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E-BANKING VALUE CREATION STRATEGIES: THE CASE OF THE SAUDI INVESTMENT BANK

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  • The University of Edinburgh (UK) / Fondazione Mondo Digitale (Italy)

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The aim of the paper is to look at the sources of value creation in e-business with particular emphasis on the processes of how banks implement e-banking to build their capabilities as well as to create new value strategies. The paper makes use of a combination of case study approach as research methodology, and network approach as theoretical framework. Specific questions addressed are (1) how value is created in e-banking, (2) how e-banking capabilities have been built, and (3) what has been the role played by e-banking in shaping the strategic direction of banks. The answers to these questions were grounded on the results of empirical research recently conducted on a corporate Saudi bank. Results indicate that differentiation niche and accelerating capability building strategies are related to the emergence and evolution of e-banking.
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E-BANKING VALUE CREATION STRATEGIES:
THE CASE OF THE SAUDI INVESTMENT BANK
Mohammed Al-Jadeed
PhD Student
University of Edinburgh
Alfonso Molina
Professor of Technology Strategy
University of Edinburgh
ABSTRACT
The aim of the paper is to look at the sources of value creation in e-business with particular emphasis on the processes of
how banks implement e-banking to build their capabilities as well as to create new value strategies. The paper makes use
of a combination of case study approach as research methodology, and network approach as theoretical framework.
Specific questions addressed are (1) how value is created in e-banking, (2) how e-banking capabilities have been built,
and (3) what has been the role played by e-banking in shaping the strategic direction of banks. The answers to these
questions were grounded on the results of empirical research recently conducted on a corporate Saudi bank. Results
indicate that differentiation niche and accelerating capability building strategies are related to the emergence and
evolution of e-banking.
KEYWORDS
E-banking, Value creation, Implementation, Sociotechnical constituencies, Saudi Investment Bank, Saudi Arabia
1. INTRODUCTION
Questions have been raised about the banks’ efficiency in utilizing the unique features of e-banking for
improving their competitive positions and images. There is a growing concern that e-banking is not yielding
the anticipated results. This has thrown the spotlight onto the problem of change from one particular delivery
channel to another. In practice, an appropriate mix of delivery channels will be determined by a number of
factors on the supply and demand sides of the market.
In this context, the aim of the paper is to look at the sources of value creation in e-business with particular
emphasis on the processes of how banks implement e-banking to build their capabilities as well as to create
new value strategies. The paper addresses three research questions: (1) how value is created in e-banking? (2)
How e-banking capabilities have been built? And (3) what has been the role played by e-banking in shaping
the strategic direction of banks? The paper makes use of a combination of case study approach (Yin 2003) as
research methodology and network approach as theoretical framework.
The paper is structured as follows. Section 2 defines the term ‘e-banking’ and describes the theoretical
framework used in this paper, the sociotechnical constituencies approach (Molina 1990; 1993) and the
associated concepts of sociotechnical alignment and diamond of alignment (Molina 1997; 1999). Section 3
looks at the emergence and evolution of e-banking in the Saudi Investment Bank (Saib) (i.e. Saib e-banking
constituency), one of the corporate Saudi banks. A final section discusses the applicability of the generic and
positioning strategies (Porter 1980; 1985; 1996), the resource-base view of the firm (Penrose 1959), strategic
network theory (e.g., Dyer & Singh 1998), and accelerating capability building approach (Hagel & Brown
2005) in the context of the emergence and evolution of Saib e-banking constituency. Policy conclusions wrap
the discussion.
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2. BRIEF LITERATURE REVIEW AND THEORETICAL APPROACH
The common motivation for banks to implement e-banking is to provide a faster, easier, and more reliable
service to clients, to improve the bank’s competitive position and image, and to meet clients’ demands. E-
banking may also provide other benefits. For instance, creating new markets, and reducing operational costs,
administrative costs and workforce are increasingly important aspects for the banks’ competitiveness, and e-
banking may improve these aspects as well (Devlin 1995; Hewer & Howcroft 1999; Bauer & Colgan 2001;
Chang 2003). On the other hand, questions have been raised about the banks’ efficiency in utilizing the
unique features of e-banking for improving their competitive positions and images (Frei & Harker 1999;
Amit & Zott 2001; Simpson 2002).
Indeed, there is a growing concern that e-banking is not yielding the anticipated results, creating a gap
between the actual returns and the proposed objectives and thereby losing a large amount of investment. This
especially concerns the interaction with clients and thereby increased and more rapid access to new markets.
This has thrown the spotlight onto the problem of change from one particular delivery channel to another
(Daniel 1999; Mols 2001). This is highly important since the implementation of e-banking may have radical
implications on a bank’s structures, business processes, products and services and value flows with clients
and other parties. In practice, an appropriate mix of delivery channels will be determined by a number of
factors on the supply and demand sides of the market. On the supply side, factors such as regulations,
technology, and the resultant change in the market structure influence the choice of delivery channels, whilst,
on the demand side, client preferences and expectations are of prime importance (Lang & Colgate 2003;
Sohail & Shanmugham 2003).
2.1 Definition of e-banking
The term ‘e-banking’ has been used in the literature in many different ways. While some literature restricts
the use of the term to internet banking (i.e. Daniel 1999), elsewhere the term is limited to retail banking (i.e.
Aladwani 2001) or both retail and corporate banking (i.e. Simpson 2002). The common definition for e-
banking, and the one used in this paper, comes from the Basel Committee Report on Banking Supervision
(1998, 3), “e-banking refers to the provision of retail and small value banking products and services through
electronic channels. Such products and services can include deposit-taking, lending, account management,
the provision of financial advice, electronic bill payment, and the provision of other electronic payment
products and services such as electronic money.”
2.2 The theoretical approach: Sociotechnical constituencies
The paper utilizes the sociotechnical constituencies’ approach (Molina 1990; 1993), which identifies how
different technical and social factors interact with each other in the course of the creation, production, and
diffusion of specific technologies. This approach has been applied in the context of technology diffusion and
implementation at inter-institutional (e.g., Klaes 1997) and intra-institutional (e.g., Molina 1997) levels. The
main premise of this approach is that the processes involved in creating technological capabilities always
require the development of sociotechnical constituencies, “dynamic ensembles of technical constituents
(tools, machines, etc.) and social constituents (people and their values, interest groups, etc.), which interact
and shape each other in the course of the creation, production and diffusion of specific technologies” (Molina
1993, 483). The approach focuses on building sociotechnical constituencies through the process of
sociotechnical alignment, “the process of creation, adoption, accommodation (adaptation) and close or loose
interaction (interrelation) of technical and social factors and actors that underlies the emergence and
development of an identifiable constituency” (Molina 1997, 604). Sociotechnical alignment is what social
constituents try to do when they are promoting the development of a specific technology either intra-
organizationally, inter-organizationally, or even as an industrial standard. The basic aspects of the process of
sociotechnical alignment can be illustrated through the use of the diamond of alignment of Figure I.
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Figure I. The diamond of alignment in sociotechnical constituency building (Molina 1999b, 303, modified)
This particular diamond has two levels: intra-organizational level and industrial/market level. The shaded
areas (I-Ii) and (II-IIi) represent the world of the constituency's technology (i.e. product, services, etc.); the
areas (1-1i), (2-2i), (3-3i) and (4-4i) represent aspects of critical influence to the success or failure of the
constituency's products/services. Table I describes the content of each one of the aspects in the diamond. The
key to success lies in the quality and effectiveness of the alignment strategies and tactics implemented to
keep all these aspects evolving in a convergent and synergistic direction. The success of the constituency's
product depends critically on the effectiveness of the alignment, or management of misalignment, of all these
aspects of the process of creating market success.
Table 1. An overview of aspects of the diamond of alignment (Molina 1999a, 10)
(I-Ii) Constituents’ Perceptions, Goals, Actions and Resources
This dimension relates to the present state of the constituency’s resources: the type of organization, people, material
and financial resources, knowledge, expertise, experience and reputation and other elements such as current
perceptions, goals, visions and strategies. In short, what the constituency is at a given point in time.
(II-IIi) Nature and Maturity of the Technology
This dimension highlights the importance of the nature and maturity of the constituency’s technology for strategy.
Constituencies’ strategies must be aligned with the strategic opportunities and limits implicit in the particular
characteristics of technologies. It is a simple fact that the nature of microprocessors is different from that of
hammers or drugs, and a ‘universal’ approach will not do.
Alignment (1-1i) – Organizational governance
This dimension highlights the importance of alignment of the constituencies’ technologies with the governance and
strategic directions of organizational, industrial and market environments. In an intra-organizational context, this
means, on the one hand, that the market or objective addressed by the technology is perceived as highly significant
to the organization’s performance; on the other hand, it means a simultaneous perception that the potential technical
and market solution is promissory and viable so as to merit allocation of resources and market demand.
Alignment (2-2i) - Target Constituents’ Perceptions and Pursuits
This dimension relates to the people and organizations the constituency is seeking to enroll behind its technology.
This includes alignment of perceptions and goals between the technology developers and potential or ‘target
constituents’ in the organizational, industrial and market environments, including users, suppliers, and other relevant
organizations such as independent developers.
Alignment (3-3i) - Nature of Target Problem
This dimension highlights the importance of alignment between the capabilities of the constituency and the technical
requirements of envisioned products/services and markets (i.e. target functionality and cost). This includes
alignment between the technology and widely recognized technical and market trends and standards in the target
industrial area (see alignment 4-4i). In short, to avoid ‘failure’, constituencies must have the technical capacity to
deliver appealing products/services within available resources and in competitive time.
Alignment (4-4i) - Interacting Technologies/Constituencies
Commonly, technologies emerge in an organizational, industrial and market environment populated by other
technologies. This dimension relates to the type of interaction and relations established with these other technologies
in the pursuit of success. It also includes alignment between the technology and technical/market trends (see
alignment 2-2i).
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The ‘constituencies’ approach is not alone in stressing the interaction of different social and technical
factors in explaining the characteristics and results of innovation and technology implementation processes.
Other approaches (e.g., actor networks: Law & Callon 1992) also stress such interaction. The ‘constituencies’
approach, however, has been found particularly useful for systematically analyzing the interaction of
different social and technological factors, for instance, due to its suitability in analyzing the processes of
implementation where a particular outcome is privileged (Kinder & Lancaster 2001). Also, the approach does
not wish to give prominence to any particular level of analysis, distancing itself from methodological
reductionism or holism (Klaes 1997). The sociotechnical constituencies approach acts as a conceptual
instrument for the understanding and guidance of processes of innovation and implementation (Kinder 2000),
making it an analytical tool appropriate for understanding e-banking implementation.
3. CASE STUDY: THE DEVELOPMENT OF THE E-BANKING
CONSTITUENCY AT SAIB
This case study investigates the emergence and evolution of e-banking at Saib. It provides a brief overview of
Saib and some of the key events shaping its developments in almost 30 years of existence. It then looks at the
particular development of e-banking through the conceptual lens of the ‘diamond of alignment’, following
which significant lessons for innovation processes are discussed.
3.1 Brief overview
Saib started operations in 1977 to provide investment banking and finance services to the Saudi market. In
particular, it arranges financing of quasi-government and private industrial sectors and trade finance products
for imports and for the increasing Saudi exports (Saib 2005). The initial share capital of SAR 30 m increased
many times until it reached SAR 1,375 m in 2004, a 5.21% of the Saudi banks share capital. The
shareholders include J. P. Morgan International Finance Limited (JPMorgan), Mizuho Corporate Bank
Limited (Mizuho), Saudi public and private institutions as well as Saudi individuals. Saib employs about 582
employees, and operates 16 branches throughout Saudi Arabia dedicated to serve about 30,000 retail and 800
corporate clients. It also operates about 100 ATMs and 267 POS terminals (see Table II). Although Saib’s
corporate policy has developed to provide retail banking services, it is still concentrated on corporate banking
services and in particular medium-term financing (MEED 2001).
Table II. Saib market share positions, 5-year periods (Al-Duhkeil 1995; Tadawul 2004)
For years ended December 31,
(SAR millions) 1983 1988 1993 1998 2003
No. of branches 1% 1% 1% 1% 1%
Total assets 4% 2% 2% 4% 4%
Share capital 6% 3% 1% 6% 4%
Shareholders equity 2% 1% 1% 4% 5%
Net income 1% 0% 1% 2% 3%
3.2 Some key events
Three key events at Saib have shaped the present e-banking constituency:
1. New focus: Saib modified its focus around the mid-1980s by entering the corporate banking
business (Al-Duhkeil 1995). The change made Saib a competitor against two different groups:
governmental-owned funds in the financial business and commercial banks in the corporate
business.
2. Private banking: The strong-relationship that Saib built with many corporate banking clients
helped to provide private banking. Saib started to produce private banking products and targeted
the staff of corporate banking clients (e.g., an Operations Manager of a corporate banking
client).
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3. Financial joint-venture: The establishment of non-bank local financial institutions as a new
investment approach was another key event. Saib established in 1999 the Amex Saudi Arabia
Ltd. (Asal), a joint-venture company equally owned by Saib and American Express. It also
partnered with Orix of Japan, the world's second largest leasing company, and established in
2001 the Saudi Orix Leasing Company (Solc). The trend is for the establishment of more joint-
ventures - (Banker Middle East 2004).
These events shaped Saib corporate policy and helped create and sustain a competitive advantage. The
question now is what are the implications of Saib’s business focus on the emergence and evolution of Saib e-
banking constituency? The following section aims to answer this question by applying the conceptual lens of
the ‘diamond of alignment.’
3.3 Development of Saib e-banking constituency (2000-2005)
The ‘diamond of alignment’ selected for the analysis is a two-layered intra- and inter-organizational diamond
given that important features of the Saib e-banking constituency-building process are the result of intra- and
inter-organizational interactions between Saib and other organizations.
The origins of e-banking constituency-building process go back to 1997 when Saib developed its business
and IT strategy (BIT). The aim of BIT was to fulfill the technological needs of the long-term objectives. The
initial technological build-up approach was “to purchase integrated packages rather than developing new
ones. This is due to the cost/benefit in relation to the bank business objectives and resources. However, this
behavior is not without risk. Integrating different packages involves risk because different packages come
from different vendors … We do not take risks. We are talking about technology. If you would like to be at
the leading edge, this is probably not the right country to attempt to be in. Innovativeness is a huge risk in the
banking industry. We do not implement anything unless it has been proven that it works somewhere else,”
(IT Group Manager).
3.3.1 (I-Ii) Constituents’ perceptions, goals, actions and resources
To leverage the development of the e-banking constituency, Saib formed the IT Group and the e-Commerce
Department in 1998 and 2002, respectively. The IT Group tackles the technological aspects while the e-
Commerce Department tackles the operational and administrative aspects of e-banking developments.
Saib also allocated about 2% and 11% of the workforce and operational budget, respectively, to the
development of the project. Front-office applications (e.g., Internet banking) acquired about 30-40% of such
budget while back-office systems (e.g., core banking systems) received the remaining budget (Saib Survey
2003; IT Group Manager).
The service agreements among Saib, American Express and Orix of Japan require the IT Group to process
all financial transactions of Asal and Solc and integrate them in the back-office systems of American Express
and Orix of Japan.
Externally, Saib furnishes clients with many forms of e-banking include ATMs, POSs terminals, e-cards,
e-bills, internet banking and ALLOBank. Table III lists Saib major milestones toward modern e-banking.
Table III. Saib major e-banking milestones (Saib Survey 2003; E-Commerce Head)
Lunch Date Product/Service Description
May 2001 ALLOBank Phone banking
June 2002 Saib Internet Internet banking, retail
August 2003 e-bill payments Bill payments via ATM
April 2004 Saib Internet Internet banking, corporate
December 2004 Saib SADAD Checks payment & presentment service
Although Saib has made all possible efforts to build the strength of the e-banking constituency, the
strategic role of ICT is still lower than that of other Saudi banks. This seems largely because the task of
defining the long-term ICT policy and strategy is still handled by the CEO rather than the Board of Directors
(BOD) as in the case of other Saudi banks (e.g., Samba Financial Group) (see below Dimension 1-1i) (Saib
Survey 2003; E-Commerce Head).
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3.3.2 (II-IIi) Nature and maturity of the technology
The implementation of BIT implied changes not only on the organizational aspects but also on the
technological aspects. “From this point, the bank has a technical infrastructure that can build on…Nearly
everything is being digitalized,” (IT Group Manager). The technological system consists of mature, well-
proven technology consisting of a group of IBM-AS400 i-Series servers and the underlying infrastructure
became TCP/IP that works on a high speed WAN. Equation, an integrated banking system provided from a
British software company named Misys, replaced MYDES, the core banking system that had been acquired
from JP Morgan in the early 1990s. Figure II portraits the structure of Saib technological system.
Figure II. Saib technological system (IT Group Manager)
The technological system improves the overall performance of transactions processing. For example, the
major performance specification of the Internet banking technological sub-system is the ability to support a
client-base of up to 15,000 clients with sub-second response times. Although such performance specification
does not imply major cost-performance improvement, it does enable the provision of a completely new
service. Clients now can manage their different accounts with Saib, Asal and Solc via a single virtual
channel. Figure III portraits the structure of Saib Internet banking technological sub-system.
Figure III. Saib Internet banking technological sub-system (Saib Survey 2003)
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3.3.3 Alignment (1-1i) – Organizational governance
The e-banking constituency-building process has been influenced by many intra- and inter-organizational
constituents. Intra-organizationally, the e-banking decision-making process is a mixture of a highly
centralized management and a culture of participation.
The IT Group has to translate an e-banking initiative into a business case, followed by a business plan that
proves its economic feasibility. The CEO usually consults external IT consultants for advice and
recommendations prior to making the ‘go/no go’ decision (see Dimension 2-2i). After approving the
initiative, the CEO and the initiative’s users (e.g., Corporate Banking Group) review the development
progress of the initiative with the IT Group through monthly management meetings and informal discussions.
In general, the process is more flexible than that of other Saudi banks (e.g., AlRajhi Banking & Investment
Corporation) as it is done apart from the BOD.
Another intra-organizational aspect influencing the e-banking constituency-building process is the
specific governance of providing a corporate banking service (e.g., corporate financing). The provision of
such service is subject to multiple levels of authorization (e.g., Credit Control, BOD) (see Dimension 2-2i).
Consequently, providing a virtual banking product or service for a corporate client requires linkages among
all levels of governance, which increase the cost of e-banking development (see Dimension 3-3i).
Inter-organizationally, the e-banking constituency-building process is influenced by the regulations of
American Express, Orix of Japan, the national ICT infrastructure, the Saudi Stock Market (Tadawul) and the
Saudi Arabian Monetary Agency (SAMA). For example, the operational agreement between Saib and
American Express to process the transactions of Amex cards requires that any enhancement (e.g., cultural
customization) to the features of Amex application has to be approved by American Express (IT Group
Manager).
3.3.4 Alignment (2-2i) - Target constituents’ perceptions and pursuits
The success of Saib e-banking with target constituents is clearly visible at the retail banking services (e.g.,
ALLOBank). Saib has kept the same share of e-market since the early 1990s (see Table IV). The number of
retail clients using ALLOBank and Internet banking has grown substantially to 25% and 35%, respectively.
On the other hand, at the corporate banking market, the bureaucratic burden of the multiple levels of
authorizations is likely to be responsible for the low rate of provision (see Dimension 1-1i). This means that
the Saib e-banking constituency has yet to transform a substantial number of target corporate institutions into
members of the constituency.
Table IV. Saib e-market share positions, 1999-03 (BTC 2004)
Year Branches ATMs POS terminals e-Cards
No. sector % No. sector % No. sector % No. sector %
1999 13 1.09 24 1.21 179 1.09 38,645 0.82
2000 13 1.10 29 1.31 221 1.19 9,882 0.21
2001 13 1.09 49 1.91 264 1.22 9,015 0.16
2002 15 1.25 74 2.38 286 1.18 28,899 0.51
2003 15 1.24 94 2.71 267 1.06 48,112 0.82
Although the business and constituency-building aspects are improving in the retail banking market, the
competition is not without challenges. Saib is facing a competition mainly from AlRajhi and NCB, especially
in the service of bill payments. An interesting issue here is that NCB is considered by Saib as an e-competitor
although NCB owns 8% of Saib’s share capital. This indicates a potential misalignment situation with an
important shareholder if intra- and inter-organizational relations are not kept clearly defined (see Dimension
1-1i).
3.3.5 Alignment (3-3i) - Nature of target problem
BIT sets out four main objectives for Saib e-banking: (1) to maintain the clients’ base, (2) to decrease the
operational expenses (3) to build a cross-selling channel for Saib and its joint-ventures, and (4) to provide
products and services locally and internationally (Saib Survey 2003).
Although the main objectives of Saib e-banking were well defined from the beginning, they have evolved
in response to the change in Saib corporate policy (e.g., the change of focus from a leasing business to the
corporate banking business).
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The E-Commerce Head clarifies how the objectives have evolved:
“Our e-banking strategy has been modified to align with the change in the overall strategy of the bank.
We were mainly a corporate bank until the mid 1990s. After that the bank entered the retail banking market
to have a presence. Such change in business force us to modify our e-banking strategy to meet the
requirements of the new clients segment, retail. Therefore, we expanded our ATMs and POS terminals
networks to capture some shares from the retail banking market.”
The available technical, human and financial resources of Saib e-banking did not entirely match the
proposed objectives (see Dimension I-Ii). The initial estimated cost of e-banking development was
approximately SAR 5 m. And, the initial estimated time was approximately 3 years. The actual cost and
delivery time exceeded the proposed plan by 20% and four months, respectively, due to the introduction of
international information security standards.
3.3.6 Alignment (4-4i) - Interacting technologies/constituencies
The migration of the Saib core banking system from MYDES to Equation eliminated many problems of
integration of interacting technologies and enhanced the performance of many divisions and groups. The
main characteristic of Equation was the ability to cluster transactions processing according to the
requirements of the beneficiary division or department (e.g., TI of the Credit Division). It also enabled the
provision of a completely new service in relation to MYDES. For example, the Internet banking service
helped retail banking clients to manage their different accounts with Saib, Asal and Solc via a single virtual
channel.
The integration of interacting technologies achieved by BIT implied also many changes on skills and
adoption. On one side, the e-banking constituency required (1) skilled resources in the technologies and
presentation standards for end-users, (2) core systems to be adapted to a non-stop operation, (3) operational
staff to understand the nature of straight-through processing, and (4) legal staff to understand technology-
related client agreements. From the adoption viewpoint, the e-banking constituency heightens awareness of
straight-through-processing, legal agreements and client visibility of core operations. It also increases the
vigilance and skills in IT security aspects as well as the awareness of clients’ needs across remote channels
(Saib Survey 2003).
Externally, however, the e-banking constituency-building process has been negatively influenced by the
national ICT infrastructure of the Saudi Telecom Company (STC), the sole telecommunications provider in
Saudi Arabia. Two years ago, for example, Saib completed the development of an e-banking service. For
information security purposes, the service required a 2 G-bit bandwidth. The STC could not deliver such
bandwidth although it has such service. The reason was because “STC could not organize its marketing and
operations in order to sell the line to us. The STC needs to improve its data communications infrastructure
and improve its marketing skills. It should also deliver huge amounts of bandwidth,” (IT Group Manager).
3.3.7 Summary
Figure IV provides a more visual and succinct evaluation of the state of the process of sociotechnical
alignment at Saib. The ‘diamond of alignment’ has been positioned into a “spider web” and decomposed into
two levels, intra- (dark area) and inter- (light area). Each has been given a marking from 1 to 7, depending on
the strength of the state of alignment1. Figure IV also visualizes the gap between the overall state of
alignment at Saib e-banking constituency-building process (red areas) and the optimal state of alignment
(green areas). Clearly, the best state occurs at the intra-organizational level of interacting
technologies/constituencies (green circle) because of the ability to smooth the interaction with internal
technologies (e.g., the integration of TI with Equation. On the other hand, the most challenging alignment
situation occurs at the inter-organizational governance (red circle) because of many unsuccessful stories (e.g.,
the 2 G-bit bandwidth provided from STC).
1 1: strong alignment, 2: significant alignment, 3: weak alignment, 4: misalignment, 5: significant misalignment, 6: strong misalignment,
and 7: no-alignment.
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Figure IV. Saib e-banking constituency-building process
It can be said that Dimension 4 asserted a major role in shaping the present Saib e-banking constituency.
Equation, for instance, helped Saib to lunch the Internet banking service, which was not technically possible
with the capabilities of MYDES. This suggests a strong degree of alignment with Dimension 4, with great
role played by the intra-organizational level.
However, the alignment is different with other dimensions. The alignment with Dimension 1 is facing
challenges. Intra-organizationally, for example, the e-banking constituency has not managed to change the
role of defining the long-term ICT policy and strategy from the CEO to the BOD. Anther example is the
difficulty in simplifying the multi-level of authorities surrounding the corporate banking business. An inter-
organizational example is the limited introduction of further enhancements to Amex cards system. All these
suggest a degree of misalignment with Dimension 1 with a significant influence from the intra-organizational
level.
The alignments with the remaining two dimensions (2 & 3) are fluctuating. For example, the high
acceptance rate of ALLOBank and Internet banking indicates a significant degree of alignment with
dimension 2 (i.e. clients constituent). However, the 20% increase in the development cost and the 4 months
delay in the delivery of the Internet banking service indicate a degree of misalignment with dimension 3,
particularly with regard to industrial standards. Such fluctuations suggest a weak degree of alignment with
dimensions 2 and 3 with a major influence from the inter-organizational level.
In summary, the Saib e-banking constituency-building process has developed since the implementation of
BIT. Developments at both intra- and inter organizational levels have helped shape the characteristics of the
present e-banking constituency.
4. DISCUSSION AND IMPLICATIONS
This section discusses the applicability of the generic and positioning strategies (Porter 1980; 1985; 1996),
the resource-base view of the firm (Penrose 1959), strategic network theory (e.g., Dyer & Singh 1998), and
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accelerating capability building approach (Hagel & Brown 2005) to characterize the strategic approach
followed in the emergence and evolution of the Saib e-banking constituency.
The developments in Saib corporate strategy since the mid-1980s suggest that Saib has implemented, in
Porter’s term (1985), a differentiation niche strategy to gain market position within the Saudi banking sector.
To create value within such position, Saib has followed a strategic approach combining elements of both the
resource-base view of the firm (Penrose 1959) and the strategic network theory (e.g., Dyer & Singh 1998).
This is precisely what Hagel and Brown (2005) has called the accelerating capability building approach.
While Saib has progressed substantially in some aspects, in others the results have been more mixed.
Regarding the differentiation niche strategy, Saib has focused the efforts and resources on a narrow and a
defined segment of the market. This has been through the provision of corporate banking products and
services since the mid-1980s. This has been followed by fulfilling the needs of its clients through the
provision of private banking products and services. Porter (1985) argues that there are potential problems
with the niche approach as small-specialist niches such as Saib could disappear in the long-term. To
counteract this risk, Saib has attempted to strengthen its competitive position through establishing Asal and
Solc. Thus, “We have recognized that the ten banks operating in Saudi Arabia are not very different from
each other. They are talking to the same customers, and offering almost the same products. Our strategy
therefore is to establish specialized entities that handle specialized products,” (Banker Middle East 2004: 15).
Indeed, Saib has progressed well in differentiating its offerings.
With regard to value creation strategy, Saib has created value through implementing the accelerating
capability building approach (Hagel & Brown 2005). For example, Saib has used the power of its
governmental shareholders’ relationships to capture a stake in the market when it recently signed a
memorandum of understanding to act jointly as lead managers and financial advisers for the process of share
flotation of new insurance companies (Arab New 2005). The partnership with American Express and Orix of
Japan, as well as the search for similar relationship with an international insurance company are examples of
inter-organizational alliances for intra-organizational capability building. Clearly, Saib is progressing well in
the strategy to build-up its capabilities.
The implications of these strategies on the build-up process of the Saib e-banking constituency are
various. The agreements with American Express and Orix of Japan on the use of their IT applications allow
Saib to introduce new services to the market. The relationships with IT vendors in the build up of Equation
and its related components allow Saib to produce an integrated ICT system. However, Saib shows a
weakness regarding creativity in differentiating e-banking products and services. As of today, Saib has not
offered for example mobile banking and e-brokerage services as those of the Saudi Banks Samba and
AlRajhi. Such services are usually the preferred methods of stocks trading in Saudi Arabia for private
banking clients (Al-Jadeed & Molina 2005a; 2005b).
Hagel and Brown (2005) argue that the competitive edge depends on the institutional capacity of a firm to
rapidly extend its differentiated capabilities and to accelerate learning across boundaries. Therefore, investing
in innovative e-banking products and services (e.g., e-brokerage service) is recommended for Saib to
strengthen not only its strategic positioning but also its accelerating capability building strategies.
5. CONCLUSION
This case study has investigated the emergence and evolution of e-banking at the Saib Bank. It provided a
brief overview of Saib and some of the key events shaping its developments. It then looked at the particular
development of e-banking through the conceptual lens of the ‘Diamond of Alignment.’ The results indicate
that the Saib e-banking constituency-building process has developed since the late 1990s with combined
efforts at both intra- and inter organizational levels which have shaped the characteristics of the present e-
banking constituency. They also indicate that Saib e-banking strategy has implemented a differentiation niche
strategy to position itself within the Saudi banking sector, along with an accelerating capability building
strategy to create value. While Saib progressed substantially in some efforts, in others the results were more
mixed. Investing in innovative e-banking products and services is recommended to strengthen not only the
strategic positioning but also the accelerating capability building strategies of Saib constituency.
IADIS International Conference on WWW/Internet 2005
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ACKNOWLEDGEMENT
We would like to thank Saib’s interviewees for their positive and open attitude to our research questions.
Also we want to thank Saib’s Administration Department for administering the survey, and all other groups
and divisions who responded to the survey.
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