The world is changing, yet people constantly assume, incorrectly, that tomorrow will be like yesterday. When business leaders make this mistake, the outcomes are generally bad because opportunities are lost. Competitive advantage is gained with the ability to transform insights into useful innovations by seeing the unseen. In this chapter excerpt of Agile Innovation, Langdon Morris explains how ethnography drives better innovation at a top-five U.S. financial services company.
Part of what is so fascinating about the transformation process is that, once successful examples are revealed, almost everyone immediately grasps the significance, and the world is changed. It’s a paradigm shift.
Even after the telephone was invented, quite a few people thought it had no value. Many companies, quite contented with the communication tools they already had, shortsightedly turned down the opportunity to own Alexander Graham Bell’s technology, and indeed a memo written at Western Union in 1876 said, “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” An enormous opportunity was missed.
This is but one example among a great many. A humorous list of similar comments is circulating on the Internet, in which very smart and famous people reveal their incapacity to imagine the usefulness or the possibility of new technology.¹
They said what?
On a Web page titled “They Really Ought to Have Known Better,” you can view a very long list of comments that are humorous in hindsight, such as²:
“Drill for oil? You mean drill into the ground to try and find oil? You’re crazy.”
—Drillers who Edwin L. Drake tried to enlist to his project to drill for oil in 1859
“Stocks have reached what looks like a permanently high plateau.”
—Irving Fisher, Professor of Economics, Yale University, 1929
“Louis Pasteur’s theory of germs is ridiculous fiction.”
—Pierre Pachet, Professor of Physiology at Toulouse, 1872
“The abdomen, the chest, and the brain will forever be shut from the intrusion of the wise and humane surgeon.”
—Sir John Eric Ericksen, British surgeon, appointed Surgeon- Extraordinary to Queen Victoria, 1873
“We are probably at the limit of what we can know about astronomy.”
—Simon Newcomb, 1888
Noted computer industry pioneer (in mainframes and minicomputers) Ken Olsen pronounced in 1977 that no one would ever want a computer in his or her home. (Today, not so many years later, my home has more computer chips in it than I can count.)
Lord Kelvin, quite a talented scientist, nevertheless revealed his own ignorance when he proclaimed the heavier-than-air flying machine to be impossible. He made this remark just a few years before the Wright brothers proved him wrong.
Speaking of airplanes, Sir Sam Hughes, while Canadian Minister of Defence, commented in 1914 that “The aeroplane is the invention of the devil and will never play any part in such a serious business as the defence of a nation.” Marechal Foch of the French War College said something quite similar around the same time, because it was a commonly held opinion.
These are examples of people making predictions based on their experiences of the past. This phenomenon is notable only because it’s so common—people constantly assume, incorrectly, that tomorrow will be like yesterday. When business leaders make this mistake, the outcomes are generally bad because opportunities are lost. Later on, when things do change, we wonder why we didn’t see something so obvious and simple, something that was staring us in the face all along.
Once you master the ability to see when things really are broken, countless innovation opportunities will unfold before you. You’ll then start asking questions such as, “How could this be improved through a different approach, a new process, or a new technology? How could this be radically improved?”
This way of thinking, of course, goes to the roots of the very process of learning, and developing skill in this way of seeing differently becomes a core competence that you can apply over and over in many contexts. The power of your new competitive advantage will be the ability to transform insights into useful innovations by seeing the unseen (understanding unarticulated needs), translating unseen needs into innovations (anticipating future or hidden requirements), and bringing them to market.
Furthermore, these competences must be developed at every level of the organization, not only in innovation or in research and development teams. In fact, the sales staff may be the most important group, because when they understand what hidden information is, then they can recognize it and use it to become better at selling, and when they know what good design is, they’re also better at selling. They have done this quite successfully at Wells Fargo Bank, a top-five U.S. financial services company.
Ethnography achieves $20 million in top-line growth at Wells Fargo
Wells Fargo embraces the power of ethnography and uses it extensively throughout its operations. For example, the bank conducts ethnography studies at client sites to uncover innovation opportunities both internally and for its clients, and to provide feedback to improve products and services.
Steve Ellis, EVP at Wells Fargo, along with EVP Pam Clifford and senior vice president Kim Pugh, had a brilliant idea to do a technology transfer project with coauthor Moses Ma and Michael Barry, a professor at Stanford’s legendary d.school. The objective was to teach the bank’s customer insight group how to do ethnographic research.
Ellis, an extreme snowboarder, explains:
When you go heliskiing, it’s about the feel of the mountain and reacting to the texture of the snow and the hill. It’s about intently listening to yourself, your body, and your emotions. In business, it’s about listening as closely as you can to the customer. So it made sense for us to learn ethnography, which is all about listening harder. We created a small team to literally camp out at a customer site for several days to observe how customers do their jobs and interact with financial services. I felt this would give us a fresh approach to look for ways to reshape our services.
Vice president Paul Kizirian was tapped as the first official Wells Fargo ethnographer because of his keen skills as an analyst, paired with a remarkable level of empathy. He manages client studies in the Southwest and special projects. Kizirian explains the correlation between listening harder and being innovative:
Listening more intently to our customers was both our objective and our greatest challenge. We needed to find a way to sit with the individuals who do the actual work in a customer’s back office. To do that we needed to align the interests of several key people: the bank’s relationship manager, the customer firm’s leadership, and the individuals with whom we’d be sitting.
At first the program was a hard sell because nobody had heard of ethnography. Relationship managers were hesitant: “Let me get this straight, you want me to introduce your ethnography service to the CFO [chief financial officer]?” And customers would say, “Okay, what is that . . . and does it hurt?” So we quickly realized that we needed to give something of value to our customers so that they would let us sit and observe their back-office operations. The service was free of charge, and we threw out the notion that they would only get what we paid for by wrapping up each study with a top-shelf consulting deliverable. The customer received insight into how they could improve business performance; relationship managers gained a much deeper understanding of their customers; the lives of customer employees were improved; and the ethnography team analyzed the data to identify opportunity areas for Wells Fargo.”
After a careful start, the group’s first few studies were so successful that news spread quickly through Wells Fargo’s grapevine. Before long, relationship managers were calling to put their top customers into the pipeline. Even though the group could manage only a handful of studies at a time, the service gave leadership something to talk about as not only a source of innovation but also an expression of the bank’s commitment to listening to its customers’ needs.
Customers and relationship managers started having deeper conversations, and although customers are, of course, never obligated to implement anything that is recommended, the team tracked results and found an unanticipated so-called side effect—every customer that participated in a study subsequently bought more solutions from Wells Fargo.
One customer, a global sugar manufacturer, invited its long- time relationship manager to its global banking roundup meeting for the first time, marking the first time that Wells Fargo had a seat at the proverbial table. Its CFO commented about Wells Fargo: “This is a bank that really cares about us and wants us to succeed—it’s not just a bank, but a partner.”
Listening harder has also led to many other successes. Here are two.
Ethnography Drives Better Innovation Management
Ethnography studies are powerful at accurately identifying previously undiscovered customer needs, and in one case, ethnographers identified an unmet need that kicked off a new service for the bank. Today, this service helps hundreds of large corporations manage billions of dollars in cash around the world.
It all started with cash managers, who log on to various portals to aggregate account information for their firms. Then they call, e-mail, and fax others within their company to ask about their cash needs and put all of that into an Excel spreadsheet to assess how much cash they will have and need in their accounts after all transactions settle at the end of the day. At one company, the CFO mentioned, “Every day we end up in both a borrowing and investing position.” One cash manager who works fast within a limited period refers to this deadline as a ticking time bomb, because daily she hunts down information from 15 people across 10 subsidiaries and three time zones.
This turned out to be a very consistent need across many customers, so Wells Fargo developed a next-generation treasury management workstation. Understanding the core needs accelerated product delivery by 12 months, saved millions by avoiding unnecessary features, and elicited customer responses, including “How did you know this is what I’d need?”
Creating a simplified solution that also solved customer needs meant that the service could be offered at a price one-tenth that of the nearest competitive offering.
Empathy drives $20 million in top-line revenue growth
The studies and final presentations were not a sales effort, yet customers bought services they had resisted for years, surprising the relationship management teams.
Ethnography studies also led to new ways for Wells Fargo to sell its services. After each study, customers described the shift in the relationship between customers and the bank as “being on our side.” The studies and final presentations were not a sales effort, yet customers bought services they had resisted for years, surprising the relationship management teams.
At one point the head of Wells Fargo’s Treasury Management sales asked a sales consultant, “What? They finally bought what we’ve been telling them for years?! I’ve been out to meet them for two to three years and they’ve never budged. What was it that did it for them?” to which the sales consultant replied, “It was an ethnography study.”
Because of these successes, Wells Fargo’s sales leadership asked the ethnography team to train the entire sales force of more than 800 to perform scaled-down versions of ethnography studies to give Wells Fargo an edge in the market.
The key learning is that sales professionals put aside their expertise so that they could listen, have empathy, be humble, and be curious about what it’s like in their customers’ shoes. By doing this, salespeople were able to transform their conversations, and Kizirian estimates that for Wells Fargo’s 1,000 relationship managers, empathy and ethnography drive a contribution of $20 million in new sales each year.
In summary, ethnography at Wells Fargo identifies the right problems to solve, and then innovation management helps find the right solutions. It helps increase customer satisfaction, customer loyalty, and ultimately new revenue, and it is as effective with new product development as it is in the sales process.
One of the keys to success is that listening and empathy aren’t just buzzwords or marketing gimmicks; they’re skills practiced throughout the Wells Fargo organization. At the top, Ellis practices what he preaches—he regularly studies what the ethnographers hear from customers, and he acts on it. From the front line to the back office, it is now a cultural norm for people within Wells Fargo to listen to their customers actively.