Material Detail

Leading with Information Technology

Leading with Information Technology

This video was recorded at MIT World Series: Principles of Engineering Practice (3.003). Marshall Carter leads an MIT class through a case study on corporate transformation, highlighting tips he believes are as salient for engineering students as for those focused on business services. Don't turn to the best-seller lists for advice on change, advises Carter, since most books pick up the story after a business has made the strategic decision to remake itself. Carter's decade (1991-2001) with Boston's venerable State Street Bank helps illuminate the thinking that comes before the decision, and the steps necessary to fulfill it. State Street, Carter recounts, had focused primarily on processing transactions, such as the purchase or sale of stocks and bonds, only to watch its key products age, and revenues drop. At the same time, "customers were asking us for more and more information," such as the IBM pension manager's request for the geographic distribution of his plan's mutual funds. State Street did not then have a sophisticated enough network to provide such data. So the bank came to realize it needed "a new vision and operating model." Carter and top managers figured out that "each security purchase or sales threw off about 25 pieces of information we could actually sell." So they set about determining what new services State Street could feasibly offer, and how to package these into a new business model for the bank, one where the revenue potential was much higher. Managers produced a large egg-shaped chart, a graphical depiction dividing the future State Street empire into revenue-producing activities. This was accompanied by a "food chain analysis," an attempt to determine where the competition lay in different services, and where the greatest opportunities were for a higher margin. Central to the plan's success, Carter notes, was the integration of IT strategy into the business and financial model. Staff had to support the new activities, including developing and managing migration to new information technology on a global basis. Carter warns that whenever a company shifts to a new operating model, "it must protect traditional revenue sources, as the new strategic revenue generators may be delayed." He advises as well that "early wins are essential to convince people that resist change, that change is irresistible." This might mean attacking more easily won targets first, to prove that the model works and to banish employee skepticism. And a company might need to defend its performance (long-term aims) against Wall Street critics seeking higher short-term earnings.

Quality

  • User Rating
  • Comments
  • Learning Exercises
  • Bookmark Collections
  • Course ePortfolios
  • Accessibility Info

More about this material

Comments

Log in to participate in the discussions or sign up if you are not already a MERLOT member.