The New Age of Innovation

ICICI’s chief executive officer, K. V. Kamath, identifies the bank’s ICT capability as one of the two pillars of the company’s organic growth and ability to rapidly deliver new products and services to its customers.

ICICI differs significantly from other banks in how it manages the synchronization between IT and business. First, it does not have a CIO. The bank’s head of IT has several years of experience in domestic and international banking, where he learned the strategic assets of ICT. Second, the entire senior management team, starting with the CEO, K. V. Kamath, has a deep understanding of the business implications of ICT. Synchronization between business needs and ICT investments is governed by a small group called the Technology Management Group that consists of both bankers and IT professionals.

The portfolio of ICT applications at ICICI contains only a few “packaged applications,” with the rest being customized applications to enable the dynamic business process capability that the strategy mandates. In reference to the building blocks shown in “Business Process and ICT Architecture“, ICICI has deployed standard pieces of hardware and software in the lower two blocks of the infrastructure while it has customized the ICT applications that support business processes. The application layer enables the business processes that help ICICI execute its business model and strategy. For example, the Technology Management Group at ICICI decided to abandon packaged software from a leading enterprise software vendor because the functionality in that product was restricting its capacity to change its business processes rapidly at low cost. The company opted to codevelop a customized system by partnering with one of the largest IT vendors in India. This codeveloped banking application is now offered in the international market.

Yet another distinction in the case of ICICI is the two-way flow of ideas and information between business units and IT. It is not just the traditional model of requirements emanating from business units that lead to demand for investments in IT. As noted earlier, the tech R&D lab and senior management constantly scan new technologies and developments in ICT for their business relevance. They engage commercial and academic partners to seed low-cost experiments.

For example, ICICI has partnered with the Indian Institute of Technology, Chennai, to develop a new electromechanical ATM machine customized to the rural Indian environment at a much lower price point. The climate in many parts of India makes the currency notes soggy with moisture and soiled with rough usage. Hence, the traditional ATM technology used in the West or in cities may not be suitable, since the makers of those ATMs expect cleaner currency notes. The new ATM from ICICI is being designed to deliver currency notes to consumers in collated bundles of cash similar to the way in which soda vending machines work.

Customized ATMs for rural markets, biometric devices for rural markets, and corporate cash management applications are some of the examples resulting from this exercise. ICICI has always been on the forefront of adopting new technologies. While business groups pull ICT projects on a need basis, the ICT team and the tech lab push new technologies through low-cost experimentation. In a typical large firm in the United States, various industry reports suggest that discretionary spending on IT is in the range of 15 to 25 percent of the total IT budget, while the rest— 75 to 85 percent—is spent on the incremental maintenance of legacy applications to keep current business operations running with minor changes. However, in the case of ICICI, only 20 percent of the total IT budget is spent on maintenance, while nearly 80 percent is spent on new business applications. One of the reasons for this distinct difference is that unlike traditional international banks, ICICI has no legacy systems. The business implication of this difference is significant because it unleashes resources for experimentation with new business processes and technology solutions.

by C.K. Prahalad and M.S. Krishnan, Via The New Age of Innovation: Driving Cocreated Value Through Global Networks (2008)

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