Case Study: Product Innovation at Bank of America
By Cindy Murray
What ﬁnancial institutions can learn from inventions and innovations in other industries.
owhere is innovation more essential to survival than in the banking industry. In the payments domain, for example, nonbank competitors less constrained by bank regulations and therefore more agile are changing the banking industry’s grip on the public perception of banks as the only trusted brand for holding and moving money. However, innovation is challenging for banks. Many products, like payments, are a commodity. A vast number of products and a complex infrastructure require continual upgrades to keep apace with technology advancements and comply with evolving regulations and security requirements. This article describes how Bank of America fosters a culture of innovation. Pivotal to an innovative culture is the direct engagement of clients in the innovation process. We highlight some of the ways that Bank of America achieves this. But ﬁrst we’ll look at the role of innovation process in building brand loyalty.
Build Brand Equity Through Progressive Transformation
Change can occur by redeﬁning a problem or redeﬁning a solution. According to Robert Sternberg, a leading creativity expert,1 creativity is the ability to redeﬁne a problem. Innovation can be viewed as the ability to redeﬁne a solution. Successful innovation is a process over time—one that typically happens in increments rather than leaps. Rarely is a single innovation a game changer. In banking, 90 percent of innovation focuses on core competencies (that is, business-as-usual innovation), seven percent on game-changing innovation MAY–JUNE 2009
within core competencies and only three percent on leaps that signiﬁcantly shift the client experience. Outside of banking, an evolutionary approach to innovation is also the rule, not the exception. Continual improvements throughout a product’s life cycle build brand equity. Take the case of Nabisco’s Oreo cookie, the bestselling cookie in the United States. In 1912, Nabisco came up with the idea of two chocolate disks with cream ﬁlling in between. Since then it has released Double Stuff cookies with more ﬁlling; fudge-covered Oreos; holiday cookies, including Halloween and Christmas cookies; bite-sized Oreos for children; and reduced-fat Oreos. Oreos illustrate two important aspects of product innovation. First, Nabisco stayed close to its customers. It understood how needs 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 example illustrates an incremental approach to innovation that focuses on advancing core products. The iPod was at once the next step in an evolutionary process and also a creative leap. This product integrated a number of capabilities in a portable device, but it was not the ﬁrst MP3 player. However, the concept of iTunes was a new business model that changed the way consumers could store and listen to music. The iPod was transformative, too, because it aligned with changing consumer behavior reﬂected 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 firstname.lastname@example.org.
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way that stays close to customers’ evolving needs. For example, through ethnographic research, 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 head—redeﬁning Innovation is a process over time—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 gradual way in which people change. Consumer Change, each time a customer pays...