For many firms, mastering digital technologies might be the key to long-term survival and success, according to McKinsey & Company.
Building directors' information technology (IT) expertise allows boards to guide management in technology strategies and initiatives.
Whether you’re IT savvy or not, review the following questions as a starting point for shaping a fruitful conversation with management.
1. How will IT help us compete?
Technology erodes boundaries between industries and providing opportunities for “attacker” models.
For many traditional retail firms, technology has become a race to harness social media and location-based services in hopes of capturing market share.
Your executive team must identify emerging competitors and explain how technology is helping you succeed against traditional and new competitors.
2. What will it take to exceed members’ expectations?
Consumers—including your members—have been conditioned by e-commerce leaders like Amazon and Apple to expect an ultra-convenient, personalized experience.
Simply meeting consumers’ enhanced expectations can be a major effort for organizations that weren't born digital. Credit unions must automate end-to-end sales and service processes so members can transact in real time and in an error-free digital environment.
Make sure your management team has clear plans for how to exceed consumer expectations.
3. Do our plans link technology to improved performance?
By seizing certain opportunities and mitigating emerging threats, firms can dramatically improve business performance.
And while technology expenses can be high, they’re relatively small compared with the potential to boost your credit union’s operating performance by driving revenues and reducing overall costs.
Ultimately, you need an integrated plan that shows how your credit union will beat the competition using information across a multiyear horizon—not simply a revised annual IT budget.
4. Are IT investments aligned with opportunities and threats?
A dynamic IT portfolio should clearly reflect business opportunities and threats.
Balance short-term opportunities such as upgrading digital channels, medium-term platform investments such as member databases, and carefully chosen longer-term bets—for instance, piloting new, digitally enabled business models.
Review and rebalance the IT portfolio frequently, as assumptions can change quickly. Many companies, for instance, recently cut investment in the Internet channel, as customers switched to mobile apps.
Also, manage the portfolio to keep execution risk in an acceptable range. On average, large IT projects run 45% over budget and take 7% longer than expected, while delivering 56% less value than predicted.
5. How will IT improve operational and strategic agility?
IT has a significant effect on operational business agility—for example, time to market for new products—as well as on strategic business agility.
IT's ability to rapidly design and implement changes to systems, at low cost and with minimal risk, underpins business agility.
Increase IT agility by changing the systems landscape, improving data quality, optimizing IT delivery processes, and building flexibility into sourcing arrangements.
Leading businesses measure and manage both business and IT agility, ensuring that the business can respond competitively.
6. Do our IT systems deliver full value?
Technology alone delivers no value. A clear strategy, the right technology, high-quality data, IT-literate executives, and lean processes combine to create value.
Any weak link in this chain will lead to poor value delivery from IT. For example, a new IT system to support cross-selling might not boost revenues unless management improves data quality, trains staff appropriately, and realigns sales processes and incentives.
Ensure that your credit union develops the capabilities to drive full value from existing IT systems.
7. How do we measure IT accountability?
Leading organizations define a clear IT operating model, which determines exactly who's accountably for specific IT functions such as finance and human resources.
All too often, IT departments present volumes of technical data instead of a limited set of business-relevant metrics focused on productivity and bottom-line value delivered by IT.
Use scorecards to measure value delivered in the form of efficiency, agility, and risk levels. Scorecards should be intuitive for even the least IT-savvy board member, and they should be aligned with executives’ incentives.
8. Are we comfortable with our level of IT risk?
Cybersecurity is a growing IT threat, but it’s only one category of technology-related risk. Few executives understand the entire risk landscape, and many firms fail to measure and reduce IT risk.
A comprehensive system for managing IT risk addresses the root causes, including inappropriate technology, incorrect policies, poor processes, and insufficient oversight. Determine who’s responsible for overseeing all areas of IT risk.
As you work through these questions, also ask yourselves if the credit union is making the most of its technology. Interest will rise among members and consumers as you go digital.
Be ready to communicate the benefits of your IT initiatives through well-timed external messages.
This article initially appeared in Credit Union Directors Newsletter.