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Facing technology head-on

Hugh L. McColl is scared, and he doesn't like it one bit.

This, after all, is the usually fearless chairman and chief executive of NationsBank Corp., an ex-Marine who keeps a hand grenade in his office and who once told a takeover target to respond promptly, "or I will launch my missiles." This is the man who braved the scorn of his peers by predicting the wave of consolidation now sweeping the banking industry _ and followed up by building his own bank into one of the country's powerhouses.

So what fills him with trepidation?

Technology.

McColl believes technological change threatens to remake the banking industry. But how swiftly, and in what form, these changes will come is anyone's guess. And that's what is bugging McColl. He is convinced that if he makes the wrong bet, or the right bet at the wrong time, the company he nursed from a regional bank to a player on the national stage will fade into obscurity.

"This thing," he says, referring to technology, "is like a tidal wave. If you fail in the game, you're going to be dead."

Across the country, chief executives in industries from banking to publishing to retailing to manufacturing are facing similar scares. Once, mastering technology meant learning to use a personal computer and figuring out how to tweak productivity gains. Suddenly, the march of technological change means rethinking corporate strategies. Products and delivery systems face drastic changes. Competitors emerge from unexpected places. The Internet is a wild card.

So how does a successful CEO, struggling to remain successful as the ground shifts, deal with it? Never one to cower, McColl, 61, is busy trying to figure out how to navigate this new world. One change: Once a no-nonsense, in-charge CEO with a clear vision of the future, he is having to teach himself to trust in subordinates' ideas when it comes to high-tech and its implications. "I'm more dependent on others than I've ever been in my life," he says. "It doesn't feel good."

Despite his qualms, he's spending big. This year, NationsBank will spend $1.4-billion on operations and technology, including $400-million for discretionary projects and $136-million for telecommunications. Today, McColl calls mergers and acquisitions the "old paradigm"; instead, he is pushing for "strategic alliances" with other banks. He has been one of the biggest backers of Inet, a soon-to-be-announced joint venture among several big banks and IBM to create a complete home-banking service. NationsBank has started selling its PC-banking software in four of its nine states. It is one of three banks participating in the first U.S. launch of "stored-value" cash cards for the Olympics. By the first quarter of next year, the bank plans to offer certain account transactions over the Internet.

McColl is, of course, no stranger to risk. When he took over as chairman and chief executive in 1983, his company (then known as NCNB Corp.) had only $12.2-billion in assets and was the nation's 20th-biggest bank. He led his army of young, brash executives through a series of bold acquisitions that changed the face of banking. From Florida to Texas to Maryland, he stormed the South, roiling its courtly world of banking with his military metaphors and hard-charging demeanor.

Many said he was crazy and that his billions of dollars in acquisitions would bring down the bank. Today, he says he never doubted the strategy that turned NationsBank into the country's fifth-largest, with $192-billion in assets. Consolidation, he says, "was so straightforward, the logic was so overwhelming."

But with technological change, he laments, the logic "is not so clear _ there are a lot of unknowns." For example, no one knows how consumers will choose to do their banking in the future. Right now, banking via home computer seems a hot prospect. Yet only about 1 percent of the population is using PC banking. Meanwhile, telephone banking is soaring. Should the bank put most of its money in phone banking? What about alternatives such as interactive television? What about electronic cash, with customers carrying "smart cards" that hold everything from cash to medical records?

Some of McColl's competitors think the best strategy is to watch and wait for answers to emerge. "You can be on the leading edge of losing your you-know-what if you're not careful," says James B. Williams, chairman and chief executive of Atlanta-based SunTrust Banks Inc. Williams, 63, has never used an automated teller machine, let alone a PC. He says he keeps in constant touch with his bankers, and they never have considered SunTrust's technology inadequate.

Even some of McColl's top lieutenants believe they can cover all bases with small, strategic investments in each delivery system. Kenneth Lewis, the president, says changes in technology "may not be an issue of survival, but the difference between high performance and mediocre performance." So long as NationsBank "is ready to respond" and stays abreast of technology, he says, "I don't think the changes will be so dramatic."

Not so McColl. He sees technology as fundamentally changing the industry, perhaps destroying it. One possibility he envisions is that his competition won't come from the banking industry but from some unexpected quarter. Technology, in this view, is not merely a way to boost productivity but an important channel for delivering financial services.

Thus, in an era when speed and convenience are more important than a friendly banker, banks could become nothing more than a commodity, handling the behind-the-scenes, low-profit transactions for the high-profit electronic "store" controlled by some technological giant.

That's why McColl believes NationsBank must be on the leading edge of introducing technologically advanced products. The first one to offer such products, he argues, can lock up a lucrative market. McColl has pushed the bank to offer its own personal-finance software instead of depending solely on big software companies.

In March, NationsBank rolled out its Managing Your Money personal-finance software package in Texas. The target was 32,000 customers by the end of the year; yet in less than five months, the company has signed on 65,000 customers, 30 percent of whom had never before banked with NationsBank.

"We think change is coming at us not like a freight train but like a speeding bullet," McColl says, noting that NationsBank has 48,000 personal computers and only 60,000 employees.

"What is it I'm afraid of?" he asks. "I'm afraid of losing time _ you can't get it back. I know that I've got competitors out there in the high-tech area, not the banking area, who are working this very minute to build a better mousetrap and drive me out of business."

McColl's bias in dealing with change is toward action. ("I don't like my competitors," he once told some new subordinates. "I don't eat with them, don't do anything with them except try to waste them.") But how do you waste an enemy if you aren't sure who the enemy is?

Technology moves so quickly that a company's expertise could become obsolete by the time it has been acquired. And unlike banks, where you buy loans and branches, the biggest assets of high-tech companies are people who might quit the day a bank acquired them.

Of course, that isn't to say McColl no longer lusts for bank acquisitions. He still envisions NationsBank truly being the nation's bank.

And it is in this arena where McColl has long commanded the expertise to plan and execute strategy. He knows what it takes to make a good bank acquisition. Issues such as credit quality and deposit share are second nature to a man who has played a role in countless mergers and acquisitions. In these deals, he has often called the shots, interacting with a small circle of advisers.

Nowadays, he is trying to stay ahead by relying on a team of lieutenants more technologically savvy than he is, even though they often speak in a jargon he doesn't always understand. Such a shift is important, experts say, because in a technological era, strategic ideas often come from employees far down the pecking order or from outsiders.

Sometimes McColl, who usually trusts only long-time colleagues, has even reached outside his inner circle. Janey Place, a Wells Fargo & Co. executive with a Ph.D. now heads the company's strategic technology group, a team of 95 executives who track emerging opportunities in technology and act as the bank's internal consultants. More important, Place has become a sounding board for McColl and has spent several hours training him on computers and talking to him about complex technological issues.

McColl, who confesses to having trouble with his home intercom, insists that knowing how to use computers isn't necessary for him to manage NationsBank effectively. So why learn? "Because I don't like anybody knowing anything I don't know," he says.

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