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Name: Siddhanth Ganesan

ID: sganesan7

Due: 2/17/2015

Reading Summary: Bank of America


Traditionally there was little call for innovation in the banking community
given that financial services, while local (unlike products) were viewed as
commodities. However, to combat the competition in the late 1990s, organic
growth, the growth that a company can achieve by increasing output and
enhancing sales, was the way to go, as it would reduce earnings volatility that
resulted from acquiring new banks and increase profitability. Thus the I & D team
was launched for product and service deployment. To risk the possibility of large
scale failure, the experimentation of new technology and services was initially
confined to a set of 20 (later 25) branches in Atlanta. In order to protect these
branches from market fluctuations that could lead to product termination, it was
suggested that these branches function as separate R&D branches, free from the
day-to-day responsibilities of running a bank. However, this was contested by the
fear that the results from the I&D market would not be duplicable elsewhere.
Atlanta was chosen as the site for the I & D market as it represented a stable
market. The banks had the most advanced communications network and Atlanta
was close to HQ in Charlotte. As a part of the I&D market, there were 3 types of
branches: express centers for quick, routine transactions, financial centers with
more complex technologies and access to a wider variety of services, and
traditional centers, which were simply traditional branches with enhanced
processes and technology. Prior to introducing these experiments, the team
typically rehearsed how the activity should occur in a prototype center in Charlotte.
For instance, the Walt Disney Company designed and taught them the Bank of
America Spirit program which laid emphasis on increased customer relations.
There were several problems faced by the team: how to prioritize ideas,
gauge success, run several experiments at once, prevent the novelty factor from
affecting the outcome and defend the team from budget cuts. Experiment cycle
time was 3 months to ensure rapid feedback. Due to the 18 month concept to
national rollout lag as opposed to the 3 month testing period, productivity was used
as an indicator of success instead of financial performance. To prove themselves
and meet the bottom-line, ideas with a higher probability of success were given a
higher priority. In order to isolate the effect of an experiment on branch
performance, the team repeated trials, averaged the results and paired
experimental branches with a branch operating under normal conditions to
minimize the effect of noise factors. In order to increase the number of experiments
running at once almost 15 experiments were run per branch and specialists were
brought in to analyze the effect of each variable (experiment). The TZM experiment
which was intended to reduce perceived wait times, in fact, decreased the number
of people who overestimated there wait times from 32 to 15% and increased
revenue by 1.7%.
Traditionally, associates were paid by a bonus point incentive system. The
associates in I&D branches felt this was unfair to them, given the amount of time
they spent in training and therefore not serving customers which reduced their
bonus points. A fixed incentives system was implemented which made the I&D
associates feel special and assured them of upper management commitment to the
I&D project. However, due to resentment from traditional branch associates and
disgruntlement from senior executives who felt that an unnecessarily large amount
of resources was dedicated to the I&D team as well as the fear that such practices
would not guarantee the success of the experimental concepts under the traditional

Name: Siddhanth Ganesan

ID: sganesan7

Due: 2/17/2015

incentive system, the traditional incentive system was reintroduced. This reversed
the staff behavior in I&D branches.
While overall deposit growth in the I&D market was 0.5% as opposed to
traditional market growth of 3.7%, in terms of revenue I&D branches did 10% better.
Despite, only a slight increase in customer base, there was a large spike in
customer satisfaction. Furthermore apart from an initial turnover spike, turnover
reduced from 50% to 28% over 3 years. Thus it is safe to say that the I&D project
was a success and should have been continued with the additional branches across
the country. Despite the risk of a poorer balance sheet, the increased
experimentation capacity would allow for reduced feedback time or higher reliability
of ideas and quicker national rollover of successful ideas.

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