Strategic Management of Technology Essay

300 WordsMar 5, 20142 Pages
How does a retail bank innovate? Traditional innovation would suggest that organizations innovate by getting new and improved products to market. However, in a service, the product is the process. Thus, innovation in banking relies more in the process and organizational changes than in new product development in a traditional. Baking industry continues to unite and to invest heavily in new information technology. As a result, new electronic means of transacting with the bank continue to expand due to their relative cost advantage. Banking industry is undergoing a period of rapid change in market share, competition, technology, and the demands of the consumer. Technology plays a key role in the performance of banks. Large banks in the United States spend approximately 20% of non-interest expense on information technology, and this investment shows no signs of lessening. Even with these large investments, it is still difficult to determine the payoffs associated with these projects. In manufacturing, recent studies have found large payoffs in information technology (IT) investments, both in terms of equipment and personnel (Brynjolfsson and Hitt 1993; Lichtenberg 1995). Many believe that financial services are at the brink of major performance improvements due to technology. However, this will not come in the traditional back-office role. Rather, the performance development will arise in the combination of front- and back-office roles. Roach points out that the consolidation of back-office process is due in large part to scale economies due to IT investments, but that these investments are becoming increasingly difficult to find (1993; p. 10). However, he states that “...new productivity opportunities are now spreading rapidly across the sales function of the service sector...” It is exactly in these front-office functions that major investments will occur. Philip

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