IT-enabled transformation: lessons from the financial services

With the developments in information technology has come a radical change in the way firms are structured and the principles by which firms are being managed. Nowhere is this trend more apparent than in financial services. Financial service firms, particularly in the Western nations, are more advanced than many other industries in assuming the structures and processes pertinent to the new information economy. This is a direct result of the intangible nature of their services and their compatibility with the technology. Evidence from cross-sector studies of IT investment in the US economy is presented that suggests this vanguard role of financial service firms in extracting value from their IT investments. Building on a stages model developed by one of the authors, we discuss some of these new management principles, and illustrate their implementation in the financial services industry. These principles, we argue, go beyond any single sector of the economy, and thus offer useful lessons for managers in other industries. These principles cover a wide range of business processes; varying from the strategic, such as how firms will manage their inter-organizational relations and the new role of leadership as organizational architect; to the tactical, how firms develop dynamic incentives and tradeoff control and individual empowerment. These principles are illustrated in action using real firms in the financial services sector; more rigorous tests of these principles are also suggested as a spur to further research in this area. Finally, we look at how firms in other sectors can learn from the experience of financial service firms, and suggest some of the challenges they may face in doing so.