Boards must define their bank’s strategy and senior management must execute it with resource constraints in mind — including their budget as well as their technical and operational capabilities. First, boards must decide how to compete effectively in today’s banking industry, which requires a broad view of the market. Second, bankers must juggle maintenance and modernization while their specific choices are guided by risk tolerance, their commitment to innovation, and staff’s technical competence

As part of this, bankers need relevant KPIs that are carefully articulated by the board and accurately measured by management. As we’ve written, banks must be able to put a number on a technology project’s success and accurately, completely measure inputs. KPIs may not be strictly formulas based on revenue and cost — bankers may also measure technical metrics like system uptime or customer metrics like digital adoption, customer satisfaction, and customer retention. The important thing is that, once a strategy is in place, executives can determine whether they’re allocating resources effectively.

How an institution meets those metrics will take shape based on its needs, preferences, and constraints. In our research, we’ve found banks with different levels of control over their technology roadmap — which may dictate their decision making and subsequent return on investment. That control falls on a spectrum between heavy dependence on a vendor to embracing a best of breed model and independently making decisions. Those that lean on their vendor are more likely to follow a prescribed path guided by cost, while those pursuing best of breed will more likely choose to maximize their returns.

Banks can only allocate resources to technology and innovation successfully when it’s linked to a strategy, and the bank’s leaders can judge the results only when those are measured precisely. A good exercise for senior leadership would be to commit a recurring part of its agenda to technology’s alignment with business strategy — regularly discussing one in the context of the other should reinforce logical decision-making and encourage follow-through with technology projects.