Innovation and Reality: It’s Hard to Innovate When Your Hair’s On Fire
[Two Points of View: vendor and industry analyst]
The Vendor: Joe Spatarella, VP, Sales & Marketing, Online Banking Solutions (OBS)
Innovation has been around for a long time and is almost always viewed as a key element to progress. It requires creativity, forward-thinking and, oh yeah, time. Well, we can all be creative on some level and we can all imagine our future, but if you don’t have any time to think about innovation, it all just stops there. Doesn’t it?
How can we possibly invent and introduce something new for online business banking when we spend most of our time absorbed with the clients, products, services and systems we already have? Ironically, many FI project teams are spending 1 to 2 years working to implement technology solutions that used to be fresh and new.
So is innovation relegated to interesting reading and lively conversation? Hardly.
It actually can be more a matter of personal philosophy: if you accept the fact that every ebanking product, service, process, method and procedure can be improved, and that a minimal investment of time and effort can yield great results, you will constantly innovate.
History and experience demonstrate that only a fraction of new system functionality ever gets implemented. All the resources are focused on the initial implementation and then redeployed to another critical project. The benefits of mining features and functions that were never turned on during “phase 1” can be substantial.
Drivers for innovation can be internal or external. Internal drivers include: improvement of cost, value, timing, process and quality. Even with new products, you can implement and improve simultaneously, provided you have budget and resources to accomplish the additional work. External factors tend to have a greater impact on us as they include: new technology, economic climate, client needs and requirements, integration challenges and, of course, company initiatives. Think of internal as the “you have to want to” and external as “you better find a way to get this done”. As fear can be a great motivator, you can see how external forces can drive more innovation.
So, as you can see, our ability to innovate is less about time than it is about our state of mind and willingness to go one step farther with every task, regardless of the challenges.
The Analyst: Maggie Scarborough, Managing Director, FinServ Strategies
Fire Fighting Leaves Little to Spend, Collaboration Not Frustration is Key to Execution
Clearly, the Corporate/Small Business Banking line of business at many banks is chafed by the lack of monetary commitment from the CIO’s office, which holds the budgets for technology expenditures and technology investment in tools for innovation. The irritation rages, especially when transaction fee revenue from business customers of all sizes has helped the bank withstand the ravages of the recession.
The IT reality:
After mandates are satisfied, only 23-28% of budgets remain for technology improvements. Fast rising compliance demands now eat up to 30% of IT budgets. IT budgets remain relatively flat when accounting for spending pent-up by recession-driven fiscal conservation.
IT has a lot of mouths to feed, therefore, large institution-wide projects (due to scale), tend to get the most investment, but they have the highest incidence of failure or significant delay (60%). Moreover, capability can be diluted to the lowest common denominator, causing the business banking line of business to “go AWOL” and invest in its own solutions using operating budget. This type of investment can be a business line saver to meet goals. The strategy is driving sales to software as a service (SaaS) based solutions, which IT may have never considered before, but it doesn’t do much for business line-IT relations. Moreover, because operating budget isn’t roomy, the business line may fall into the trap of buying on price rather than capability best suited to their business customers and markets. The best strategy is for the business line and IT to work together.
Business Line-IT Collaboration Best Practices:
Work together. Over the last several years we have seen increasing numbers of institutions creating business line – IT counterparts. Capital One Bank is an example of an institution, whose business line and IT work closely to achieve business and technology goals and get the most out of investment on both sides.
Keep informed by IT. Understand what IT’s plans are and inform them with your needs, influence early.
Leverage Your Solution Investment. Think of other areas of the institution that can benefit from the proposed solution – allow them to buy in with you early.
How Leverageable is the Vendor Solution? Make sure you understand how frictionless the effort is to add applications, customizations, and roll out new services to your customers. You may want to buy the solution all of the big banks are buying, but if you don’t have time and resources to support an ocean liner maybe you need a power-yacht.
Core Providers, Aren’t Your Only Provider. Core banking application vendors are typically one-stop shops when it comes to consumer and business banking, particularly in the community banking market. But, be realistic about core’s focus on business banking – it’s not their “core” revenue generator and you may get much more capability from an independent business banking provider through SaaS.
Be Realistic about Implementation. Ego, control and staff considerations may drive your desire to implement a business banking solution on the bank’s premises. Be realistic, can you support the platform as efficiently as the vendor can serve you on a SaaS implementation? Over 63% of US institutions have implemented SaaS-based solutions.
Maggie Scarborough, Managing Director, FinServ Strategies
www.FinServStrategies.com
Maggie@FinServStrategies.com
