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This
research addresses the issue of determining the impact of information
technology on enterprise level performance, for banks. More specifically, it
addresses the question How can managers
in financial services organisations (FSOs) use ICT investments to improve
performance through the attainment of Market Power?
The
motivation for this work arises from several factors. Firstly, from my own
professional experience that makes me critical on how financial services
organisations have used information technology for business transformation.
Secondly, it is clear from the literature that financial services is an
industry under great pressure due to that competitive forces have turned
asymmetric on the sector: for example barriers to entry for newcomers are
significantly lower than the opportunities for financial services firms to
move into other market spaces. Finally, it is well established from both the
literature and from discussions with knowledgeable informants that there is
an incomplete understanding of the value of ICT in such organisations.
The literature on the impact of ICT
investments on the performance of business is reviewed by partitioning it
into two dimensions of value creation: Revenue Enhancement, and Cost
Reduction. These two dimensions are, in turn, observed from four
perspectives: ICT Investments and Productivity; ICT Investments for
Competitive Advantage; Change Management as an Approach to Closing the Gap
Between ICT and the Business; and Treating ICT Investments as a Portfolio.
These two dimensions and four perspectives define a 2x4 matrix in which each
cell corresponds to a section of the review.
The research strategy applied is based on multiple case studies. The
research has been undertaken at company level, and the cases are selected
from the Chilean banking sector. The conceptual underpinning of the study
draws from the industrial economics theory of market power, or monopolisation
theory; the value discipline of market leaders, proposed by Treacy &
Wiersema (1995); and the ‘Managing by Maxims’ process of ICT
planning proposed by Weill & Beoadbent (1998).
Finally, based on the literature and grounded on the findings of
the empirical work carried out with six banks, it proposes the following
theoretical conjecture: Banks that operate in a customer intimacy or product
leadership value discipline, will only convert into shareholder value those
ICT investments which enable them to increase their Market Power. Departing
from this theory it then presents an ICT investment decision model and a set
of guidelines aimed at helping managers convert ICT investments into value.
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