Note: All text within quotation marks in the responses below comes from the London Business School case study, Mondex International: Reengineering Money prepared by Blake Ives and Michael Earl. To integrate this text into the case write-up, some paraphrasing has been performed – these portions are shown within square brackets. Where paraphrasing occurred, it is the intention of this author to preserve the original meaning of the case study text.
1. What kind of global information infrastructure will be critical for Mondex to be successful?
Creating the global information infrastructure must occur with attention to the following provisos:
n Satisfying the challenge of “[m]aintaining a global brand and interoperability within the constraints of local requirements”
n Building an “[infrastructure that is] in keeping with [Mondex’s] image as a secure provider of electronic payments [while satisfying] an overwhelming need for a sophisticated IT infrastructure.”
The current Mondex infrastructure – with focus tightly directed on the electronic wallet – is considered “a closed system, in which data is created within the cryptographic scheme. While this data can pass between valid entries comprising the cryptographic scheme, its data never leaves the scheme unless destroyed or removed in a highly controlled environment.”
Whatever Mondex builds, it must capitalize on its current brand, address competitive factors and be in line with the expectations of the marketplace – a large part of which involves providing capabilities that enable the performance of on-line purchase transactions. In doing this, Mondex must face the challenge of opening a somewhat closed system – using different approaches to secure transactions and relying on the Internet to facilitate the creation of the global information infrastructure.
Other components in the infrastructure should be:
n Secure network interface components that provide the first line of defense against invalid and/or defective transactions
n Proxy servers that handle the routing of transactions to the main server(s) after authenticating
n Centralized database servers (behind a well-configured firewall, of course)
n Mirrors of the main servers as well as the commensurate synchronization applications – these can be used to balance the load on all the servers and to provide operational continuity should one server fail
n Support for email and online account information
n Access and security support for merchants and consumers
Consumer and merchant interfaces are also important components of the infrastructure. These must be created with regard to what works best in Mondex’s priority countries – conformance with predominantly used technologies and compliance with client (consumers and merchants) preferences.
The global information infrastructure must also be flexible and expandable. As Mondex expands and the types of available technology change, the system must be adaptable. The company will not be able to remain viable if they are not poised to confront future challenges.
2. Does Mondex raise any privacy concerns in the U.S.? If so, what are they and how should they be addressed?
(First, to state a couple of assumptions – since this question pertains to privacy, consumer privacy is considered the focus and any potential issues for merchants involved with Mondex are not discussed in this reply. Also, the more general issues regarding security are not addressed since the question is specifically about privacy. Some of these issues will be covered in the reply to question 5. )
Wherever there is a system that involves people and their money, there will be security, privacy and appropriate use concerns. Mondex provides strong security and access control; however, this does not answer all of the privacy concerns – in the U.S. and elsewhere.
Consumers are required to register their cards before gaining the ability to perform transfers between their banks and the Mondex cards. This registry information is a potential source of privacy concern. It must entail creating a repository of consumers’ personal information including some details of their banking arrangements.
A second source of concern involves the ability to view information about transactions that is stored on the Mondex card itself. This is intended as a convenience for card owners, but if accessed by others, privacy concerns arise. Could this information be used to track someone’s recent actions and perhaps be used to damage reputations?
Both of these aspects require that Mondex provide assurances that personal information is protected. In the case study, John Beric (head of Security for Mondex) states, “risk must then be balanced against the perceived business value.” Such a practical expression regarding Mondex’s approach to security and privacy protection may not be sufficient for consumers. They expect that the information they provide will be used as intended within the system. Mondex needs to provide a strong impression that this is the actual case rather than present the attitude that customer information is an asset of limited value.
3. If you were to give some advice to Mondex at this point, what would it be? How do you manage a firm that is simultaneously a small startup and a major global player? What are the critical success factors for management?
My first piece of advice to Mondex would be: set priorities – have a plan. The company is at a critical juncture in its growth and must be careful in managing the next steps that it takes. It must also be able to communicate a sense of mission, a purpose, and an organized approach to doing business. There must be something that indicates internally and externally that the company will not stagnate, nor will it be motivated by whims or fads.
The company must pay attention to the needs of the marketplace – evaluate their product with regard to the consumers and merchants that would accept it and get the most benefit from it. These are likely to be those whose needs are not being met by Mondex’s competitors. So, going where the competition isn’t – and is unlikely to go in the near future – would be a good idea.
If this means giving lower immediate priority to pursuing on-line commerce, then so be it.
Mondex must also consider the relevant regulatory dynamics when making growth decisions. Markets must allow them to provide their services without imposing unwieldy restrictions and compliance challenges. They must also have adequately complete information with regard to the regulatory picture – beginning an expansion effort only to make later discoveries could result in a devastating setback.
With the purchase of a controlling share of Mondex stock by MasterCard International, Mondex must also think ahead to the next phases of their corporate life. Do they want to maintain an independent brand identity? What might be gained by planning growth that is in synch with the plans of MasterCard? Where might they make the most of collaboration? I would advise that they consider these issues.
In summary, these are the critical success factors for Mondex:
n Build on their perceived value to consumers and merchants
n Remain profitable – protect shareholder investment
n Protect and capitalize on their innovative image within the industry
n Guard their intellectual property
n Continue to improve the use of available technology
4. Assuming that Mondex cannot be effectively marketed globally due to the limited resources, what factors should guide Mondex International in focusing to market segments and what might these segments be?
In responding to question 3, mention was made regarding two factors for Mondex to consider when prioritizing the selection of expansion markets:
n Presence of consumers and merchants who have an interest and need for their product
n Absence of extreme regulation on their enterprise
Another aspect of market selection was briefly mentioned – selecting those markets that would hold little or no competition for Mondex. The company must consider the limited resources they have available – and in the face of the strong interest in their product – establish priorities. Where competition is at a minimum, Mondex will be better able to focus on delivering their core product and marketing it based on its merits, without all the additional effort required to face competition and establish and image that is at least partly a response to the competitors’ products and existing images.
Vertical market expansion – migrating the current Mondex product into new segments of existing markets – is another area that Mondex must consider. Issues regarding presence of a client base, regulation and competition must also be evaluated here.
Regardless of the expansion path that Mondex explores, they should move into areas where their distinctive competencies can be appreciated. The company needs to undergo a process of discernment – considering their current products and services, define their business. In the case, one Mondex insider stated, “We should be able to generate economic returns at the center of Mondex – we should not be just a centralized policing force.” This indicates uncertainty within the organization about the corporate goals. Answers need to be clearly provided – what does Mondex do?
A second question requires consideration as well – Will what they now have to offer be enough to keep them profitable and allow them to build the capital base they need to move to the next phase of their development?
If the answer to this question is positive, the company can focus on vertical expansion in the near term. Then move to horizontal expansion in the future. However, if there is a need to more immediately pursue innovation by way of horizontal expansion, limited resources will be an even more critical issue. Mondex will need to leverage their experience in establishing current markets and apply this savvy to new venues.
Whatever the market segments Mondex explores, they should look for areas that allow them to repeat the successes they have had thus far. The factors mentioned above led them to their current markets and there is good reason to rely on a proven formula. This doesn’t mean that Mondex should avoid all risk. They should definitely look for opportunities. That edge is where innovation occurs.
5. What risks are associated with the current hardware and software design of Mondex?
Mondex relies on “a closed system” – the chip-enabled Mondex cards, the electronic wallets and the card readers supplied to merchants. This is the crux of their infrastructure. This provides benefits and allows them to build security into that system as well as around that system. However, this system must interface with the rest of the world. This is where risks can be found.
The company must protect its technology from attempts to breach the security of its chips. They must also guard against forgery, fraud and other potential legal issues due to inappropriate use of their system – that could involve Mondex cards as well as the hardware components that they supply.
Currently, the company espouses an approach to security that focuses on doing enough to cover the major risks adequately. This is pragmatic but users of the system probably don’t want to live with the perception that Mondex is not entirely secure. The users can understand their responsibilities when using Mondex – but they will appreciate the sense that Mondex is working to protect their information and doing whatever possible to keep security and privacy risks to the absolute possible minimum.
In addition to physical security risks, Mondex definitely needs to be mindful of the risks – to their continued business success – that can evolve from an unfavorable perception of their technology management. Once a company gains a bad reputation in this regard, it’s difficult to recover.
Mondex is apparently already aware of accounting, taxation and reporting issues within the banking industry that surround the use of their product. They need to remain alert to these areas of risk and make sure they do not become serious impediments to performance. In attempting to expand, there is potentially greater risk involved here. They must be vigilant regarding this area of risk and take a proactive approach in order to remain viable.
The last area of risk for Mondex involves becoming out of synch and/or losing touch with technical innovations in and around their industry. The modern world is littered with cases where a once promising technology was overshadowed by other innovations. These may not always be better than the losing proposition. They may just be backed by stronger funding and have better connections. Mondex needs to acknowledge this area of risk and do whatever possible so that they are not one of those examples. They must also remain attuned to developments in their industry that can be used to enable the spread of their product. Ensuring that their technology is adaptive will help Mondex to avoid unnecessary costs and remain competitive in an industry that is increasingly about interoperability as well as the enabling and empowering uses of technology.