This episode adds a new dimension to our discussions with innovators, by taking us inside a huge company - American Express.
My guest is Courtney Kelso, who leads the Amex product and marketing team in Enterprise Growth.
I talked with Courtney about two things. First, their strategic move into creating an inclusive set of services, through Bluebird and Serve.
And second, what it takes to innovate inside a big company.
Interestingly, the two are linked. Their work on building an inclusive strategy is the engine of innovation at American Express.
Think about trying to drive disruptive innovation in an organization that's not only enormous and global, but is also 165 years old - one of the oldest financial brands anywhere. As Courtney says, American Express was a freight company, moving Americans west in the 1800's. Innovation and adaptation are in its corporate DNA, but change at big companies is hard.
And then also think about taking a company like American Express, which has always epitomized elite, high-prestige financial services, and shifting it from being an exclusive brand to an inclusive brand.
It's a fascinating saga, full of lessons for everyone.
Inclusion within a famously "exclusive" brand
The story starts about five years ago, when American Express looked hard at the changes underway in how people think about both money and technology, and especially mobile -- the ability to run most of your financial life from your phone.
They also pondered the fact that Amex was missing an enormous market in the so-called underserved, estimated to be between 65 and 140 million people in the United States - in other words, not a niche. They realized that the economic problems created and worsened in the Great Recession had converged with an emerging set of technology solutions.
American Express responded by launching the Enterprise Growth Group, which Courtney joined immediately. The goal was to go after totally different customers with different product sets. They unveiled an alpha version of Serve in March of 2011 , and then built the Bluebird card, aiming to be part digital wallet, part bank alternative, and part prepaid card . The goal was to reach Americans who struggle to manage and move their money or, as Courtney puts it, the people who are either excluded from the mainstream economy or "unhappily banked." An early move was to create a partnership with Wal-Mart to focus on these needs.
Along the way, American Express financed the movie, Spent, which brings these customers' needs to life and demonstrates that "it's expensive to be poor." If you haven't seen Spent and shared it in your organization, I recommend doing so.
In our conversation, Courtney tells us why they made these changes, how they did it, their efforts to "be respectful" to a customer group they didn't know, what they expected, what they learned about them, and what has surprised them. They undertook a "walk talk chalk," encouraging their leaders to step into the shoes of the kinds of customers who appear in Spent by, for instance, learning what it's like to stand in line on a Friday night to cash to check. They also connected with the Center for Financial Services Innovation (note that I serve on CFSI's board), to bring its recommended Compass Principles into designing these products. They focused human-centered design thinking on challenges like smoothing out financial "lumpiness" for people who earn enough money to pay their bills, but don't have the right amount at the right time.
Courtney describes the fascinating and varied ways customers immediately began using the new tools - including as a bank account alternative and to find ways to save. She talks about what people want most. She talks about revelations about the preferences of young customers today, and how savvy they are in using mobile services. Today, her group bases every product design decision on the preferences of mobile users (unlike, say, a bank that views mobile as just a new channel for old products). She explains how, with critical mass established on the platform, they can push the envelope with new features, including the first-ever rewards program on a prepaid debit card.
And she shares a progress report -- over $7 billion loaded on the platform as of March 2015, with merchant spend up 300% from 2012 to 2013, and 90% of these customers being new to American Express.
In September 2014, these efforts evolved into creation of FILABs - the financial innovation labs - through which American Express brings together researchers and academics with real live products. After inviting proposals, they selected three partners -- a nonprofit in behavioral science called Ideas 42, along with UC Berkeley and a team of researchers from UCLA. The goal is to use design thinking and agile development methodology to make financial products drive financial health. They are testing new ideas for both processes and products, from nudges and alerts to auto savings and debiting, to see what works. Some of this is proceeding under the aegis of the Consumer Financial Protection Bureau's Project Catalyst, which seeks to foster and evaluate fintech innovation. They'll be releasing significant findings in the near future.
In our conversation, I asked Courtney how to innovate in a great big company - after all, her Enterprise Growth group, itself, has over 1,000 people. Her answers may surprise you - including her comment that their most exciting recent innovation idea came from (of all places) the general counsel's office. It's fun to hear the excitement in her voice as she talks about what doesn't work, and what does.
Two more observations before we listen to Courtney.
In our talk she said, "I'll be honest," and explains that launching an "inclusion" strategy raised some worries about potential harm to the invaluable American Express brand, which had been painstakingly built over 165 years to be synonymous with prestige. So, they surveyed their top-tier customer base, asking whether Bluebird and Serve made them think worse, or better, of American Express. The results were resoundingly positive.
Second, think about the picture she paints. She says the company could see, five years ago, that the financial landscape was changing and American Express would have to disrupt, before they were disrupted. She says CEO Ken Chenault launched the enterprise growth initiative to "cannibalize" American Express from inside, through innovation.
I'm at Harvard this year writing a book on innovation and regulation, which recently prompted me to read Harvard Professor Clayton Christensen's classic, The Innovators Dilemma and newer related work. One of his insights is that disruptive innovation usually must begin in markets that are lower-margin and less attractive than the ones served by industry leaders. The disruptions gestate and develop in these side-markets, and then eventually burst into the mainstream with a better, cheaper product - often too late for the industry's leading firms to adjust. American Express seems to be following something like this logic, putting its innovation engine in the hands of people trying to reach a separate market that's traditionally been "underserved." The results to date are fascinating.
Perhaps it's not a coincidence that Courtney says the whole company now routinely recruits from her team.
Here is more on some of the topics we discussed:
- CFSI's Compass Principles
- CFPB's Project Catalyst project with American Express
- Ideas 42
- The Lean Startup, by Eric Ries
- The Innovator's Dilemma, by Clayton M. Christensen
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