Bank of America

In early 2000, the American Banking sector was in consolidation phase. Over 7000 banks had closed down and the competition amongst the remaining was intense. But the banks viewed financial services as products and no efforts were made towards innovation. In such a scenario, Washington Mutual (WAMU) started innovating. Bank of America quickly picked up on this and started extending its product line by innovating. It established the Innovation and Development Team.

Innovations

One major problem with innovation in services is experimenting and testing the innovation. These activities can not be performed in laboratories in a manner disjoint from customers. It is necessary for customers to be involved in the experiment itself. To overcome this problem, it selected 25 of its branches in Atlanta as experiment centers. The reasons for selecting these branches were as follows:

• These were hi-tech branches equipped with latest technology

• Atlanta was a “stable” market

The second point was important because the customers could consider an experiment synonymous with a mistake. Further because of the requirement of direct customer presence in the experimentation process, normal activities could not be hindered in any way. So these branches continued to perform the routine daily activities in the usual manner, while at the same time trying out ideas for better customer satisfaction. Having established the “market” for experimentation, the I&D team created a process for generating, collecting and queuing up ideas.

Finance

Financial investment required was the next problem area. The senior leadership argued that the groups funding should be tied to the performance of the 25 I&D banking centers.

Those in favor of independent budget and a separate R& D department felt that this would burden the team with the day-to-day activities along their task of experimenting. A separate R&D center, many felt, would yield hypothetical and impractical results.

Experimenting

Unlike products, where separate test laboratories are possible for experimentation, such isolation is impossible in case of services. To overcome this, the I&D team tried to do as much of planning and designing of the idea before experimenting it in the test branches in Atlanta. It had a well documented process for the ideas to flow through, ensuring as much ground work on ideas to be done before the actual experimenting.

Further, the branches were divided into “express centers”, “financial centers” and “traditional centers” to facilitate better control and satisfy different customer needs.

The team had a continuous flow of concepts that needed to be tested. This resulted in a need for prioritizing the concepts. The team assigned priorities to the concepts as high, low and medium. To make the results of the experiments as useful as possible, the team worked on the following.

• Hi-Fidelity:

This ensured that the concepts were tested such that, their success or failure in the experiment would be a true reflection of their success or failure in the real world scenario.

• Noise:

The team tried to minimize noise by repeating the experiment in different branches and paring up the results etc.

• Rapid Feedback:

The team sometimes terminated concepts that looked like failing early. This saved on effort and time

• Increase experimentation capacaity

The team tried to maintain the optimal number of experiments running per branch because too many experiments would cause increase in Noise.

• Radical experiments:

The team did not try out too many radical concepts. This was mainly due to aversion to take risk as the future was not deemed to be secure. This is a problem faced in most experiments in services. The service mix can not be altered drastically because of the fear of loosing customers.

Measurement

An experiment tries to test some concepts. To be able to do this, some method of measurement needed to be adopted. This is very difficult in services as many improvements add value in terms of customer satisfaction which is difficult to measure objectively. In case of the I&D team, the performance of the research branches was below that of the traditional branches despite successful implementation of numerous concepts. The branches did register a reduced teller turnaround rate but some