Opinion: A CEO’s conundrum – technology positioning for the bright new world
Charles White Thomson, CEO at leading fintech specialist Saxo UK, on seizing the technology nettle…
CEOs often feel at a disadvantage as they consider their technology stack and tech positioning within a fast-changing world driven by consumer sophistication and demands. In many cases, they have inherited a puzzle of technology stacks, on the back of acquisitions or legacy strategies, bolted together with patches and tech Elastoplast. Looking at this from the C-suite’s perspective can feel like looking through a kaleidoscope. The cost of maintaining this puzzle is expensive and often makes them overly dependent on the powerful Chief Technology Officer (CTO) who knows how the technology spaghetti comes together. Complexity, high cost, lack of scale, legacy, and dependency are not preferred words in a CEO’s dictionary. So, how do we resolve these often-contrasting realities?
Charles White Thomson, CEO at leading fintech specialist Saxo UK
In my dealings with banks and wealth managers, I have noticed the following. In general, CEOs with less than two years until they leave are not as willing to tackle the technology conundrum. They prefer to muddle through and keep clipping the coupon – as change is viewed as higher risk, costly and raises the question of why this has not been done earlier or an admission that mistakes have been made. This is where the chairperson and board need to have a view as a misfiring technology platform is a growth suppressor, potential business or board member killer and can trigger regulatory blowups where controls fail, or breaches occur. As with many things in life, problems and worries should be dealt with head-on – it is necessary to seize the technology nettle.
Another type of CEO is the one who is just in seat or has five years to go. The temptation to ‘kitchen sink’ old strategies, to distance themselves from previous mistakes, is more often than not a good one. CEOs who have inherited the technology kaleidoscope and want to future-proof their business, including getting in front of any inter-generational wealth developments and an increasingly tech-smart and smartphone-driven consumer, have three options to choose from – to build, buy or partner.
Build
The decision is made to build a new technology proposition in-house and decommission the old one. The key here is to have the right CTO and team who have the ability and understanding to build a state-of-the-art system. The downside risk is that this can take longer than expected, often comes in above budget and in the worst case, does not deliver adequately on what was agreed. The CEO will also need to fully back this plan and associate themselves with the success or failure of the open heart surgery. Highly technical CEOs, Elon Musk styli, will revel in this self-build approach but it is not for everyone. Done well it is highly successful, done badly and you have wasted a large amount of time, money and credibility.
Buy
Buying is a natural move for many CEOs. It shows decisiveness, the ability to close deals and can provide instant gratification and forward direction. This was especially attractive when debt was, forgive the pun, as cheap as chips. However, these acquisitions are increasingly expensive and competitive. Due diligence can be hit and miss and, as with organ transplants, there can be rejection, or complications if it does not work out as planned. Add to this the need to bring together two cultures and this is not an easy task – normally one side wins and the other gets exited or drifts away.
Partner
When the CEO acknowledges the need for change, but that others can do this part better. They do not want to do a self-build on implementation grounds and do not want to pay through the nose via an acquisition – they want the company to focus on what it does best. The key to this is in the partner selection process. A few points come to mind as you choose a good tech partner.
Start with the end in mind. Think about where you want to go, with a particular focus on the ability to scale, and don’t overcook the model to get the partner overexcited or overly committed.
Good chemistry is important as you will work closely with the technology provider. Proper due diligence, digging into the partner’s track record and good referrals are, of course, an instrumental part of this.
Compartmentalisation. There is nothing wrong with starting small or picking a particular project to see if it works as planned and growing from there. A hybrid version of the three scenarios.
Price is important but don’t lead on this. Ideally, this should be a win-win. Signing a super tight deal with time may make the partner disgruntled, encourage hidden fees and increase the likelihood of a corporate divorce or renegotiation down the road. Pragmatism is the word that comes to mind.
Finally, staff the project with your best people and don’t forget to include generalists to avoid the risk of tech groupthink. Be careful who you take advice from, as many, including your CTO, will have significant preferences, including a natural survival instinct, when debating the three options I have written about.
In discussions with some of the largest global institutions, we are seeing a strong preference for this third model, disrupting the traditional build versus buy debate. Looking ahead and into the fog of 2024, I see great potential for advocates of this path and welcome the growing number of CEOs ready to embark on this partnership journey.
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