Case Study Product Innovation at Bank of America

BANKING STRATEGIES Case Study everyplacelap psychiatric hospital at depose of America By Cindy Murray What ? nancial institutions shag decide from machinations and plans in other industries. owhere is aim more essential to survival than in the situateing industry. In the payments domain, for pillow slip, non shore competitors less forced by bank regulations and therefore more agile atomic number 18 ever-changing the banking industrys grip on the public perception of banks as the only believe stag for holding and base money. However, invention is challenge for banks. M either returns, like payments, atomic number 18 a commodity.A vast number of products and a complex infrastructure require continual upgrades to keep apace with applied science advancements and comply with evolving regulations and security requirements. This article describes how bank building of America fosters a finis of re currenting. Pivotal to an innovative culture is the direct makement of leaf nodes in the vicissitude process. We highlight some of the elans that deposit of America achieves this. But ? rst well grammatical construction at the role of transition process in building brand loyalty. N Build Brand Equity Through Progressive kind Change can occur by rede? ning a problem or rede? ing a resolve. According to Robert Sternberg, a leading creativity expert,1 creativity is the king to rede? ne a problem. Innovation can be viewed as the qualification to rede? ne a solution. Successful plan is a process over convictionone that typically happens in increments rather than parachutes. R bely is a single innovation a game changer. In banking, 90 part of innovation steeringes on union competencies (that is, business-as-usual innovation), s still percent on game-changing innovation MAYJUNE 2009 inside core competencies and only three percent on leaps that signi? cantly shift the client ingest.Outside of banking, an evolutionary near to innovation i s overly the rule, non the exception. Continual improvements finishedout a products life daily round build brand equity. Take the case of Nabiscos Oreo biscuit, the lift outselling cookie in the United States. In 1912, Nabisco came up with the idea of two coffee disks with cream ? lling in between. 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 meaning(a) aspects of product innovation.First, Nabisco stayed close to its customers. It down the stairsstood how inevitably varied among consumers and changed over time. The company developed its product to meet the needs of a continually broader set of consumers. Second, the poser illustrates an incremental approach to innovation that focuses on advancing core products. The iPod was at once the next tone in an evolutionary process and also a imaginative l eap. This product integrated a number of capabilities in a portable de ungodliness, plainly it was not the ? rst MP3 player. However, the fancy of iTunes was a new business model that changed the demeanor consumers could store and listen to music.The iPod was alterative, too, because it aligned with changing consumer behavior re? ected in trends of mobility and customization. Technology enabled a tipping point. Consumers were ready to embrace a leap. Cindy Murray is Head of Product Innovation at Bank of America. Contact her at cindy. emailprotected com. mercantile modify REVIEW 35 Banking Strategies way that stays close to customers evolving needs. For example, through ethnographic research, we discovered a common practice among consumers of rounding up when piece of writing checks. We took the idea of rounding up and turned it on its headrede? ing Innovation is a process over timean evolutionary the problem by associating payments with obstetrical deliverys. running. An in cremental approach to innovation mirrors How can we foster increased saving? With Keep the the gradual way in which people change. Consumer Change, each time a customer pays using a Bank of behavior tends to change gradually. Successful innovation is customer driven. It gets as America check card, the bank rounds the payment close as possible to the customers genuine process. to the neargonst dollar and transfers the extra change A deep grounds of how customers operate to the customers savings account. odayand why they do what they dogives inNow, kinda of check writers rounding up, the sight into how to improve the process how to reach bank does it for them tho in a way that builds their a timbre forward for the customer. savings. The solution also facilitates increased use of Further, by at present savory customers in the indebit cards, thereby supporting retailers efforts to novation process, they become deeply affiliated discourage check payments. It was also a timely sol uto, and invested in, a solution, which took service tions evolutionary path. f evolving consumer beThis makes innovation a havior toward increased patriarchal differentiator, 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. platform, CashPro, over Staying close to the customer is one of the some importime. For example, we designed an enhancement base tant attributes of a successful innovation process. on a typical client study ? ow for handling exceptions.By almost watching how 15 companies were posting their receivables, we identi? ed a common practice of Get Close to the node placing a sticky mention on in fathoms when they did not match payment. Staff would then fax an invoice to At Bank of America, customers play a name role at the salesperson to inqui re about the discrepancy. We every act of the product innovation process. There incorporated 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 range of formal proficiencys for idea generation. Formal techniques focus on gaining deepened client insight and are important when Amplify the we pack limited development about an opportunity Voice of the Customer and the related customer need. Formal idea mining typically requires expertise through our internal innovation group or external specialized vendors. CashPro is a great example both of innovating in Ethnographic research is an important tool for increments to improve a product over time and of engenerating innovation ideas.Observation cans gaging clients in an evolutionary innovation process. insight into customer behavior and needs. Re turnWith CashPro, we found a customer advisory ing to the Oreo example, the idea for a bite-sized board, which has been closely pick outd in the prodcookie began to germinate when Nabisco researchers ucts development. With CashPro, the innovation watched young children handle with dunking the process becomes part of the client experience, thereby full-sized cookie in smaller cups. increasing customer satisfaction.For example, with Ethnographic research serve ups Bank of America CashPro, clients cull self-service for upgrades. understand how to advance our core products in a They are fully vested in the change process. Engage Clients in the Evolutionary route 36 COMMERCIAL LENDING REVIEW MAYJUNE 2009 Banking Strategies Our strategic client program, treasury diversify, At the other end of the spectrum, responsibility serves to amplify our voice of the customer research. for innovation can be centralized in a shared serClients are long-term program members in senior vice cente r.At Bank of America, we have dedicated treasury and/or ? nance roles within their organizastaff focused on game-changing innovations. At tions. They meet regularlyat frequencies varying the same time, our entire organization recognizes from once per quarter to yearly. The program enables the grandeur of ongoing process improvement participants to share insights on best practices and and enhancements. learn from each other, while helping us to better understand their challenges and needs. A detailed executive Work with Peers summary that identi? s key sermon themes helps pinpoint areas for deepening discussion and exploraTo maintain a private-enterprise(a) edge, banks increasingly tion. Conference calls exploring priority topics serve allow look for ways to build with clients, technolas touch points between in-person meetings. ogy companies and other ? nancial institutions We also look to exchequer Exchange members to to combine 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 jeopardize will Exchange members have operate the commercialsubmitted innovation ized ACH platform that ideas under the auspices will be leveraged by the An incremental approach to of the program. Customer two banks. The goal is to innovation mirrors the gradual way advisory boards and spegain economies of casing in which people change. cial client programs like and better position both Treasury Exchange augbanks to develop future ment our extensive voice products with a single of the customer research. nvestment in the underlying processing engine instead of duplicative enthronizations. Its a platform for growth and innovation. Cultivate a glossiness of Innovation Its important to be open to ideas from all sources. Thats 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 receive equal attention within our innovation process.Collaborate with Technology Innovators In banking, technology is an enabler of innovation. Therefore, its important that banks collaborate with their technology providers. Bank of Americas collaboration with Microsoft is a great example of how we work with technology companies to develop innovative applications. Cash positioning and forecasting continue to be key client challenges. We spoke with clients to determine how they arrange cash positioning and forecasting. Treasurers might use a treasury workstation, an transcend spreadsheet or a combination of tools.However, treasurers who rely on treasury workstations typically supplement their process with an Excel spreadsheet. Our research also con? rmed that many a(prenominal) clients have dif? culty building a historical database of selective information for trend analytic thinking to support forecasting. COMMERCIAL LENDING REVIEW Foster Employees There are different options for organizational structure to foster an innovative environment. At Google, its part of everyones job to innovate. There is a decentralized approach to innovation in which all employees are engaged and given incentives.Its built into their objectives and re? ected in their salary increases and bonuses. MAYJUNE 2009 37 Banking Strategies Bank of America worked with Microsoft to develop CashPro Accelerate. This tool accepts information feeds across all of a clients bank accounts and automates the cash-positioning process. It also builds a historical database that clients can use for forecasting. Keep Moving Forward I am not discouraged, because every wrong attempt discarded is another step forward. doubting Thomas Edison With an inventors mind-set, the idea of failure is a fallacy.Some who know best have even looked at failures as a continual path forward. Besides being the still-unrivaled record holder of 1,093 U. S. patents, Thomas Edison broadened the concept of the invention to whats known today as innovationinvention, R & D and commercialization. 3 Innovative 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 using creativity to rede? ne a problem. Spencer Silver was working on developing a strong adhesive but invented a weak one instead.Silvers colleague Arthur Fry came up with a novel application for the weak adhesive, which became the basis for Post-it notesa new fomite for communicationwhich Bank of America used in its CashPro innovation. Sometimes the leap is in how we look at things. Build a Brain charge In a September 2008 issue of H ARVARD BUSINESS REVIEW, Ed Catmull, cofounder of Pixar and the president of Pixar and Disney Animation Studios, talked about how Pixar fosters collective creativity. One of Pixar s core operating principles is that, We must stay close to innovations happening in the donnish community. 2 Its part of the companys effort to extirpate boundaries between different disciplines. Earlier this year, Bank of America and MITs Media laboratory announced the creation of the Center for Future Banking. Over the next ? ve years, Bank of America will contribute $3 trillion to $5 zillion annually. The center is a prototype for how business and academia can work unneurotic to invent the future of an entire industry. It will bring together researchers with radically different perspectives, including behavioral economists, social scientists, computer scientists, psychologists, designers and others.The goal is to knowledgeableness unexpected new ideas that lead to innovation leaps in banking. Test, Learn, Evolve This inventor mentality is at the heart of our testand-learn environm ent, 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 get our product design before we get to the pilot stage. As an repetitious process, the test-andlearn environment is a microcosm of the broader innovation process focused at a certain point in the development process.The Intelligent Cash Manager, a new end-to-end Bank of America solution, gives a live 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 deposit as a major(ip) pain point. Its an ATM-like machine that counts cash, accepts it for deposit and provides safekeeping. An issue related to crowd surfaced in the test-and-learn environment, which will inform a solution redesign. MAYJUNE 2009 deal 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 include whether a concept matches to plan objectives, whether it has wide applicability, its level of innovativeness and complexity and the potential magnitude of its impact. At Bank of America, for example, out of 919 ideas received this year, 10 have been submitted for funding in 2009. Building a business case is a key step. An rough-and-ready business case must describe the opportunity and its alignment with strategy and also describes the target client and market within the context 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 speed time-to-market. By not building the entire productbut rather using storyboards and prototypes in a test-and-learn environmentwe retain ? exibility even as we move further into the product-development process. Flexibility enables us to prioritize the most important features and integrate feedback and new insights from customers.It helps us to make smart choices with our investment dollars as products take more tangible form. The Next Leap in the Innovation Process The ability to synthesize information into insights will be an increasingly important part of creating a valuable client experiencenot only banks connecting to customersbut of customers connecting to each other for insight. Incubation and the cross-fertilisation 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 survey is to link our various Treasury Exchange client groupswhich are base on industry, functi on and geographyinto 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 integrating social networking into the banks 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 storage capacity. each(prenominal) of these come together, along with consumer readiness for change and the introduction of the iTunes business model. in spite of appearance the banking realm, clients increasingly want banking solutions to integrate into their flowwhether flow constitutes, for example, a sprightly consumer or the workflow related to a treasurers broader pecuniary processes.The need to integrate payments in the broader customer experience will involve rambling technology in some form and the analysis of information to provide insight. For corporate customers, banks are already delivering time-sensitive information to personal digital assistants (PDAs) and cell phones. Information analysis and synthesis could help treasurers to improve broader ? nancial processes (for example, accounts account payable or receivable), help optimize working capital and minimize court 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 weigh product features and engage in ? nancial planning to label a purchase within a desired spending budget. Perhaps, ultimately, clients will want to take their bank accounts with them, stori ng 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 critical to our success. What force Be the Next Leap in Banking? Successful innovation infinitely improves aspects of the customers experience. Leaps occur Endnotes 1 2 3 prof 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. MAYJUNE 2009 COMMERCIAL LENDING REVIEW 39 Reproduced with permission of the copyright owner. Further copy prohibited without permission.