In a paper entitled ?System Demographics?, ITE panel member, Ian Barron argues that although most areas of IT are characterised by steady progress, there are areas of discontinuity where leaps in progress are being made and where changes occur very quickly, for example, the explosion in the use of inter-organisation networking via the Internet; the use of video discs for storage of data; the use of new technologies which enable companies to implement strategic information systems. Technology discontinuities which enable strategic leaps of this kind help to create new markets, and forecasting, in his view, should be based on identifying these opportunities. He offers three examples of technological discontinuities which will occur in the near future, and each could have a major effect on the retail financial services sector: the convergence between the TV set, the PC and other office products could change delivery patterns to consumers of products such as bank accounts and insurance; the convergence of computing, telecommunications, and broadband communication enables the delivery of completely new products and services, for example, interactive financial advice; business communication through networks is nearing critical mass which will enable most businesses to switch to computer-based communications. This development could have a dramatic effect on employment patterns in the sector as duplicated effort is eliminated.



The retail financial services sector has not really experienced any major discontinuities in its underlying technologies since the 1960s. Even the emergence of the PC has until now been superimposed upon existing well understood technologies. Various authors, researching in the insurance sector and Ernst and Young Consultancy (1994) researching in the banking sector, comment on how companies in these sectors in the UK go through a step-by-step process building on existing well proven technologies with different companies taking the lead in implementing new technologies at different times. Arthur Andersen (1988) carried out a survey to compare the impact of three different IT strategies; ?to pioneer or to lead the field; to move with the pack; or to trail?; on different aspects of performance in the insurance sector in the USA. The subsequent report, published in 1988, drew the following conclusions: pioneers in the use of IT will attract and retain customers and talented personnel. This will give an important competitive edge and improve productivity. However, the potentially higher profit must be weighed against the higher degree of risk. Moving with the pack will reap similar benefits to those enjoyed by the pioneers, but does not offer the same potential for competitive advantage. For many of the US insurers surveyed, this was acceptable, given the lower level of risk associated with this strategy. Similarly, with few exceptions, it is the preferred option for the majority of UK insurers. Most financial services companies adhere to Andrew Carnegie's maxim: ?It is better to be a follower than a pioneer. The pioneers get scalped. Trailers will tend to lose competitive advantage. In addition, they could find it very difficult to catch up, particularly as the costs involved would be relatively high, effectively acting as a barrier to competition.

In the past, the best position was probably that of the ?fast follower?, that is, allow the leaders to pilot the new technology and make the mistakes, and then move quickly to exploit the technology once it was proven. However, as Barron (1994) stresses we are currently in a stage of major technology discontinuity where it is possible to make strategic leaps. Retail financial services sector companies have to decide whether to introduce technology steadily in a step-by-step approach, as in the past or make these strategic leaps. Prior to 1990 most financial services companies had account-based systems, i.e. every account opened was indexed according to the account number rather than customer name in hierarchical databases which were not integrated with systems from other departments such as finance, sales and marketing. During the late 1980s they started moving from account-based to customer-based systems; from hierarchical to relational databases; and to integrated management information systems.