I recently attended a banking conference. Hartman Executive Advisors, a technology leadership and advisory firm designed to bring executive-level IT strategy to financial institutions, presented a session called From Strategy to Success: Unlocking Technology's Potential in Community Banking.
I attended because I recognize this as a challenge for financial institutions. A challenge because community financial institutions want a CIO or CTO who not only focuses internally by creating a stable IT infrastructure that works and protects the bank, but also looks to the bank's strategic plan to determine the solutions, interoperability, and ease of use to create a frictionless experience for internal and external customers. During the session the presenters mentioned the numerous steps it takes to change a bank customer's address. The multiple steps, however, were likely develped to reduce the incidents of fraud, i.e. to "protect the bank" and its customers. This is contrary to the dual mission of creating a frictionless and easy-to-use experience for internal and external users.
I'm not sure we know what we want from our CIO or CTO.
CIO to CTO
First, let's distinguish between the roles. Consulting firm McKinsey says this about the difference: "Broadly speaking, a chief information officer focuses on internal technology, while a chief technology officer focuses on emerging technologies and product strategy." Based on my experience, we want both from that one seat on our management team, be it a CTO or CIO. We can't afford to have two people!
Bankers are notorious for focusing on the things they need to do. In my opinion the definition of "needs" should be expanded. But first and foremost, I will stipulate that the head of technology "needs" to be that internally focused person. The one that creates a stable, secure and functioning infrastructure. To be more the CIO than the CTO. As the bank grows, the role must grow with it.
Because "needs" is often described by bankers as what is "required" by our regulators. But "needs", as I see it, are what the bank needs to be relevant, even important to its customers and employees.
In my presentation at the conference, I discussed the important role component plans in the bank's strategy are to its success. These include the HR Plan, Capital Plan, Risk Appetite Statement, Marketing Plan, and yes, the IT Plan. When we ask for the bank's IT Plan, we typically get a list of IT projects that have only a loose connection to the bank's strategic plan.
This is indicative of a bank that has a CIO. One that is focused internally. One designed to succeed in their IT audits, either by internal/external audit firms or their bank examiners. These IT Plans include things like "upgrade to Windows 11" or "replace branch redundant communications in the Northern Region." Important projects for sure but bear little resemblance to the strategic priorities identified in their strategic plan. There is a disconnect.
As the role grows and evolves from CIO to CTO, these "business as usual" projects remain. Heck, nearly all projects have a technology component. But the person occupying the CIO to CTO role would have next-level management fully capable of participating, even leading these important projects designed to keep the bank running and keeping information safe and secure.
The CTO, however, would participate in the development and execution of the bank's strategic plan. If the plan calls for a funding strategy that includes multiple facets such as business deposit products that are in demand and technology-driven, or standing up a virtual branch to serve customer segments outside of the bank's geography. Introducing options on how the bank can execute on these strategic priorities and to play a key role in both leading and participating in the success of those projects.
Hiring leadership in technology has been challenging in banking. It's not exactly a high-octane career that top technologists think to join. I'm not sure why since banks were the first to employ technology. Digital general ledgers came around in the 60's and the ATM came around in the early 70's. But it is highly regulated and therefore lacks the sex appeal of other industries.
In Conclusion:
The ideal technology leader for your community bank is not a pure CIO or a pure CTO, but a hybrid – a strategic technologist with a strong operational foundation and a customer-centric vision. They are a guardian of the present and an architect of the future, capable of translating your strategic aspirations into tangible technological realities. The challenge lies in identifying and nurturing this unique blend of skills and potential within a single, indispensable leader. The characteristics outlined above provide a framework for that crucial search and development.
What are the characteristics of the person occupying this most important role at your financial institution?
~ Jeff
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