Moving Target

By Thomas P. Johnson Jr.

Customers may come first, but the market guidance they provide has its limitations.

Putting customers first makes good sense in an industry where profitability largely derives from established relationships. This entails providing a level of service and range of products customers both need and want. Viewed from this perspective, ascertaining and then meeting customer needs is a strategic priority.

This strategy has its own hazards, however. Providers rushed into electronic billing, wireless banking and Internet portals, for example, believing customers would eagerly embrace these services. Yet none has taken off, at least so far. Banks misread customer demand and dissipated precious developmental resources in the process.

While it is true that many companies simply went too fast, an even more basic problem is that customer feedback does not always provide reliable guidance. People may tell survey-takers one thing, but they can act entirely differently when faced with real-life choices. Customer inertia — the propensity to stick with familiar methods (especially in financial matters) — has proved challenging as well.

The consequence for financial institutions was a series of sizable bets on unproved technologies that have yet to pay off. E-billing has captured a paltry 1% of the payments market; Bank of America Corp. and Wachovia Corp. suspended their retail wireless banking programs; once-vaunted portal strategies are in ashes.

In the aftermath, many institutions are striving to improve the way they evaluate and prioritize technology projects. We're seeing a lot of experimentation with metrics, feedback mechanisms and governance structures, all aimed at more closely aligning technologies with customer needs and overall strategy. Such efforts can only be applauded.

It's important to recognize, however, that making the right bets is often a matter of art as well as science. Since customers cannot always predict how they will respond, strategists may, in some cases, have to anticipate the future for them. "You have to understand what people need, as opposed to what they specifically ask for," says Janey A. Place, executive vice president of e-commerce at Mellon Financial Corp.

Ms. Place was speaking in the context of B2B e-commerce, but her comments underscore the need for a balanced, nuanced approach to technology investing generally. While customer needs must remain foremost in the decision-making process, the fact that those needs constitute a moving target must be taken into account as well. Sometimes it makes sense to anticipate demand; at other times, it's better to delay rollout until the business case solidifies. Customer feedback should always be consulted when making these decisions, but not to the exclusion of all other factors.

Copyright © 2003 by Banking Strategies, published by BAI.

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