whatever it takes–in order to help customers in their financial planning? Because in doing so, I can help them achieve a long-term retirement strategy that says that when they retire, I’m still there to provide the same financial services as a partner with them.

Those are the keys that will differentiate how technology will be used by banks in the future.As a result, boards need to have a better understanding of how technology can achieve those goals–how the latest innovations in mobile computing can be applied and how Internet banking and Web service architecture can help banks become innovators that differentiate them from their competition.

What Boards Must Focus on Today

Technology has created an environment and an opportunity for us to create products and services that traditionally haven’t been the type of products community banks brought to market. So let’s be creative–the keys to success are no different than any other project. It takes strong project management, clearly stated objectives,metrics to measure success, and a determination of the project’s ROI.What I’m saying as it relates to technology is no different than any other project undertaken by the bank, but the directors need to understand the technology strategy in terms of how they can use this.Often it takes a strong outside partner sitting down and helping them understand not how it’s all wired together, but the purpose of the objectives.

Therefore, if I were to focus on the most important component, I would go back to strong project management. Successful projects come from having very good discipline and well-understood objectives at the board level when rolling out new products and services or opening a new branch. Focus and clarity are needed in order to be successful. Does the board need to understand the technology itself, the wiring, the integration? Absolutely not, but it’s important that the board appreciate the experience the customer is going to have as a result of the deployment.That almost-transparent use of technology as a tool in delivering service is what you’re looking for. It could be as simple as this: As a customer, the next time I’m in paying a bill, I want to be able to click on and view the check from the last time I paid that vendor so I can see the information.Or it might be as simple as I want to bring up my checking statement and look at it for tax purposes. It could be bringing in the driver’s license that was captured as a part of opening a new account at the teller line, or pulling up a customer’s last check while he or she is in the teller line so I can validate that the signature matches the check that’s being presented for cashing.

All of these are implementations of technology, and while you can get into the details at the board level, I don’t recommend that. Rather, I suggest that boards focus on what type of technology delivery can be done transparently, and then let experienced staff come together with the solutions. I’ll go back to one point, though. Strong project management will make it successful, as will clear objectives and having a well-defined ROI on the project. Banking is fun, and technology creates opportunities for innovators to differentiate themselves from their competition.Technology is a tool to facilitate those innovations and imagination.Allow your creative juices help you differentiate from your competition.

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