Innovation at BBVA (Operations Management)

1. Written by Juan Ramis-Pujol and Henning Droege of ESADE 311-098-1
2. Large retail bank BBVA faced competitor challenges 
3. BBVA=Banco Bilbao Vizcaya Argentaria, founded in 1857 in Bilbao and is the 2nd largest Spanish bank after Santander. 
4. Innovation is considered one of the companies "three strategic pillars"  (Source:  biographies-angel-cano-manuel-castro-ramon-monell-juan-ignacio-apoita.pdf)
5. Current CEO:  Francisco Gonzales, author of Innovation for the 21st Century Banking Industry
6. What distinguishes BBVA from other retail banks?
7. 2007-BBVA launched an innovation program spending 5 billion Euros to create Centro Innovacion, CI
8. Manuel Castro-Head of Innovation
9. Open Innovation approach of Google was studied.  Ref. 2:  Bring in outside knowledge and pursue outside paths to a market (Source Open Innovation, Chesbrough 2003)
10. Cooper's Stage Gate Model is a traditional institutional approach to innovation
11. at BBVA, each innovation is considered (and funded) in isolation using a non-standardized approaches (page 4,7)  Some common themes exist in how the company handles innovation, listed below:
1. Track the Consumer- customer insight unit was created (Ref 3) Including testing subgroups of consumers to see how they react to an idea (page 4 bottom).  Customer trends and needs are sought (page 5 top).  Research begins by examining existing market data on the consumer (Q: from which source?) Fig 2:  (Q: What "New Digital Tools?")
2. Looking outside of the company (Ref4 same as Ref3)  Business Partner Department for identifying technology and approach (outside partners for example) that can meet an innovation need.  BBVA is active in outside innovation fairs
3. Tools created to share "collective experience".  Innovations are given thorough scrutiny.  Project managers must report to an innovation team manager to allow higher level corporate oversight of each project.  Additional people are invited if they have experience to share (inside or outside of the company. (page 7 top)
12. innovation centers exist at the division level and higher up at the "Innovation Center" in Madrid, high up the corporate ladder and situated under the bank president (page 6).  There are also "strategic innovation councils" with the CEO involved.
13. Tu' Cuentas funded on a fixed budget while Tpresento required incremental (stepwise) funding
14. Project Example 1 :
1. tu cuentas- "customer experience" developed with Strands
2. outside BBVA accounts linked to a spending-watcher style portal
3. BBVA acquired a 24% minority stake in Strands.com, nike+ and ipod software creator
4. Joint project team created involving 60 BBVA employees
5. SCRUM technique-lean development method by Takeuchi and Nonaka 1986 (Ref 6)
6. daily meetings tracked project progress
7. Jan. 2009, limited website release of Tu' Cuentas
15.  Project Example 2:
1. POK-targeted at those aged 14-40 to allow users to choose the members of a reality TV show
2. represented BBVA's attempt to enter the Social Media industry (ie compete with Facebook)
3.  communications software outsourced to a small IT company, BBVA little involved (page 9)
4. concept failed past short term run of TV show, but was used as a marketing tool to understand user behavior.  POK helped to fuel the tpresento project
16. Project Example 3:
1. tpresento (SME means small and medium enterprises)
2. allowed small to medium size organizations to network and to have an internet "presence"
3. networking is culturally important to Spain and Latin American countries (page 10)
4. 50 interviews and 18 focus groups fueled a BBVA research project on the needs of small and medium sized businesses.  The result was that many companies required IT resources, but were unwilling to fund such an effort.  A flexible solution was required, because each customer had their own IT needs.
5. the project manager, named Javier outsourced design of portal to a Swedish design company.  This company used a design approach called PERSONAS.  8 fictional personas were developed to represent the distinct user styles discovered by the focus groups
6. 2 months of "intense" beta testing was conducted and the service was released in Spain
7. Yellow Pages Spain and others have begun to successfully compete with tpresento
8. As of 2011, I have found almost no trace of Tpresento, save this flyer in Spanish
17.  Project Example 4:
1. eConta- accounting services for small and medium sized businesses
2. begun based on BBVA perception that small businesses accounting quality was poor
3. BBVA bought a 70% stake in eConta in June 2007.  In February of 2009, BBVA began to assert decision making authority over the small company, changing its "organic" practices
4. Rather than struggling to enter their own accounting data online, it was discovered that many eConta users could be better served through a mailed form system based on an earlier document archival service (Virtualdoc)
18.  Project Example 5:
1. Virtualdoc-archival service for preserve valuable paper documents by scanning them and storing them securely online.
2. Virtualdoc is a 70% owned by BBVA and 30% by a partner.  Management is primarily through the partner, but BBVA retains a parallel management team based in the innovation center in Madrid.
19. Project Example 6:
1. New ATM development- a project initiated by management to check it ATM machines were being fully utilized by customers
2. IDEO was contracted to study people's use of technology.
3. According to The Art of Innovation, Tom Kelley 2001, the IDEO method of innovation is as follows:
1. Understand the market, client and technology
2. Observe problems
3. Visualize through prototype creation
4. Evaluate & Refine by building additional prototypes
5. Implement- commercialize and market
4. BBVA mediated among several ATM suppliers, communicating the design intent of IDEO
5. Some images of IDEO's ATM concept are shown on this website.
20. Questions for discussion:
1. What types of innovation were pursued by BBVA?  BBVA pursued software as a way to increase its access and appeal to customers.  It did so by acquiring or hiring smaller innovative firms to develop customer solutions (such as a new ATM design) which it then offered to customers.
2. Outline the main stages in the process of innovation at BBVA.  BBVA would embark on an idea from upper management, conduct research into the idea, and if the research confirmed the initial idea, they would hire outside companies to solve a particular problem.  In conjunction with the outside company, their own CI (Innovation Center, see above) would supervise and try to expand on the idea of outside firms.  Overall, BBVA cannot be said to be an innovative company in its own right.  The poorly written article proves this point many times.
3. How is Open Innovation applied at BBVA?  Because almost no innovative ideas could flourish within the large BBVA organization, it was almost exclusively brought in from other companies.
4. How do BBVA ensure that their lead from innovation is maintained?  Due to their size and market position, they are capable of simply "buying innovation" instead of having to breed it within their own company.  As long as they remain profitable, they can continue to "buy innovation" from other firms such as IDEO.
5. How can BBVA improve their management of innovation? How would you justify any changes? Are there any potential dangers?  Innovation is for smaller firms that can support rapid change.  A bank's activities don't lend themselves well to this type of rapid change.  BBVA cannot and should not be an innovative company.  What is should do is to simplify its operations and innovation management structure (preferably eliminating it all together) and focus on being a bank.  For innovation, BBVA is best hiring outside companies as it has done and should stop trying to be a software company.
6. Chesbrough Article on Innovation 
7. CRM- Customer Relationship Management- focus on innovation
8. https://www.wellsfargo.com/wfonline/wellsfargovsafe/plans
9. (Q:Why doesn't BBVA focus on banking innovation?