Nov 10, 2015
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.
Innovation
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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