Pub. 6 2017 Issue 3

April/May 2017 11 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s VEGAS STRATEGY: A WARNING STORY I t’s your anniversary. You head to Vegas with your wife to celebrate with two goals in mind. First, see Celine Dion perform before her big run at Caesar’s Palace is replaced by that group that did the Macarena. Secondly, buy your kids a very lame and incredibly overpriced Las Vegas t-shirt. You step off the plane and are offered $500 in chips at a craps table, if you’ll just sit through a brief presentation about a time share in Tahiti you know you will never visit. You accept. The whole afternoon is shot, but that’s ok, you can still play craps. The rest of the evening is a blur. You wake up in the desert at noon the next day with a goldfish tattoo on your ankle, a tube sock full of Jolly Ranchers, and the Macarena stuck in your head. You didn’t see Celine, and your kids will remind you for decades to come they never received that souvenir shirt. Plus, your wife is mad — really mad. What happened? Not to speculate too much on the dark hours, but you lost sight of your overall goals; you didn’t form a strategy to achieve them, and you were distracted by the chaos that is the Las Vegas Strip. Everything that came along took precedence over what you actually wanted to do, and in the moment when it mattered most, you missed the show. Strategy leads. Strategy should always lead. That seems like a relatively common sense statement, but with respect to the financial industry, it often happens that technology either dictates what the bank will attempt or is a painful afterthought. At one point, the extent of technology in banking was a papyrus scroll, and the IT guy’s only job was making sure it was backed up. For millennia, banking was a slow process. That changed. The Knights Templar took in gold in exchange for paper notes, and international travel without carrying gold was made a reality thanks to the 13th Century Venetian banks. Now you fast forward to the 1970s, when CORE technology banking allowed a single bank to share information between branches in near real time. Enter the “Keeping up with the Joneses” of technology services. The bank down the street had several branches across town that could all give you real-time information about how much money you had. How can you not implement the same thing? How can you afford to fall behind? Little did the banking industry understand that the box they had now opened once belonged to Pandora. From CORE technology to remote deposit capture to the latest in mobile pay technology, these services all require a depth of technical skill to set up and maintain the background systems that make them possible. Add to that the regulatory requirements placed on banks to ensure the safety and resilience of all systems, and the consumer demand for constant access to financial information creates a perfect storm that banks must weather to stay competitive because, thanks to this burst of technology, the community banker’s competition is no longer located just a short walk down the street — it has become global. Technology not only affords you the services your customers demand, but servers and network connections are practically required just to keep the doors open throughout the day. When the AOL CDs came in the mail 20 years ago, it is doubtful anyone dreamed an internet connection would be crucial in accepting a loan payment. When the network needs updating, the first questions tend to be: • What will this cost? • Is that safe? • Will the auditors approve? When one of the big banks (with more zeros in their research and development budget than your entire revenue) run a commercial with a new product and service, the questions are the same: •What will this cost? • Is that safe? •Will the auditors approve? When a tornado touches down one city over and knocks banks out of commission for days, you start to question if your backups work or if the disaster recovery (DR) plan you wrote would get you through. Those are all important questions, but they are 100 percent secondary questions. Instead, start with questions that are integral to your identity: How do I want to grow? Organically? Build? Merge? Acquire? Sell? Who are my target customers? What products and services do they need? How long can I really afford to be out of commission if there is a natural disaster? Am I retaining customers when orif they move away from my town? Do I appeal to the next generation? These are just a few of the questions you need to answer before you even consider adding a new product or service, choosing a network upgrade, hiring technical resources (internally or outsourced), and also before you even consider the cost of a DR solution. Set your goals and strategy, and don’t apologize for letting strategy push you to something new and uncomfortable or intentionally letting some items pass you by for now. By all means, use technology to accomplish your goals, create efficiencies, service your customers, and become the best version of your bank you possibly can. But whatever you do, don’t let technology dictate your next steps. Don’t miss the show. See Celine. And don’t forget the overpriced t-shirt. By Rob Schuetz, CIO and Mentor, CalTech