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 ...view middle of the document...
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 using a Bank of behavior tends to change gradually. Successful innovation is customer driven. It gets as America check card, the bank rounds the payment close as possible to the customer’s current process. to the nearest dollar and transfers the extra change A deep understanding of how customers operate to the customer’s savings account. today—and why they do what they do—gives inNow, instead of check writers rounding up, the sight into how to improve the process; how to create bank does it for them—but in a way that builds their a step forward for the customer. savings. The solution also facilitates increased use of Further, by directly engaging customers in the indebit cards, thereby supporting retailers’ efforts to novation process, they become deeply committed discourage check payments. It was also a timely soluto, and invested in, a solution, which took advantage tion’s evolutionary path. of evolving consumer...