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.

Introduction / Definitions

2.

Overview “Bank of America”

3.

Product development processes

4.

Strength and weaknesses of the systems

5.

Learning through experimentation

6.

Conclusion / Learnings

7.

Summary

8.

Questions for group discussion

9.

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)

how learning from experimentation can be maximized;

2)

incentive and reward systems that motivate employees to experiment in
"life" environments;

3)

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” *

Determine the Trends

Identify Lead Users

Change Strategy

Lay the Foundation

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

weaknesses
1

strengths

2

3

4

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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