Financial Services, Innovation and Web 2.0

"It's not a channel; It's technology"

As a member of the ISF (Internet Strategy Forum), we’ve had some discussions of late around web governance, obstacles surrounding internet strategy development and relevance/adoption of Web2.0 technologies. I was recently engaged in a Web2.0 study by another ISF member (and CTO for IBM.com) and it got me thinking...about how it relates to my business area, the financial services industry and the key issues we face in adopting Web2.0 technologies. You can find I’m sure a thousand and one definitions for Web2.0 but here’s my high-level take coupled with thoughts pulled from the web:

Web 2.0 is the result of an internet technology movement involving multi-dimensional collaboration (social networking, open standards, b2b/b2c/c2c relationships). It's the result of a technological movement where the web replaces the PC as the platform not just from a business operating standpoint but from the consumer standpoint as well.

Due to recent progresses like pervasive Web connectivity, faster bandwidth, growing numbers of online users, increased trust of online software and general cost-to-buy difference…eventually I believe that web software will replace PC software in measurable numbers.

That said, internet strategies in this area and within the financial services sector are far from where they should be and our adoption of new web technologies trails that of most other business areas and by a long shot. In order to move forward with the times and drive efficiencies in customer-centricity we need to make some sweeping changes in how we drive the business. First stop: we need to ixnay leveraging the internet as a communication “channel” and start viewing the internet from a technology perspective so that we can maximize our offerings, visualize the opportunities that lie in those technologies, and focus on "harnessing" and "developing".

What does all this mean - simple: We need to revamp our business models to incorporate internet as technology. Period.

Obstacles we face today
Policy
- Ensuring the applications and offerings don’t expose the business to regulatory or legal action. An obvious caution that needs to be carefully addressed.
- Application access control levels: Most large financial corporations are mired in hierarchical, complex authorization schemes across data repositories and web functions (understandably to keep folks from accessing things they shouldn’t) but folks across business verticals need to be able to leverage [all] the data that's available internally and externally.
- Risk (reputational and/or business risk). The kiss of death. Have someone from legal or operations say the words “there’s risk involved” and people won’t move for boo. It’s stifling. While risk is necessary to review and measure – it shouldn’t be the roadblock that halts innovation.

Technology Strategy
- Like I said, right now the internet is viewed as “just another channel” to reach our customer base but really it should be considered from a technology perspective in that it presents a fundamental shift in how we offer financial services to our customers. It means separating Internal/industry/and functional technologies from Internet Technologies.

Performance-based Goals
- Measuring ROI, prioritizing monetary returns: The requirement to address quarterly performance targets gets in the way of strategic investment period. The Web2.0 environment centers on multi-dimensional collaboration and thus carries with it a soft ROI. When dealing with innovation and new technologies such as Web2.0…we should focus on measuring information relevancy and value prop to our customers. Measurable ROI will come in time.

Sponsorship
- The internet champion. I put this one last because I feel it’s the most important and I wanted to discuss it a bit further since it impacts corporate governance and organizational structure. The industry needs to have people at the top of the corporate ladder sponsoring internet activities so that we can realize the opportunities behind the technology.

Organizational Structure
Most large corporations have some rendition of the following governance structure: They have a CMO (Chief Marketing Officer); an IT executive (or CTO focusing primarily on internal or industry-specific technologies, network infra-structures, etc.); a Legal executive; and a Customer Service executive to manage all customer level communications and interactions (think call-centers, etc.). This list might be a missing one or two but it’s pretty much the bulk.

What the structure is missing (and what it needs) is a CIO (Chief Internet Officer) whose primary focus is to drive internet technology innovation and internet technology adoption across the business while addressing the smaller needs of other business areas as they relate to the internet. All things internet should fall under the CIO; All business areas should liaisons with functional areas within the internet department to achieve their respective business goals.

An independent block that stands on it’s own and not as a sidearm to (or blended-in with) other marketing teams creates "business focus”. Blend the internet function with all other marketing areas and you end up with what we have today – function and focus gets blurred, ideas serving different needs get thrown into the same prioritization bucket, soft ROI loses and innovation gets lost.

"Innovation and the consumer" - that's what's key here. Web2.0 means a shift of power from the business to the consumer; it means a change in the way we communicate with our customers and how we service our customers. We need to harness what’s out there and we can do that if we change the way we view the internet.

It's not a channel; It's technology. Say it again...it's not a channel; It's technology.

Now... let’s start by getting ourselves a senior sponsor. CIO’s sign here please!