International Management II (Core Competencies)

Case Study Bank of America (A)

by Alexander Beil Christoph Hillgärtner Florian Schlegelmilch

Harvard Case Study: Bank of America

List of Contents
1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction / Definitions Overview “Bank of America” Product development processes Strength and weaknesses of the systems Learning through experimentation Conclusion / Learnings Summary Questions for group discussion References

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Harvard Case Study: Bank of America

1. Introduction / Definitions
Description of the case study “Bank of America (A)” * The case study describes how Bank of America is creating a system for product and service innovation in its retail banking business. Emphasis is placed on the role of experimentation in some two-dozen real-life "laboratories" that serve as fully operating banking branches and as sites for testing new ideas and concepts. Focuses on: 1) 2) 3) how learning from experimentation can be maximized; incentive and reward systems that motivate employees to experiment in "life" environments; the challenges of managing innovation in an industry that eschews risks, failure, and change.

*Reference: http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=603022

Harvard Case Study: Bank of America

1. Introduction / Definitions
Process: which activities are to be taken, in which order* Organization: who (person, team or department) is involved (who is responsible for what)?* Management: how to get things done (how to keep the process running effectively)?* Culture: which habits and traits support the process and the people involved (which values are necessary to be successful)?*

*Reference: www.wpelz.de/d_index.html, Guide for the case study "Bank of America"

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Harvard Case Study: Bank of America

1. Introduction / Definitions
Innovation: Innovation is the implementation of a new or significantly improved idea, good, service, process or practice which is intended to be useful. Scholars who have studied innovation generally differentiate among four main types of innovation1 Experiments: An experiment is a set of actions and observations, performed to support or falsify a hypothesis or research concerning phenomena. The experiment is a cornerstone in the empirical approach to knowledge.1 Test: A session in which a product or piece of equipment is placed under everyday and/or extreme conditions and is examined for its durability, etc.2 Learning: Learning is the process of acquiring knowledge, skills, attitudes, or values, through study, experience, or teaching, that causes a change of behavior that is persistent, measurable, and specified or allows an individual to formulate a new mental construct or revise a prior mental construct (conceptual knowledge such as attitudes or values).1
1 Reference: 2 Reference:

www.en.wikipedia.org www.en.wiktionary.org

Harvard Case Study: Bank of America

2. Overview “Bank of America”
Organization
Until relatively recently, Bank of America had never made innovation a priority. It lacked any formal infrastructure for developing new ideas. However, recognizing several years ago that it needed to improve its innovation performance, the bank decided to create a new corporate unit called the innovation and development (I&D) team.1
Exhibit 4: Section of Bank of America´s Organizational Chart2

Ken Lewis CEO

Consumer/Commercial Bank

Quality & Productivity (Milton Jones)

Innovation (Amy Brady) (Waren Butler)
1Reference: 2Reference:

www.bcg.com/publications/files/Profitable_Innovation_in_Financial_Services_Apr04_FS_OfA.pdf Stefan Thomke, Case study Bank of America (A), p. 17

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Harvard Case Study: Bank of America

2. Overview “Bank of America”
Culture
Core values of Bank of America:1 • • • • • Doing the right thing. Each of us has the freedom, authority, and responsibility to do the right thing for our clients, customers, communities — and each other. Trusting and teamwork. We rely on each other and succeed together. We take collective responsibility for the quality of client and customer experiences. Inclusive meritocracy. We care about each other, focus on results and strive to help all associates develop their full potential. We respect and value each other's differences. Winning. We have a passion for achieving results and winning — for our clients and customers, for our teammates and communities and for our shareholders. Leadership. We're decisive leaders at every level, communicating our vision and taking action to help build a better future.

Management
To run the processes effectively Lewis (CEO )was to consult several outside executives what they considered to be “best management practice”.2
1Reference: 2Reference:

http://www.bankofamerica.com/careers/index.cfm?template=o_values Stefan Thomke, Case study Bank of America (A)

Harvard Case Study: Bank of America

3. Product development processes

Reference: http://www.sdk.co.jp/contents_e/rd/index.htm

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Harvard Case Study: Bank of America

3. Product development processes
Exhibit 5 The I&D Market´s Product and Service Innovation Process and Activities *

1. Idea Conception

2. Planning & Design

3. Implementation

5. Recommendation

4. Test

Market Rollout

= Go / No Go

*Reference: Stefan Thomke, case study Bank of America (A), p.18

Harvard Case Study: Bank of America

3. Product development processes
Innovation process at “3M” *

Lay the Foundation

Determine the Trends

Identify Lead Users

Change Strategy

Develop the Breakthroughs

* Reference: Eric von Hippel, Stefan Thomke, Mary Sonnak, article „Creating Breakthroughts at 3M“, p.2

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Harvard Case Study: Bank of America

3. Product development processes
Networking to Lead Users at 3M *

* Reference: Eric von Hippel, Stefan Thomke, Mary Sonnak, article „Creating Breakthroughts at 3M“, p.6

Harvard Case Study: Bank of America

4. Strength and Weaknesses of the Systems
Comparison of the Development Processes of Stage Gate System, Bank of America, and 3M
Development Processes
Review Criteria
1

weaknesses
2 3 4

strengths
5

Length of the process Failure susceptibility Cost Quota of success

•Stage Gate System •Bank of America •3M

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Harvard Case Study: Bank of America

5. Learning through experimentation
Within all I&D branches the customers were monitored closely to see their reactions to the innovations by a variety of means like surveys or statistics on such factors as revenue growth or number of services used by each customer. 1 Shorter turnaround time for feedback would held experimenters learn and prepare modified experiments more rapidly. 2 Despite the great success of the I&D Team, Amy Brady and Warren Butler want to enlarge the learning through experimentation. So in particular, the need for failure so as to generate more learning. 3 But: Butler commented, “(…). If we have too many failures, we just won´t be accepted. Currently, we may have failure within concepts, but not failure in concepts.” 4
1- 4

Reference: Stefan Thomke, case study Bank of America (A),

Harvard Case Study: Bank of America

6. Conclusion / Lessons learned
Insights in an innovative company Understanding of the differences between the product development in the service sector and the industry sector Understanding of innovations How Bank of America manages innovation in an industry that eschews risks, failure, and change with its experimentation laboratories. Become familiar with different product / innovation development processes How to use reward systems to improve work mentality How to maximize “Learning” through experimentation How business processes can be improved by technical devices How important customer satisfaction for the success of the business is

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