Congruence between strategy, information technology and decision-making at the unit level: A comparison of U.S.A. and Canadian retail banks
The strategic management literature draws attention to the importance of congruence between strategy, technology strategy and structure, and the potential for disjuncture. Bearing this in mind, we developed a cross-national, exploratory, institutional study of the retail banking industry, focusing specifically on information technology implementation at the unit level. The study employs a dual methodological focus at two levels of analysis, with extensive, semi-structured interviews at the corporate and regional level, followed by a questionnaire at the unit, branch manager level. A response rate of 81% seems to imply a concern for the timeliness of the research.
In both Canada and the U.S.A., governmental deregulation and widespread technological developments have resulted in increased competition and restructuring of the industry. Against this backdrop of turbulence, information technology has the potential to change significantly the decision-making structure of the branch system.
The most striking difference between the banking systems of the U.S.A. and Canada are the disproportionate number of branch units per bank, approximately 1:10. In some important aspects, decision-making in the Canadian bank is decentralized to the branch manager level, while in the U.S.A. bank decision-making is centralized to the regional level.
The study concludes that the strength of the Canadian bank rests on its extensive, decentralized branch network. Conversely in the U.S.A., the bank is restricted in its expansion by the lack of decision-making at the branch level. Arguably, technology can be used to centralize or decentralize decision-making, constrained by existing structure and technological capability. In both countries the technology strategy is somewhat incompatible with structure.
Constrained by industry structure, both banks espouse different strategies, and have dissimilar structures. Competitive strategy, in Porter's terms, is shown to be inappropriate, with both banks seeking to maximize cost efficiency, and simultaneously develop differentiation.