A new industry playing field

FST’s Leslie Knudson meets Gregor Bailar, former CIO of Capital One, who explains how innovation is spurring a transformation of the industry.

If someone asked you what Steve Fossett, the Chinook, and the iPhone have in common, most likely you’d be waiting for the punch line. Rather, these three topics each signify an important shift in the progression and application of technology.

As Gregor Bailar argued in his keynote speech at the FST summit this fall, these focal points serve as evidence of the forces today calling the industry to respond to a new degree of change. From a real-time search for a missing man using satellite images from Google Earth – to the use of computer logic to solve the unsolvable – to the one-and-only iPhone, technology is bridging consumer and corporate worlds and being used in ways never thought possible.

We caught up with Gregor after the event to further delve into his ideas around these developments and what they ultimately mean for the industry. Below we’ve outlined his vision from the keynote along with a few afterthoughts regarding his take on these industry forces.

The search for Steve Fossett
While he made his riches in the financial industry, Steve Fossett is better known as a world-class aviator, sailor and all-around adventurer, being the first person to fly around the world solo in a balloon and the first person to fly a plane around the world without refueling.

On the morning of September 3, 2007, Fossett took off over western Nevada in a single engine plane and was never heard from again. After an extensive air search covering 10,000 square miles of Nevada wilderness failed to yield any findings, long-time friend Richard Branson elicited the help of Google and Amazon to join in the search.

Utilizing satellite imagery made available for Google Earth and a collaborative search scheme developed by Amazon through its Mechanical Turk system, in less than a week approximately 50,000 volunteers had enlisted to scour through thousands of high-resolution images for any sign of Fossett’s aircraft.

This is just one instance of the ever-growing social networking trend. “The first case demonstrates a whole different approach to social networking and computing,” Bailar says. “Here are rescue workers, 50,000 of them now enlisted in a distributed manner with very high-tech technology; this is mass-scale, real-time satellite reconnaissance.”

The reality is the Amazons and Googles of the world are transforming the usage of social networking in ways never before imagined. Advanced aggregated data capabilities have surpassed traditional limitations and boundaries, and are enabling technology to be employed toward complex, real-life solutions.

Eventually these capabilities – and expectations for such capabilities – will seep into the business world. Financial institutions can either embrace this advanced computing power or be swept aside as the trends outpace their business functionality and capacity.

Solving the unsolvable
While the term Chinook may be better known as a warm wind pattern in the western part of North America – it’s also the name of a computer program out of Alberta, Canada that has officially solved the game of Checkers.

Developed at the University of Alberta in Canada, the Chinook project started in 1989, and became the first program to win a human world championship when it won the World Checkers Championship in 1994. Dozens of computers and a handful of researchers and developers devoted to the project worked steadily over the 18 years to entirely solve the game. In April of this year it was announced that Checkers is now solved – representing the largest non-trivial game that has been solved to date.

So what does this have to do with anything in the business realm? “The Chinook is basically saying the things that we thought weren’t solvable in the past – the Human Genome, the game of Checkers, the game of Connect Four – these things are all being solved now and present us with an expectation that we can solve things and solve them in real-time for our businesses,” Bailar elaborates.

The larger implications of the Chinook project suggest that shared computing power can be applied to more meaningful – and seemingly impossible – challenges, such as the Human Genome. The Human Genome Project was one of the biggest scientific investigational projects, and its successful completion in 2003 of the mapping of human genes represented a significant step in medicine.

Ultimately today there exists a kind of computing on an entirely different level – one that is capable of taking on the most seemingly insurmountable challenges. Bailar acknowledges that shared computing power is creating a wealth of capability for solving problems. Thus organizations need to find a way to harness this capacity and leverage a greater well of knowledge to apply in the context of their own business challenges.

iPhone’s impact
Now that the iPhone is finally here, what is its true impact? Everyone from hackers to imitators to analysts are all chiming in with different reactions to the heralded ground-breaking device, which has shaken up markets, raised eyebrows with its exclusive deal with AT&T, and garnered raving to less-than-satisfactory reviews.

Whether or not it’s lived up to its expectations is anybody’s discretion – Bailar has his own opinion after returning his after 29 days due to the lack of a search function and the ability to remotely disable – but its wildfire popularity and widespread usage is not to be disputed.

In most recent news its release has not surprisingly spawned hackers around the globe determined to unlock the phone. In fact the appeal of hacking the phone has gone so far that Apple recently released a security patch to disable any phone that has been modified – a.k.a. hacked – making it unusable.

No doubt the iPhone is making a splash of every kind. But aside from all the hubbub around its release, less attention is drawn to its true impact on the corporate world and the message being communicated to corporate everywhere: consumer usage is gaining sway in the corporate world. “Some sexy technologies – Blackberrys being one of them already in the corporate world but the iPhone especially – are forcing us to change what we do in our businesses because our users are saying I want to use this iPhone – I don’t care that it doesn’t sync with what I have, I don’t care that it doesn’t do certain things that I have in the corporate world,” Bailar explains.

While consumer and corporate worlds used to be at once distinctly separate, the two realms are melding as consumer demand is moving into the driver’s seat and the corporate world is beginning to operate on the heels of consumer adoption. “Consumers today – and therefore, our associates and our customers – are having their expectations set by the technologies they need in the consumer environment versus those that are set at the corporate environment,” Bailar says. “Those expectations are becoming much more intense relative to what we can offer in the corporate environment and it’s not going to take long for consumers to demand those same things from us as financial services IT professionals.”

As things like Blackberry devices and iPhones continue to pave the consumer experience, expectations are continually being reset by people who are demanding and embracing these new technologies at a much more rapid pace than businesses. “Consumer electronics and consumer technology are far outstripping what we are able to put into the corporate market,” Bailar admits.

Consumer demand will eventually push businesses to their endpoints unless organizations take a stance as stewards of technology and position themselves to be ahead of the industry with respect to vendors and regulators – so they are able to shepherd new technologies safely through an organization.

The iPhone is only the beginning. Other emerging technologies and trends will impact the industry to the same extent. The first trend Bailar cites is catering to the always-online customer. “The notion that you are going to be always online, whether it be Wi-Fi or Wi-Max or 3G-Plus is pretty clear in the next five to 10 years. It’s going to be necessary for you to interact in a real-time way with your customers and in a way where they’re inbound coming to you for things that they want to do in a self-service mode.”

The other broader trend that is becoming more and more visible is the use of things like open source computing – customers’ increasing ability to adjust technologies and web usage to their liking. “The second one is the notion that the consumer has the power to change what they use and to do it in an almost free way, through open source computing or through adding widgets to their television, these kinds of things are going to force us to have a very different view around security, around privacy, around protecting our assets,” Bailar says.

The call to the industry
Bailar refers to these three examples as “a call to action and a call to stewardship for us as IT professionals”. What these changes and forces ultimately mean for the industry is that corporate business constituents need to be on the cusp of innovation – ahead of consumer adoption – in order to be able to set expectations rather than respond to them.

Not only is technology driving the need for businesses to place themselves ahead of the consumer curve, but traditional players also need to be aware of the new innovators of the industry who are embracing technology more rapidly – so much so that many of them are more commonly known as internet companies rather than financial services companies.

“The new innovators in the financial services space play the game differently,” Bailar admits. “They look to beta software and test it openly with millions of people; they assume that you’re going to be social networking or involving integration of various parts of your life with their services. This is something we have to be watching out for if we’re going to be innovative leading players.”

One of the ways that Bailar advises companies on how to be leading players is to understand the ‘building materials of our trade’ – an analogy he likes to make to the architecture space, in which architects need to possess a thorough understanding of steel. “If you think of a Frank Lloyd Wright or a Frank Gehry, in order to be innovative, these folks are intimately involved with understanding the building materials, literally of their trade – steel, the manufacturing of steel, the CAD CAM design of steel structures. From the intimate understanding of these materials they create totally new things that couldn’t be created in the past.”

Applying this to the financial industry, it would translate to truly understanding technologies, devices, access methods, and so on – and then visualizing how these materials may evolve in the future.

“Our business users, like those architects, need to really understand the building materials of their trade, because in the financial services industry so much of what we deliver is entirely electronic and the paper aspects of it are being eliminated as we speak,” Bailar adds. “Everything we do is literally a building material that finds its origins somewhere in technology. It’s the need to move from systems discussions into educating our businesses and making them innovators with the building materials of their trade.”

Transformation is already well underway in the financial industry. As technology continues to progress and new methods for its application continue to be developed – financial organizations need to translate how to leverage such innovation in their own business models. As increased computing power, social networking and new technologies continue to shape our cultural and consumer landscape, only the companies who usher the same innovation into the corporate environment successfully will be leading players.