Management Strategies

05:32 PM
Edward R. Merchant, Cognizant
Edward R. Merchant, Cognizant

Using Social Media to Drive Operational Change

The first piece in this two-part series explores how social media can help drive operational changes that are needed in financial institutions.

The "obvious" answer—simplify architectures and rationalize platforms—is easier said than done, given the lack of understanding of how these things are really tied together and the extremely long payback periods for these investments. Identification of compelling business cases is even harder in the current environment, where client and regulatory demands are likely to further squeeze near-term margins without necessarily promising significant increases in revenue. Inevitable industry consolidations will also add complexity costs to the environments of those who pursue an acquisition strategy to capture market share and economies of scale. Even if organizations were prepared to make real changes, architectural simplification and standardization always carry the threat of commoditization, disintermediation, and lower cost of entry for new competitors.

Changing the Way We Work
In the face of these challenges, what is needed is a radical change in the way work is done. Understandably, it is difficult for many industry veterans to see or believe this type of change is possible while still meeting near-term objectives. When it comes to technology investment, the tendency to only leverage new tools when the benefit is obvious has been deeply ingrained over decades. Also, if you are in operations and IT, radical change historically means more work, more execution risk, and decreased job security -- not a great incentive to go innovate. So, the industry is looking for a solution that deals with a series of conflicting and contradictory drivers:

  • Simplify offerings but avoid commoditization
  • Standardize IT and operations but differentiate products and services
  • Enable easy access but prevent disintermediation
  • Innovate but minimize disruption

The only thing that an organization has that will truly enable it to find the right balance for addressing these conflicting priorities while simultaneously dealing with an unstable business landscape is the insight, talent, and creativity of the people who are doing the actual work. However, in order to tap into this capability, the staff need to be provided information and perspective about the larger ecosystem in which they work. They also need to be able to interact more with individuals across the silos inherent in the factory model that institutions have imposed. These interactions need to be dynamic, as real innovation comes from following lines of thought in unanticipated ways.

The traditional tools of reorganization, task forces and special projects are not adequate to maintain the necessary pace. Instead, what is needed is an ecosystem that enables these interactions to naturally develop and grow at a pace an organization can sustainably maintain.

Enter social media and collaboration technologies. They have immense potential to accelerate resolution of complex problems, generate new efficiencies, and revitalize the workforce. Most importantly, by striving to increase the participation and contribution of the entire staff on a wider basis, institutions can differentiate their services via business models that are more resistant to the adverse business impacts typically associated with simplification, standardization, accessibility and innovation.

However, most likely, few, if any, of the larger financial institutions will lead the charge here. Some will simply assume this is another business cycle and that things will eventually return to business as usual. Others will wait for smaller players and new entrants to validate these ideas and then attempt to be a fast follower. The risk in these approaches is that the regulatory restrictions and pricing pressures (due to drastically increased transparency) may not afford them the luxury of time to change strategies once it becomes clear how the industry is evolving.

However, as history has shown repeatedly, crisis will forge a few business leaders that realize it's finally time to make a fundamental shift in the way they think about the importance of operations and IT. In my next post I will discuss where and how those leaders should consider starting using social media to drive operational change.

Edward R. Merchant is vice president of consulting at Cognizant.

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