Coment: For Internet Success, Make Speed Learning a Priority

By Finzi, Benjamin | American Banker, April 15, 1998 | Go to article overview
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Coment: For Internet Success, Make Speed Learning a Priority


Finzi, Benjamin, American Banker


Most banks are still struggling to find a suitable approach to the Internet.

Though the Internet is on the agenda of most all top bank executives, only nine out of the 100 top U.S. banks provide even basic Internet-based account access, according to a NETBanker survey, and fewer offer full transaction capabilities.

Moreover, not one traditional bank is offering products that are exclusively Internet-enabled. Banks have neither explored approaches to modifying their business model to exploit the Internet nor developed an integrated Internet strategy.

The industry's response to the Internet falls into one of three categories: Pretend it doesn't exist or doesn't matter; analyze to the point of paralysis; or engage in frantic activity because "we've got to do something."

Why are bankers confused-or possibly even paralyzed-by the Internet? Because three valid assumptions combine to form a logical paradox, with no apparent solution:

The Internet can no longer be ignored by banks.

The Internet does not lend itself to traditional strategic thinking.

Net present value and/or return on investment are the appropriate criteria to assess any initiative.

Banks have tried to resolve this Internet paradox by dismissing the first or the second condition.

Discounting the first led some banks (and a very few today) to behave as though the Internet were not worth their attention. Today this seems an ostrich-like attitude

Other banks, denying the second assumption, tried to apply traditional strategy development processes to the Internet problem.

This has not succeeded.

The traditional processes were designed for environments of relatively low uncertainty, where the definition of "industry" is sufficiently clear and conventional forecasting can be applied. Also, a complete cycle-from research through option identification, analysis, design, implementation, and feedback-takes about a year or longer.

What do you do when the uncertainty is so high and the evolution so fast that six months may bring any of a million scenarios? You cannot pursue a yearlong process when in three to six months all your data are likely to be outdated.

Nor is operating in frantic mode a solution. Random initiatives are likely to deliver at best the performance of an averaged-run venture capital fund. When combined with the immensely higher cost of doing it within a bank (overhead as well as potential negative impact on the embedded base), this approach is economically unattractive.

Banks must adopt an approach that lets them use their embedded base and capabilities as leverageable assets instead of treating them as liabilities. Banks must be willing to recognize that their principles of strategy development may not apply to the Internet.

The solution lies in the replacement of the net present value/return on investment model with a resource allocation model that includes a clear emphasis on learning as a major economic justification for action.

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