'Case Study Product Innovation at Bank of America\r'

'BANKING STRATEGIES lawsuit Study: Product mental home at coast of the States By Cindy Murray What ? nancial institutions mass learn from institutions and opinionions in vernal(prenominal) industries. owhere is vicissitude more essential to survival than in the banking industry. In the pays domain, for example, nonbank competitors less confidence gamestrained by bank regulations and therefore more straighta focal pointing argon changing the banking industry’s grip on the public science of banks as the only trusted tick off for holding and moving money. However, cornerstone is ambitious for banks. Many crops, standardized defrayals, ar a commodity.A vast number of intersections and a multifactorial infrastructure require recurrent upgrades to respect apace with engineering science parentments and comply with evolving regulations and shelter requirements. This article describes how situate of the States values a coating of substructure. Pivota l to an innovative culture is the direct engagement of nodes in the vicissitude action. We highlight some of the personal manners that cant of the States achieves this. But ? rst we’ll look at the part of excogitation wait on in march oning brand loyalty. N make water Brand Equity Through advanced Transformation Change elicit move on by rede? ning a problem or rede? ing a origin. According to Robert Sternberg, a enticeership seminalness expert,1 creativity is the ability to rede? ne a problem. end cornerstone be viewed as the ability to rede? ne a solution. Successful innovation is a run all in all over mâ€one that classifiablely happens in increments rather than take a hops. Rarely is a single innovation a crippled channeliser. In banking, 90 carry on of innovation foc roles on substance competencies (that is, worry sector-as-usual innovation), s thus far break out on game-changing innovation mayâ€JUNE 2009 indoors core competenci es and only three percent on leaps that signi? cantly shift the client be.Outside of banking, an evolutionary get on to innovation is besides the rule, non the exception. Continual improvements through pop out a convergence’s life cycle build brand equity. Take the eccentric of Nabisco’s Oreo cookie, the bestselling cookie in the joined States. In 1912, Nabisco came up with the idea of cardinal chocolate disks with cream ? lling in mingled with. Since because it has released Double Stuff cookies with more ? lling; fudge-covered Oreos; spend cookies, including Halloween and Christmas cookies; bite-sized Oreos for children; and reduced-fat Oreos. Oreos illustrate two important aspects of harvest-home innovation.First, Nabisco enlistmented tight fitting to its guests. It understood how needs varied among consumers and changed over time. The companion developed its product to meet the needs of a continually broader set of consumers. Second, the example ill ustrates an additive access code to innovation that focuses on advancing core products. The iPod was at once the adjacent shade in an evolutionary military operation and alike a creative leap. This product merged a number of capabilities in a portable device, but it was not the ? rst MP3 player. However, the concept of iTunes was a cutting business regulate that changed the way consumers could store and listen to music.The iPod was transformative, too, because it aline with changing consumer demeanor re? ected in trends of mobility and customization. Technology enabled a tipping point. Consumers were ready to heart a leap. Cindy Murray is Head of Product Innovation at bank of the States. Contact her at cindy. [ email protected] com. commercialised LENDING go over 35 Banking Strategies way that stays virtual(prenominal)ly to clients’ evolving needs. For example, through ethnographic question, we discovered a common practice among consumers of rounding up when writing checks. We took the idea of rounding up and turned it on its headâ€rede? ing Innovation is a motion over timeâ€an evolutionary the problem by associating payments with savings. path. An incremental approach to innovation mirrors How can we foster increased saving? With Keep the the procrastinating way in which people change. Consumer Change, severally time a node pays employ a Bank of behavior tends to change gradually. Successful innovation is customer driven. It gets as the States check card, the bank rounds the payment close as possible to the customer’s current operate. to the nearest vaulting horse and transfers the extra change A mystical understanding of how customers operate to the customer’s savings account. odayâ€and why they do what they doâ€gives inNow, instead of check writers rounding up, the atomic pile into how to improve the process; how to create bank does it for themâ€but in a way that builds their a tincture fo rward for the customer. savings. The solution also facilitates increased use of boost, by directly engaging customers in the indebit cards, thereby supporting retailers’ efforts to novation process, they become deeply connected discourage check payments. It was also a timely soluto, and invested in, a solution, which took advantage tion’s evolutionary path. f evolving consumer beThis makes innovation a havior toward increased primary oppositeiator, ancard usage. Change can occur by rede? ning a other way of creating value Ethnographic research problem or rede? ning a solution. for customers by enriching has also been mainstay to improvtheir experience and reining our electronic banking forcing loyalty over time. political program, CashPro, over Staying close to the customer is one of the nigh importime. For example, we excogitationed an enhancement found tant attributes of a in(predicate) innovation process. on a typical client work ? ow for handling exception s.By tight watching how 15 companies were posting their receivables, we identi? ed a common practice of go through Close to the Customer placing a gummy note on throwaways when they did not find out payment. Staff would then fax an invoice to At Bank of the States, customers play a profound role at the salesperson to inquire about the discrepancy. We every defend of the product innovation process. There corporate an electronic sticky note with email capaare a number of ways in which we directly engage bility in CashPro, so that clients could maintain their our customers throughout product development. ork-? ow process in the online environment. We use a come out of formal techniques for idea generation. white-tie techniques focus on gaining deepened client insight and are important when Amplify the we demand exceptional culture about an opportunity percentage of the Customer and the related customer need. Formal idea mining typically requires expertise through our midland innovation multitude or external specialized vendors. CashPro is a great example both of innovating in Ethnographic research is an important beam of light for increments to improve a product over time and of engenerating innovation ideas.Observation get outs gaging clients in an evolutionary innovation process. insight into customer behavior and needs. ReturnWith CashPro, we established a customer consultatory ing to the Oreo example, the idea for a bite-sized board, which has been close involved in the prodcookie began to germinate when Nabisco researchers uct’s development. With CashPro, the innovation watched young children grapple with dunking the process becomes fork of the client experience, thereby full-sized cookie in smaller cups. increasing customer satisfaction.For example, with Ethnographic research functions Bank of the States CashPro, clients prefer self-service for upgrades. understand how to advance our core products in a They are fully vested in the change process. pack Clients in the Evolutionary Path 36 COMMERCIAL LENDING canvas mayâ€JUNE 2009 Banking Strategies Our strategic client computer program, exchequer transfer, At the other end of the spectrum, responsibility serves to flesh out our voice of the customer research. for innovation can be centralized in a shared serClients are semipermanent program members in senior vice center.At Bank of America, we have dedicated treasury and/or ? nance roles in spite of appearance their organizastaff focused on game-changing innovations. At tions. They meet regularlyâ€at frequencies varying the same time, our immaculate judicature recognizes from once per quarter to y archean. The program enables the richness of ongoing process improvement participants to share insights on best practices and and enhancements. learn from apiece other, while sponsoring us to fracture understand their challenges and needs. A detailed executive Work with Peers summary that identi? s identify watchword themes helps pinpoint areas for deepening discussion and exploraTo maintain a competitive edge, banks progressively tion. Conference calls exploring priority topics serve go away look for ways to work with clients, technolas oppose points between in-person meetings. ogy companies and other ? nancial institutions We also look to exchequer Exchange members to to shuffle strengths. For example, in May 2008, validate and ? esh out new product ideas and to Bank of America announced a partnership with provide validation at points in the product develWells Fargo called Pariter Solutions LLC.The opment cycle. Treasury 50-50 joint venture bequeath Exchange members have operate the commercialsubmitted innovation ized ACH platform that ideas under the auspices entrust be leveraged by the An incremental approach to of the program. Customer two banks. The name and address is to innovation mirrors the gradual way advisory boards and spegain economies of home plate i n which people change. cial client programs like and better position both Treasury Exchange augbanks to develop future ment our ample voice products with a single of the customer research. nvestment in the underlying processing locomotive engine instead of duplicative investments. It’s a platform for growth and innovation. Cultivate a finish of Innovation It’s important to be open to ideas from all sources. That’s part of cultivating a culture of innovation. At Bank of America, all associates are invited to collaborate in the innovation process. For example, associates can submit their ideas online via IdeasZone, an internal intranet site. These ideas are funneled into the idea stream and fuck off equal attention within our innovation process.Collaborate with Technology Innovators In banking, technology is an enabler of innovation. Therefore, it’s important that banks collaborate with their technology providers. Bank of America’s collaboration with Microsoft is a great example of how we work with technology companies to develop innovative finishs. Cash pose and forecasting continue to be key client challenges. We spoke with clients to determine how they practise cash positioning and forecasting. Treasurers might use a treasury workstation, an Excel spreadsheet or a combination of tools.However, financial officers who rely on treasury workstations typically supplement their process with an Excel spreadsheet. Our research also con? rmed that many clients have dif? culty building a historical database of schooling for trend summary to support forecasting. COMMERCIAL LENDING redirect examination Foster Employees There are disparate options for organizational structure to foster an innovative environment. At Google, it’s part of everyone’s job to innovate. There is a decentralize approach to innovation in which all employees are engaged and given incentives.It’s built into their objectives and re ? ected in their recompense increases and bonuses. MAYâ€JUNE 2009 37 Banking Strategies Bank of America worked with Microsoft to develop CashPro Accelerate. This tool accepts information feeds across all of a client’s bank accounts and automates the cash-positioning process. It also builds a historical database that clients can use for forecasting. Keep go Forward â€Å"I am not discouraged, because every wrong attempt toss out is another step forward. ”â€Thomas Edison With an craftsman’s mind-set, the idea of hardship is a fallacy.Some who know best have even looked at failures as a continual path forward. Besides being the still-unrivaled testify holder of 1,093 U. S. patents, Thomas Edison broadened the concept of the invention to what’s known today as â€Å"innovationinvention,” R & D and commercialization. 3 mod companies ? nd ways to leverage new insights to keep moving forward. The creation of 3M Post-it notes is a classic story of turning failure on its head and victimization creativity to rede? ne a problem. Spencer Silver was operative on developing a truehearted adhesive but invented a spineless one instead.Silver’s colleague Arthur churl came up with a novel application for the weak adhesive, which became the basis for Post-it notesâ€a new vehicle for communicationâ€which Bank of America used in its CashPro innovation. Sometimes the leap is in how we look at things. frame of reference a Brain Trust In a September 2008 thin of H ARVARD BUSINESS REVIEW, Ed Catmull, cofounder of Pixar and the president of Pixar and Disney sprightliness Studios, talked about how Pixar fosters collective creativity. One of Pixar ’s core operating principles is that, â€Å"We must stay close to innovations happening in the pedantic community. 2 It’s part of the company’s effort to eliminate boundaries between different disciplines. Earlier this year, Bank of America and MITâ €™s Media Laboratory announced the creation of the Center for Future Banking. Over the next ? ve years, Bank of America go out put forward $3 million to $5 million annually. The center is a prototype for how business and academia can work unitedly to invent the future of an entire industry. It go away bring together researchers with radically different perspectives, including behavioral economists, hearty scientists, computer scientists, psychologists, designers and others.The goal is to trigger unexpected new ideas that lead to innovation leaps in banking. Test, Learn, Evolve This armorer mentality is at the heart of our testand-learn environment, in which we deploy an initial solution design to get ? rsthand feedback from clients on its usability and value. At this stage, the intent is to address any issues or opportunities in the next iteration of the design. The process enables us to evolve our product design out front we get to the pilot stage. As an repetitious p rocess, the test-andlearn environment is a microcosm of the broader innovation process focused at a genuine point in the development process.The quick Cash Manager, a new passim Bank of America solution, gives a receive example of the test-and-learn approach. The solution concept germinated in a series of Treasury Exchange meetings, where clients identi? ed cash handling and doctor as a major put out point. It’s an ATM-like machine that counts cash, accepts it for deposit and provides safekeeping. An issue related to jamming surfaced in the test-and-learn environment, which result inform a solution redesign. MAYâ€JUNE 2009 Choose Winning Concepts Vetting ideas and building a business case are key steps in the innovation process.Bank of America uses a scoring technique as part of our process for vetting ideas. Scoring criteria involve whether a concept matches to architectural plan objectives, whether it has huge applicability, its level of innovativeness and comp lexity and the potential order of magnitude of its impact. At Bank of America, for example, out of 919 ideas accredited this year, 10 have been submitted for funding in 2009. Building a business case is a key step. An effective business case must describe the opportunity and its alignment with strategy and also describes the rate client and market within the background of the competitive landscape.Finally, it outlines the proposed approach, the risk and the ? nancial opportunity. 38 COMMERCIAL LENDING REVIEW Banking Strategies Storyboarding is a creative technique used in the early stage of ? lmmaking. Storyboarding can help go time-to-market. By not building the entire productâ€but rather using storyboards and prototypes in a test-and-learn environmentâ€we stay fresh ? exibility even as we move nurture into the product-development process. Flexibility enables us to prioritize the most important features and contain feedback and new insights from customers.It helps us t o make smart choices with our investment dollars as products take more tangible form. The conterminous springtime in the Innovation turn The ability to synthesize information into insights pull up stakes be an increasingly important part of creating a valuable client experienceâ€not only banks connecting to customersâ€but of customers connecting to distributively other for insight. Incubation and the cross-fertilization of ideas are important to the creative process. Bank of America is integrating online networking into its innovation process. For example, we are connecting participants in the Treasury Exchange program to an online forum.Our long-term vision is to link our various Treasury Exchange client groupsâ€which are based on industry, function and geographyâ€into a clientcentric global collaborative network. We also plan to introduce online ideation as a way to collaborate with Treasury Exchange participants on innovation. More broadly, the idea of integratin g social networking into the bank’s innovation process holds tremendous promise. With our consumer base of 59 million households, social networking can be a powerful tool for engaging customers ? rsthand in product development. hen the next step integrates multiple aspects to transform the end-to-end client experience. To cite an earlier example, the iPod integrates communication speed, mobility and remembering capacity. All of these come together, along with consumer zeal for change and the introduction of the iTunes business model. deep down the banking realm, clients increasingly want banking solutions to integrate into their commingleâ€whether flow constitutes, for example, a mobile consumer or the workflow related to a treasurer’s broader financial processes.The need to integrate payments in the broader customer experience will involve mobile technology in some form and the analysis of information to provide insight. For corporate customers, banks are alrea dy press homeing time-sensitive information to personal digital assistants (PDAs) and cellular phone phones. Information analysis and synthesis could help treasurers to improve broader ? nancial processes (for example, accounts payable or receivable), help optimize working capital and smear cost and use payment information to deepen insight into customer behavior.We are already seeing merchants, for example, use consumer payment information to tailor coupons to a customer ’s buying preferences. Banks can deliver robust information to consumers, for example, to help them look at product features and engage in ? nancial grooming to evaluate a purchase within a desired spending budget. Perhaps, ultimately, clients will want to take their bank accounts with them, storing virtual money inside their mobile phones. Banks have an opportunity to reassert their unique role as the trusted brand in storing and moving money.Innovation will be life-sustaining to our success. What Mig ht Be the Next Leap in Banking? Successful innovation always improves aspects of the customer’s experience. Leaps occur Endnotes 1 2 3 Professor at Tufts University; research focuses on creativity. How Pixar Fosters Collective Creativity, HARVARD BUS. REV. , Sept. 2008, at 71. The Edison Papers, http://edison. rutgers. edu/biogrphy. htm. MAYâ€JUNE 2009 COMMERCIAL LENDING REVIEW 39 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.\r\n'