Management Strategies

11:10 AM

Bank IT Organizations Must Balance Risks and Rewards of Technology Innovation

Banks that seek competitive advantage through technology innovation, such as implementation of Web 2.0 technologies such as blogs and wikis, must balance the risks with the marketing opportunities.

The gods of technology giveth and taketh away -- often simultaneously. Every advance or innovation seems to come with both benefits and risks, improvements and (often unexpected) complications. Whether you chalk it up to the law of unintended consequences, hype, hubris, passivity, karma or whatever cosmic force, the best-intentioned and most-benign-seeming tech initiatives and developments frequently seem to backfire in some way.

Although the banking industry can boast many successful implementations, everyone knows about ventures that went awry. The point is not that innovation and transformation should be avoided, but rather that an understanding of the potential risks needs to go beyond technical analysis and expense tracking. The human element often sabotages the best-laid plans.

My guess is that the next big occurrence of these kinds of contradictions will come out of banks' efforts to adopt and leverage the catch-all technology known as Web 2.0 -- wikis, blogs, portals and other Web-based services based on user participation. With so much focus on customer experience, loyalty and retention -- not to mention efforts to keep up with demographic change and the implications of the youth market in terms of both customers and employees -- we should expect to see some really innovative Web 2.0-related ventures in banking.

We'll also gain insight into the risks. Bankers can learn a lot from the response (still emerging at press time) to the revelation that the CEO of grocer Whole Foods Market posted blogs under an assumed name criticizing an industry rival -- which Whole Foods subsequently announced it intended to buy. This executive embraced the communications potential of Web 2.0 a little too enthusiastically, I'd say.

Again, my point is not to warn against leading-edge technologies, but to stress the extent to which they can be double-edged swords. This challenge will be the focus of this year's Bank Systems & Technology Executive Summit, "Banking 2.0: The New Generation of Competition" (Sept. 23-26, 2007, The Royal Palms Resort & Spa, Phoenix). We're gathering a roster of industry innovators to explore the emerging opportunities -- and attendant executive responsibilities -- that new models of computing and interaction are bringing to banking. For more information or to register, visit

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