EMTM: Weatherproofing Financial Sector
Leaders for a Tsunami of Business Change

Rapid technological advances, deregulation, mergers and acquisitions, and globalization have collectively contributed to a tsunami of change that has transformed the financial services industry in the nearly two decades since EMTM was founded in 1988.

During these years, the role of technology has changed from a facilitator of business processes to a driver of changing business models. Reflecting this more foundational role for technology, 20% of the EMTM program’s 130 students today are business and technology leaders in the financial services industry.

EMTM students and graduates work in firms such as Citigroup, Fannie Mae, GMAC Financial Services, HSBC, Merrill Lynch, JPMorgan Chase, Morgan Stanley, SEI Investments, The Vanguard Group and others, and are represented in industries that include insurance, mutual fund companies, brokerage houses, mortgage firms, credit card companies, financial information providers, consumer finance, and commercial, retail and investment banking.

In interviews with EMTM students, alumni and professors, they point to the program’s value in helping financial services sector executives cope with the influence of rapid technological changes on realms such as cost control and revenue generation, new client and product development, and operational effectiveness

Critical Ingredient

According to Howard Kaufold, who teaches EMTM’s Corporate Finance course and also serves as director of the Wharton MBA Program for Executives, “EMTM is right in the thick of the financial services sector where technology in general is such a critical ingredient to competitive success. Somebody who has a mastery of the world of technology and then combines this with training in business disciplines ought to be well-positioned to have a very challenging and rewarding career.”

Cost control is one area where technology has significantly changed the financial sector’s business models. The Internet has created greater transparency and slimmer margins for commodity-like financial services. This has pushed financial institutions toward markets in which they can differentiate themselves, says Kaufold, noting that, “The Internet has made it much easier for customers to compare product characteristics and prices, thereby reducing margins in a lot of industries. As a result, larger financial institutions are doing more ‘private,’ ‘tailored’ transactions, trying to find the higher margin business in areas such as leveraged buyouts, hedge fund activities and private equity where the product is less transparent and the marketplace less competitive.”

Making technology investments stretch further is another form of cost control. Joe Ferlisi, EMTM’06, director of Advanced Technology Services at Merrill Lynch, says, “While IT budgets are growing nominally, we’re being challenged to do more with that same budget and to come up with new and creative ways of sourcing technology solutions. My EMTM training helps me present justifications for projects in ways that show our team that we’re just as conscious about financial impact as we are about technological capability and business functionality.”

While conventional wisdom views technology as a tool for reducing costs, “A much harder question that fewer people are good at is how to use IT to generate revenues,” says EMTM faculty member Scott Snyder, PhD, President and CEO of Decision Strategies International, who teaches Fourth Generation Wireless Networks. “The problem in IT is that there aren’t enough people who can articulate the revenue-generating proposition for IT.”

Snyder adds, “CEOs in general are being challenged to grow. Balance sheets are healthy and are generating cash, but the biggest issue is how to generate growth. Shareholders are saying ‘this whole cost-cutting mindset isn’t working. You have to think about value creation.’ Well, IT is all about how to help a business grow, not just cut costs. This gets to EMTM’s premise: technology leaders need to be able to communicate the strategic case to management for long-term IT strategies. Otherwise, you’ll always be stuck with short-payback incremental type investments.”

Threshold to New Products & Customers

Technology innovations have also opened a threshold to new products and new ways of serving customers. Michael A. Miktus, EMTM’07, is Manager of Strategic Product Development for a division of Dow Jones Newswires that serves institutional users of news such as traders, hedge funds, money managers and foreign exchanges. He describes a technology-enabled product launched by the firm in 2006, the Dow Jones Text Feed & Archive, which has generated new customer value from existing company resources.

According to Miktus, the firm transformed a static 20-year archive of news into an analytic product with a real-time news feed that facilitates algorithmic trading decisions at banks, securities firms, and hedge funds. “This gives our end-users access to robust data sets that help them validate and refine trading algorithms,” says Miktus. “We’re providing a necessary element that will enable them to do research and development on their trading models, helping them spot patterns that give an advantage of a few seconds for trades.” In addition to the archive product, Dow Jones has also launched the Dow Jones Elementized News Feed, an innovative capability that operates like a traditional market data feed and can power program trading applications with news feeds.

In the credit card industry, advances in computing technology have enabled firms to streamline marketing to new customers and to customize products more effectively. Lyle Ungar, an Associate Professor with joint appointments in Penn Engineering and Wharton who teaches EMTM’s Data Mining course, says, “Credit card companies use data mining to sort through huge data sets to determine which of thousands of credit card affinity program, rates, fees and penalties to offer to each of their millions of prospective customers. This is a classic example of the reality that you can no longer separate out the strategic direction of the company from its IT function.”

New developments in fourth generation (4G) wireless technologies, which use high tech antennas to locate customers, also have the potential to transform how and when financial sector firms interact with customers and with which products and services. According to Snyder, “This is more than just a technology platform: 4G is a user-centric wireless system where the user drives decisions and access to applications. The devices themselves will be able to make decisions about what type of information, services and communications customers need, based on where they are geographically. EMTM puts this in a context of business and market scenarios, and how a business leader could use 4G technologies as a means to an end.”

Operational Effectiveness on a Global Scale

The traditional view of technology as a tool for cost reduction and operational effectiveness has had significant implications for financial services firms. Over recent years, the industry has faced myriad new challenges posed by intensive M&A activity, globalization, the shift to online transactions, and post 9-11 concerns about privacy, security and business continuity. [See IT Security & Privacy, EMTM InSITE Fall 2006].

Judith Zosh, MA, EMTM’03, Vice President with JPMorgan Chase & Co., used EMTM knowledge to help establish applications development standards across a global technology team and to best use a firm’s global footprint to locate jobs while she was still earning her degree.

Today, as Vice President, Business Continuity and Disaster Recovery within JPMorgan Chase’s Global Technology Infrastructure organization, Zosh says, “Delivering operational effectiveness requires an inter-disciplinary view to be successful. It requires an understanding of the internal supply chain delivering value to the end consumer whether that customer is internal or external. The EMTM program teaches you to attack problems from a multi-disciplinary perspective — organizational design, marketing, technology management and financial management — all are required to create lasting value. Effective resiliency programs will understand the critical supply chains and ensure that these are adequately protected with appropriate strategies to minimize loss under a variety of scenarios.”

Melanie Zairis, EMTM’06, Vice President, Morgan Stanley, says, “EMTM prepares you for globalization because you’re always focusing on the one thing that has leveled the playing field for everyone, which is technology.” A participant in EMTM’s Global Experience Program trip to India in 2006, she found the experience informed her efforts to “provide the best service to our employees and clients globally by capitalizing on labor in different markets from a time zone perspective.”

“It’s becoming increasingly difficult to function as a business leader without IT competencies,” says Gregg Vesonder, Adjunct Professor of Computer and Information Science at Penn Engineering and Executive Director of the Communication Software Research Department at AT&T Labs-Research. Vesonder, who teaches EMTM courses in Human Computer Interaction, Software Engineering, and IT Security and Privacy, says, “Pockets of IT experience and knowledge are needed in almost every aspect of business today. You can’t afford not to be cognizant of technology. It’s a basic language of commerce and a core competency — especially as you get higher in the corporate infrastructure. On a daily basis, executives have to make decisions that are facilitated by having a deeper understanding of emerging technologies.”

Industry Insights:
Financial Services

Related Story:
Hear from EMTM faculty and students about trends in Biopharma

> Industry Insights: Biotech/Pharma
(EMTM InSITE, Fall 2006)

“It has become more and more necessary for technology executives to differentiate themselves with the ability to think strategically about the business implications of technology. Similarly, those who hope to ascend the ranks of financial services organizations need to have literacy in the technologies that are going to be used and comfort with their skills at navigating technology's inevitable changes from year-to-year.”

Howard Kaufold
Adjunct Professor of Finance
The Wharton School
Director, Wharton MBA Program for Executives

“IT is all about how to help a business grow, not just cut costs.”

Scott Snyder
Adjunct Associate Professor of Electrical and Systems Engineering,
Penn Engineering
President and CEO,
Decision Strategies International

“Transforming a static 20-year archive of news ‘gives our end-users access to robust data sets that help them validate and refine trading algorithms.’”

Michael A. Miktus, EMTM'07
Manager, Strategic Product Development
Dow Jones Newswires

“The EMTM program teaches you to attack problems from a multi-disciplinary perspective — organizational design, marketing, technology management and financial management — all are required to create lasting value.”

Judith Zosh, MA, EMTM'03
VP, Business Continuity and Disaster Recovery
Global Technology Infrastructure
JPMorgan Chase & Co.

“On a daily basis, executives have to make decisions that are facilitated by having a deeper understanding of emerging technologies.”

Gregg Vesonder
Adjunct Professor of Computer and Information Science
Penn Engineering
Executive Director, Communication Software Research Department
AT&T Labs-Research

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