The Right Technology

At the dawn of the 21st century, technology is driving the business of banking. Customer service is technology-powered, from the teller’s window to the loan officer’s desk. Bank operations are fully automated at most institutions. Communications are tied to telecommunications networks. Even regulatory compliance is relying more and more on electronic monitoring and reporting.

The bottom line is that technology has a major impact on a financial institution’s success in terms of customer service, earnings, and growth. As a result, technology decision making has become a top management concern. The challenge is in selecting and effectively using the right technology.

The pitfalls in technology selection are legionu00e2u20ac”and often painful. For example, a savings bank recently purchased an expensive platform system only to be faced with mass confusion and “organized resistance” from the front-line staff. Or consider the case of a community bank that decided to automate its loan application process. A great idea, but the system it bought was geared toward mortgage loans and was not versatile enough to accommodate the bank’s strategic plan to significantly increase automobile lending and lease financing. Other banks acquire excellent systems that fit their needs, but they pay far too much for the privilege.

Before you buy, you need a plan

Technology decisions are often dictated more by perceived obsolescence than by a deliberate planning process. For example, your desktop PCs are getting “outdated” and you wonder: Do we really need to replace them now or should we wait? Your core operating system lacks “versatility,” but the cost of installing a new system is high, and conversions have the well-deserved reputation for not being organizational morale builders (as in “Let’s go have some fun and do a data processing conversion”). Technology advancements occur so rapidly, however, that most financial institutions are in a constant state of either trying to keep up or worrying whether they should take a more measured approach.

This uncertain outlook to technology acquisition is understandable given the accelerating pace of technology development. As a result, decisions may end up being highly reactive to the concerns of the moment and often based on incomplete information. The bottom line is this: Unless you develop a comprehensive technology action plan that is directly tied to your business strategy, you will always feel as though you are in a perpetual state of catch-up. The goal should simply be to have a long-term technology plan that supports your institution’s strategic plan. Your objective is to make technology decisions that are aligned with your strategic planu00e2u20ac”no more and no less.

A technology action plan that accomplishes the following three things is a good starting point:
Identify the technology gapsu00e2u20ac”Technology action planning begins with identifying gaps in your institution’s present technology infrastructure. You should be asking yourself, “Are we lacking tools that could help us more effectively execute our strategic plan?”

Suppose one of your principal business strategies is to serve the medium-sized business market with a suite of products, including commercial cash management, wire transfer, positive pay services, and commercial lockbox. It’s a good bet that your current technology cannot support all of these new products and services. Your technology action plan should identify the gaps and what specific aspects of your strategic plan lack the appropriate technology tools.
Utilize existing technologyu00e2u20ac”A technology action plan provides an inventory and usage plan for existing technology. The goal is to fully utilize what you already own.

Over the past 10 years, many bankers have found themselves focusing more attention on buying new technology than on how they will go about actually using it to its full potential. Through the technology action planning process, you pull together all the disparate pieces of technology your institution has purchased and accurately evaluate the technology power you already have at your disposal.

Invest in the right technologyu00e2u20ac”Decision making guided by a technology action plan results in technology that supports the bank’s strategic objectives. The clear proof that you are investing in the right technology is when you see an excellent return on your technology investments, whether measured by improved customer service, earnings, or growth.

Ensuring that everything works together

Technology drives and sustains your business processes, hence the importance of making sure new technology works with your people and your products. Here are some things to think about:

Achieve organizational buy-inu00e2u20ac””In many organizations, technology is still owned by the information technology department,” observes Eric Hoghaug, Sheshunoff’s director of technology consulting services. “The operations manager may know the system inside and out, but those who actually use it in front of customers often do not fully understand its capabilities and are fundamentally just not comfortable with it. The challenge is to achieve enthusiastic organizational buy-inu00e2u20ac”and that means communication and lots of training.”

For technology to work properly, it must be “owned” by the institution’s users. Insist that vendor training programs involve the end users, not just the techies who operate and maintain the technology behind the scenes. Genuine organizational buy-in involves more than training, however. The goal should be for the entire staff to be comfortable with the bank’s technology and use it.

Integrate into work processesu00e2u20ac”Historically, financial institutions have purchased technology and then tried to overlay it on old business processes. A better way is to effectively integrate the technology into your organization’s internal procedures and human operations.

When a technology investment falls short of expectations, it is often either a people or process problem, not a flaw with the technology itself. For example, suppose the account opening process has 10 steps. When evaluating software to support this process, you should look at the software’s capabilities relative to each step. Rather than simply overlaying the automated process on the 10 steps, you should consider eliminating or adjusting the human steps that the software automatically performs. By integrating the technology’s capabilities into the staff’s workflow, you optimize your internal processes and employee productivity.

Use the customer-focused solution testu00e2u20ac”Unless a technology offers “cheaper, faster, or better” solutions for the customer, it may not be worth the investment, even if some employees or managers are genuinely excited about it. During the pre-acquisition due diligence process, you should seek to determine that a particular technology application will actually improve your customers’ experience with your bank.

Seek bottom-line resultsu00e2u20ac”The right technology should enable you to offer new products, save labor costs, attract new customers, or expand your existing customer relationships. But the real litmus test for technology is whether it helps your institution increase earnings and growth.

Achieving great vendor relationships

Choosing long-term partners is critically important when, as is often the case, the capabilities of various technology products are very similar. Selecting and managing technology vendors are difficult tasks because the relationship has so many facets. Basically, your decision centers on three questions you need to ask yourself (in order of importance):

  • Which vendors really grasp our strategic objectives, understand our organizational capabilities, and will be good partners for the long-term?
  • Which vendors’ technology products have the features and functionalities we need to execute our strategic plan?
  • Which vendor has the best price?

Bankers typically look at price first, but it’s not everything. The price may be negotiable, but the vendor’s commitment to partner with you for the long term is not. So, how do you find the right technology partner?

Over the years, we have developed a straightforward, proven methodology for selecting and managing technology vendor relationships that involves a comprehensive selection process, access to current pricing information, rigorous contract negotiations, and ongoing monitoring and management of the relationship over time. Vendor selection is only the first step. Effectively managing the relationship ultimately is the key to success over time.

And why is there such a strong emphasis on time? Like any partnership, your relationship with your vendor must stand the test of time. Your vendor should be there for you, not just at the occasional user group meeting, but to train your employees, to troubleshoot, and to continually improve the usefulness of the technology.

Finally, a good vendor should be steadfast enough to stay tuned to your business strategies, appreciate how they may change in response to external and internal influences, and help you constantly evaluate new technology solutions. In short, good technology vendors welcome the opportunity to be what I like to call “a good partner.”

Of course, in the end, people are the real bottom line. Enabling good people with the right technology is one of the most powerful combinations for achieving long-term success. As with almost everything in banking, at the end of the day, it is your people who will make the difference.

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