As the management of technology is relatively underdeveloped at strategic level, and, some may say, overdeveloped further down the chain, this part of the article is important because it establishes some of the key principles that must be considered at strategic level before any lower level deployment can take place and be effective. Technology today evolves quickly and the management of technology evolves more slowly.
Technology language today has adopted many terms from the biological sciences, some of which we are unfortunately only too aware of, for example, viruses. We can continue the metaphor to good effect here by using the concept of morphology, or the analysis of form and structure, to help us begin to think about how a fast moving organism like financial services can be controlled and managed effectively by a slow moving one like management theory.
The morphology of financial services is that of a somewhat amorphous aggregation of ‘corporate entities'. We know those entities as financial services firms acting in a fast moving environment. As with any organism, several different methods of surviving evolve. The largest differentiator today is the gulf between retail financial services and wholesale. There are different ‘natural' factors at work in different ways on both communities. Similarly both communities have a degree of overlap.
Retail financial services sits in an extremely fast moving environment akin to the fast moving consumer goods market (FMCG). While it has no real comparison with FMCG, because it operates in the retail environment, many of its management traits are formed by the same pressures that form classical retail businesses. The retail financial services industry has to appear to be very flexible and move very quickly being perhaps more of an early adopter of technology than its wholesale counterparts. It also engages different kinds of technology - mobile, internet and so on to a much greater degree and is more likely to be involved with so-called disruptive technologies - FaceBook, Plaxo and so on. Of course, both retail and wholesale operate in a dynamic environment that is also reflexive, that is, it receives feedback on its activities that, to some extent, form the basis of future policy and activity. This is clearly visible over the last ten years as we have seen the continual erosion of the branch structure of most banks in favour of ATMs and internet banking. Some of these activities not only benefit our changing lifestyles but they also serve the interests of the financial institutions themselves, for example by reducing costs. Some of course have negative feedback.
In the UK for example, the recent trend to outsource customer services to lower-cost India has created a backlash in the market that has even led one bank to use its UK-based customer services operation as the lead in its TV advertising campaigns. Regulation in the retail financial services sector is of a very different kind than that in wholesale. There is some overlap, but in the main, retail financial institutions are more affected by consumer regulation. There are some notable exceptions. Both are subject to data protection regulation, yet failures in wholesale banking go largely unreported while the availability of one retail bank's customer records on a street corner in Mumbai in 2006 is now recognised by most commentators as having been the tip of the iceberg. We must also not fall into the trap of presuming that retail financial services equals banking services. As the term implies, retail financial services also encompasses a range of other services including, for example, mortgage broking and pensions. The focus of all these sectors however is founded on getting at and securing a flow of product to the retail population.
Technology therefore has much more to do in this sector, with controlling the route to market for product and the ability to deliver a very fast cycle time to sale and customer maintenance. The former means that technology systems need to be designed and delivered to meet a highly variable set of needs. Flexibility is the key. Customer fashions change rapidly, available technology is essentially ‘faddish', but woe betide the institution that misses out on something like a Google or a FaceBook which can go from a few users to millions relatively overnight.
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Note: This article was sent to us by: John R. Wright at 01042010
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