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: www.en.wikipedia.org
2 Reference: 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: www.bcg.com/publications/files/Profitable_Innovation_in_Financial_Services_Apr04_FS_OfA.pdf
2Reference: 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: http://www.bankofamerica.com/careers/index.cfm?template=o_values
2Reference: 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. 2. 3.
Idea Conception Planning & Design Implementation

5. 4.
Recommendation Test

Market = Go / No Go
Rollout

*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
Lay the Foundation Identify Lead Users
the Trends

Develop the
Change Strategy
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 strengths
1 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