The McKinsey Quarterly has published an interview with Tom Sanzone, Chief Information Officer of Credit Suisse. The authors talked with Salzone about his leadership principles, the challenges of integrating diverse IT cultures, and the evolving role of the CIO. Some remarks in this interview attracted my attention. I would like to discuss the role of IT (and therefore the role of the CIO) on the executive board level, and Credit Suisse’s approach to IT driven innovation. Whereas Credit Suisse is taking the lead in IT and Business integration, it is lagging behind with it’s innovation practice.
IT and Business Integration

Although many companies nowadays realize the importance of Information Technology as a critical business element is the number of CIO’s on the highest management level still relatively low. After a peak in the late 90’s where the CIO became recognized in the Board room, now many CIO’s are positioned in the reporting line to the Chief Financial Officer, or the Chief Operations Officer. Not at Credit Suisse though. When Oswald Grübel poached Citigroup’s Tom Sanzone in August 2005 to become the new CIO for Credit Suisse he recognized the value of IT and gave Tom a seat on the executive board. He in turn ensured that a CIO was positioned next to every head of the individual business units, ensuring full integration of IT to the business. He mentions:

“Many CEOs talk about how crucial technology is to the future of the company, but then they place IT two or three layers below them in the organization. I think if something’s that important, you want to keep it close. I’ve always felt that if companies are truly technology-centric, IT needs to have a seat at the table.”

I did some research on the members of the executive board in the 20 EU banks with a market capitalization bigger than $ 25 million. It appeared that only three companies had given the CIO a position in the Executive Board.

Last year I was working on my thesis at ABN AMRO and had the opportunity to speak with a number of senior IT managers across the organization. I remember a remark on the relation between banking business and information technology “In the end we are the same, moving around with ones and zeros” (anonymous). Although I then disagreed with the statement, as in retail banking a number of other skills than IT are vital for business success, this statement already hold for in particular the sales and trading part of the banks. A visionary movie from Dresdner Kleinwort’s Sean Park is further illustrating the statement, saying that by 2015 banks have become “giant regulated pools of capital” and that the landscape of investment banking has radically changed because of electronic trading and transaction processes. This all of course driven by IT.
It is interesting and surprising that the number of CIO’s on the highest management level in EU banking is so low. Did Credit Suisse understood the importance of IT better than it’s peers?
IT driven innovation

However, where IT received a prominent role in Credit Suisse’s organization, I found another remark in the McKinsey Quarterly interview quite dissapointing. When discussing the role of the R&D unit Tom expresses a quite traditional approach to innovation:

“The R&D group is constantly evaluating new technology to see what looks promising and how it could impact our business in the next 24 months. We have a funnel process where technologies are reviewed and piloted. If the products make it through the rigorous evaluation process, some of them are eventually sanctioned and put into production.”

and:

“only in the very early stages, in which we’re not investing a lot of time and money, would the group be working on something without a business case. It’s important to note here that the mission of the R&D group focuses more heavily on D rather than R. “

Sustainable competitive advantage comes from radical innovations. The approach used by Credit Suisse will not deliver radical innovations. It will only deliver innovations closely related to the existing processes, products and markets. By using a funnel process and enabling the R&D group only to experiment only in the very early stages, it is very likely that radical new projects will not meet the success criteria, resulting in discontinuation of the specific project.

This entry was posted on Sunday, February 4th, 2007 at 5:58 pm and is filed under Innovation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.