Focus on value. New technology ought to improve internal operations or meet client needs with new or improved products and services. At Vanguard, if a new technology doesn't add value in one or both areas, we aren't interested.
It can be tough to recognise the value of a new technology, even when it's right in your face. I remember a presentation in my first year of business school by a developer of new software called VisiCalc - a primitive spreadsheet program that predated Excel. Nobody was impressed. We couldn't imagine why anyone would need a PC-based spreadsheet when they could do things the modern way, as we did: performing our number crunching on time-share terminals in the university's computer lab.
Sometimes the toughest question is not whether to adopt the technology but how to apply it to capture the most value. For example, at Vanguard we've adopted collaborative browsing technology that allows us to serve clients simultaneously via the Web and the phone. It's leading-edge stuff: the software lets a Vanguard phone associate take control of a caller's Web browser and guide him through our Web site while they talk on the phone. The catch is that this is expensive technology - too expensive to use in every client interaction. The challenge for the business is in deciding when to make it available.
Be sceptical about technology hype. One could make the case that, from a client service standpoint, the investment-management industry has seen just three technology advances of magnitude during the past 20 years.
The 800 number, which provided every US household with easy access to direct sellers of mutual funds.
The PC, which revolutionised companies' internal operations by giving everyone desktop access to current business information.
The Web, which created a new channel for investment products and services, as well as a cost-effective way to provide individual investors with new educational and investment tools.
It's hard to know what the next big technological breakthrough in the investment industry could be. In my view, most of the hot technologies being touted today - including voice/portal technology and data aggregation - amount to incremental improvement. While these technologies are worth pursuing, they won't reinvent the industry. So I take a sceptical view when consultants or anyone else makes claims to the contrary. In every industry, IT thought leaders should maintain a healthy scepticism about killer apps.
Trust your intuition. With experience, IT thought leaders develop a sixth sense for what is valuable and what isn't. Some years back, everyone said mainframe computers were passA©. One of the thought leaders of Silicon Valley came to see me to reinforce the view that mainframes were dead, IBM was a dinosaur, and we should replace our mainframe computer with a multitude of servers (from his company, of course). We didn't buy his thinking because it just didn't feel right. As you know, more than a decade later, the mainframe is alive and well - a critical part of systems infrastructure, valued for its reliability in large-scale, mission-critical transaction processing.
Getting thought leadership right takes a system of checks and balances - a commitment to focus and disciplined processes, a sense of scepticism and the confidence to trust your intuition. CEOs and CIOs have to cultivate all of those traits to be able to see the whole board.
Jack Brennan is chairman and CEO for The Vanguard Group in Malvern (US)
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