Leap of Faith

By Elizabeth Judd

Bankers who oversee Internet ventures must be visionaries, evangelists and corporate psychologists. Are they up to the challenge?

Exciting opportunity or bewildering challenge? It's actually a healthy dose of both for the growing numbers of seasoned bankers being placed at the forefront of their companies' Internet ventures. As they grapple with uncertainties, struggle to launch projects and push for organizational change, these veterans personify the challenges banks face in embracing the Internet. As Denis O'Leary, the new head of chase.com, says, “We're at the crossroads of a lot of change.”

As the importance of the Internet has grown in banking, so has the need for individual institutions to create their own central coordinating authority. Someone has to oversee a company's various e-commerce initiatives and place them within a coherent strategic framework. Responding to this need, some of the nation's largest banks are appointing "e-commerce czars."

You won't see that designation on anybody's business card, of course. Each bank has created its own job title. Edward D. Horowitz, for example, is chief executive of Citigroup's e-commerce unit, e-Citi. David Carroll is First Union Corp.'s chief e-commerce officer. James Dixon is styled "BankofAmerica.com executive" at Bank of America Corp., while Janey Place is manager of e-commerce strategy at Mellon Financial Corp.

Though the titles differ, all of these individuals have one thing in common: each is responsible for leading the digital charge at his or her respective institution. Carroll explains his job in this way: "It gives me license to pursue anything as it relates to the Internet. It's my job to make sure our company stays at the forefront of change. That's not to say we'll be the first at everything, but that we should be making conscious decisions to take advantage of opportunities."

The fact that so many banks have chosen to create such positions demonstrates the importance the industry now places on e-commerce. It has become a strategic priority. By appointing an e-commerce czar, an institution sends a clear signal to customers, investors and its own employees that it's serious about becoming an online player. But it is a rough road for the czars, who must muster the personal skills and organizational support to achieve real change.

To begin with, they must be flexible and imaginative, grounded in the traditional bank disciplines but also adaptable to the ever-shifting currents of the New Economy. And since the role involves trying to understand the present and imagine an unclear future, an e-commerce czar needs to be something of a visionary. The executive further must be an evangelist who can exhort the rest of the organization to pursue untried paths. There are no role models to emulate, so the czars largely chart their own course, at least within the parameters established by their institutions.

It doesn't help that those parameters are constantly shifting as each bank struggles to find the right business model for e-commerce. Chase Manhattan Corp. is already on its second e-commerce czar in less than a year, and FleetBoston Corp. recently placed its top Internet executive within a new committee structure.

Amid the uncertainties, one thing is clear: the most formidable challenge facing e-commerce czars lies within their own organizations. While some of the larger banks have granted autonomy to small e-commerce units, most czars lack an independent power base. Many depend on the cooperation and resources of other departments. They have to coax and cajole, and the process of re-directing human and financial resources creates lots of friction. "The internal politics and rivalries are daunting," says Octavio Marenzi, managing director at Celent Communications, a Cambridge, Mass.-based consulting firm. "The e-commerce czar is someone that everyone else is shooting at and trying to bring down."

Institutions have taken a variety of approaches to defuse this potential friction. Chase's O'Leary, for example, serves with other top executives on an Internet council that is designed to be the ultimate coordinating mechanism for cyber-ventures at the New York-based bank. Meanwhile, czars like Horowitz and Place report directly to their chief executive officers. It is yet unclear, however, whether e-commerce executives will be able to overcome the bureaucratic inertia of banking companies that often have a hundred years of tradition behind them. None of those battleships can turn on a dime.

Coordinating Authority

A contrarian might ask whether it's really necessary to fund an independent position when a bank already has an information technology department and a host of executives pursuing Web-related ventures. The answer is that the Internet arena is too critical to be left to uncoordinated efforts. The stakes, in terms of dollars spent and time lost, are simply too great. No bank can afford to pour resources into a dazzling technology project only to find the finished product makes little or no business sense.

Elaborating on this theme, Frank Schlier, director of the financial services research group at GartnerGroup, cautions against allowing an e-commerce initiative to devolve into "a tactical project where you're making technology decisions instead of business decisions." He says banks that don't designate an e-commerce czar run the risk of doing the wrong things extremely well.

Some institutions learned that lesson the hard way. The early conventional wisdom regarding the Internet held that action was preferable to inaction, which encouraged many institutions to launch hastily conceived and poorly executed programs. Today, many of those same organizations are revamping their Web sites and rethinking their entire approach to the Net, a process that includes appointing a coordinating authority, says David Potterton, research director for wholesale e-financial and e-payment services at Meridien Research, Newton, Mass. "These banks started asking, 'Was it the right way to go? Shouldn't we take a more strategic look?'"

Beyond the financial considerations, anointing an e-commerce czar allows an institution to send a powerful message to its own troops, namely that the Internet is of vital importance to the whole enterprise. Carroll recalls how his own appointment closely followed former CEO Edward Crutchfield's public announcement early in 1999 that he now grasped just how revolutionary the Internet would be. A few months later, Carroll says, "I was asked to come in and make sure that we had a thoughtful and comprehensive Internet strategy as it relates to our entire company."

The manner in which e-commerce czars exercise their authority depends on how individual banks structure their Internet initiatives. At some institutions, the czar remains tied to a specific line of business, usually retail banking or marketing. Mike Johnson, for instance, is president of interactive delivery services at Bank One Corp. He reports to the head of retail banking who, in turn, reports to the CEO. Since WingspanBank.com, Bank One's Web-only subsidiary, has its own leader, Johnson refuses to call himself the e-commerce czar at his company, noting that today the Internet pervades almost everyone's job.

At other organizations, e-commerce initiatives have been declared a new and distinct line of business. E-Citi, for example, operates just like any other business line at Citigroup, which means that it controls its own budget. "The advantage of having e-Citi set up as an operating unit is that it allows us to move quickly – and getting a large company to move quickly is difficult," Horowitz says. Chase's e-commerce unit, chase.com, also operates independently, but O'Leary, the e-commerce czar, works closely with other units of the bank through the Internet council.

At the other extreme are those banks that have chosen to place responsibility for Internet strategizing directly within the existing business units. FleetBoston, for example, created an Internet strategy group to oversee e-commerce initiatives that are implemented by the business units. Blaise Heltai, FleetBoston's former e-commerce czar, is now serving as managing director of that group, which is headed by executive vice president Brian Moynihan.

Pittsburgh-based Mellon retains one designated e-commerce executive, Place, but has asked her to work with the business units in setting Internet priorities and launching projects. She says she views her role as essentially "holistic," meaning she focuses on trying to grasp the big picture regarding Mellon's digital future and then helps the bank fit into that picture. "We're all committed to creating horizontal linkages between our lines of business so that there's support for enterprise-wide activities," she says. "It's juggling all the pieces for the benefit of the corporation."

Bankers and outside experts alike agree that an e-czar cannot function with a traditional, top-down management style. The job requires more of a consultative type of personality, says consultant Marenzi, someone "who understands the market, understands the technology, and knows how to get things done within the bank, but also is a bit of a therapist and psychologist to assure people that they're not going to have their business taken away."

E-commerce executives also must be able to tolerate ambiguity. Says Place: "You don't have the clarity around traditional financial metrics that you'd like. At the end of the year, you can't say, "Oh good, I've accomplished all my tasks." My financial goals, and whether or not I've achieved them, are nowhere near as clear as they would be if I ran a sales division."

Given the murkiness surrounding the measurement and achievement of success, e-commerce czars must possess enough authority within the organization to make things happen. Visible support from the chief executive is particularly crucial. Place, formerly a top technology strategist for Wells Fargo & Co. and Bank of America, says she was attracted to the position at Mellon because it allowed her to report directly to the CEO, Martin McGuinn. "That's the only place where this job can be successful," she says. "You need to be able to have some impact across the whole organization."

Forget Perfection

Sooner or later, all e-commerce czars come up against the inherent limitations of their role and of the institution's resources: it's simply not possible to explore every promising idea. "You have to focus your resources," contends First Union's Carroll. "There are times when people confront you with opportunities and you have to say, "I can't pursue those."

Prioritizing projects thus becomes essential. Carroll, for example, has three criteria for evaluating any new project: its impact on revenue, on efficiency and expenses, and on customer service. These criteria should be applied to any new expenditure, whether it costs $150 million or $1 billion, he says.

Setting priorities requires that the czars keep track of the big picture by staying current with all the latest developments in e-commerce. Subscribing to countless newspapers and magazines, attending seminars, and talking with employees and customers are all means to that end. Place monitors e-commerce projects funded by Mellon's venture capital unit. She also makes good use of her spare time. "If I'm on a plane or exercising on a treadmill, I'll have something to read in front of me," she says.

Psychological and cultural issues are not to be underestimated. Some opposition can be expected from within the organization, although this is usually tactical rather than strategic in nature. Place points out that almost everybody in banking now recognizes the transforming effects the Internet is having on the business; the struggles revolve around which specific projects are worth funding. The problem is that these arguments can become organizational turf battles. "Lines of business," Place says, "are very often reluctant to tie their competitiveness to an enterprise-wide project. They say, "Give me $10 million for my project," as opposed to donating $10 million to a larger project."

Horowitz at Citigroup says e-commerce executives "need to be willing to take the grilling that comes from business-line executives who are quite comfortable being where they are." William Randle, managing director of direct access financial services at Columbus, Ohio-based Huntington Bancshares Inc., underscores the importance of finding ways to make the major players at the bank feel like they're part of the eventual solution.

But even as they argue their own points of view, e–commerce czars must acknowledge the fact that they don't – and can't – have all the answers. Intellectual humility is an essential attribute for the czars, since e-commerce represents terra incognita for them just as for everyone else. "You can't point with any sort of comfort to someone else in front of you who's already done it," Randle says. "None of the rules that have been invented so far are etched in stone. At the onset of a revolution, nothing is perfect. It's just not."

Ms. Judd is a freelance writer based in Washington, D.C.

Copyright © 2003 by Banking Strategies, published by BAI.

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