Innovation is not itself an outcome at Wells Fargo & Company, according to the bank’s head of innovation, Lisa Frazier. But that doesn’t mean it’s not happening.

The innovation group is an enterprise-wide function, she said, that’s focused on applying new technology to the business of banking, creating new business models for the organization, and developing an “innovation DNA,” or the bank’s culture, mindset and capabilities regarding innovation.

“My viewpoint is, disruption is a fact and transformation is a choice,” Frazier said.

Launched about two years ago, the innovation group covers the entire innovation life cycle at the bank, from research and development on future technologies all the way through delivering production capabilities.

“If you think about 5G or quantum computing, or IoT, we’ve been doing research on those things for quite some time,” Frazier said. “We’re trying to identify how those technologies could solve problems, improve our businesses, and improve the business of banking for customers.”

Organizationally, she said, the group drives what it calls “enterprise-led” innovation, meaning the team takes the leadership role for the enterprise — its work on artificial intelligence is an example of that. Alternatively, the group partners with the different lines of business at Wells Fargo on specific programs that drive their strategic initiatives.

Organizing for Innovation
A recently released Ernst & Young/Forrester survey of 240 senior-level executives on industrializing innovation in financial services indicates leading firms think more about, well, innovation.

David Kadio-Morokro, Financial Services Advisory Innovation Leader at EY, told Bank Innovation the results show differentiators are customer-obsessed, measure everything, and foster a culture in which employees are encouraged to innovate. Laggards, on the other hand, don’t have the right methodologies, resources or processes, and lack the capability to take an idea and run with it, he said.

“You can buy all the new, cool technologies out there that you can, but if your culture doesn’t change, or if you do things just halfway, you’ll get very little boost from those initiatives and technologies that you’re deploying,” he said.

The biggest gaps between leaders and laggards are in organizational factors, such as measuring innovation, which 88% of leaders do vs. 41% of laggards, according to the survey report. A similar gap, 84% vs. 42%, exists when it comes to identifying executives with accountability and budget for innovation.

The report said it’s the “how” of digital enterprise transformation where leaders differentiate themselves. Whereas leaders use repeatable processes and federated (or balanced) models of innovation, laggards do not design their innovation processes for scale and take either an excessively decentralized or centralized approach.

Asked whether Wells Fargo is more centralized or decentralized in its approach to innovating, Frazier said it “needs to be both.”

For what she called “sustaining innovation,” which deals with the existing products and services people see every day and the continuous effort to improve those contact points, Frazier said the responsibility is really with everyone in the organization.

“But in large organizations where you’re trying to stand out with game-changing technologies, like artificial intelligence, what happens is, if you don’t centralize that, it becomes quite fragmented,” she said.

In a decentralized scenario, she elaborated, different teams or business partners could end up working on separate solutions that either overlap and result in redundancies, or that are not unified in vision and lack cohesion.

Executing the Plan
Kadio-Morokro said having clear goals going in and efficiency metrics to track progress are crucial for effective innovation, as well as being able to justify business decisions. He said the executive leadership team must also be totally on board.

“Disruption and innovation require changing the infrastructure, the technology, but also the culture of how we get organized, how we drive performance incentives, how we enable our people to fail because innovation will require productive failure,” he said.

One thing the innovation group would appear to have at Wells Fargo is buy-in, as the reorganization for innovation came at a time when the bank was grappling with a very public sales-practices scandal.

The bank has since made progress in AI, APIs, and other emerging areas, and is piloting and rolling out new products such as Greenhouse, its mobile-first bank account, and Control Tower, which provides customers more control over their accounts. More updates are coming soon to an already feature-rich mobile app.

But how are decisions made on what direction to take innovation at the bank?

The innovation group looks years ahead for upcoming trends and evolving capabilities, Frazier said, but it also considers what competitors, including potential fintech challengers, are working on. Priorities are defined from there. Ultimately, strategic decisions are made through engagements and conversations with the bank’s operating committee members as well as directors of the different lines of business.

“We have to think about how innovation is used to improve the customer experience, customer engagement, customer satisfaction, and the economics of how we operate, whether that’s driving new revenue through new business models or operating efficiency,” she said.

Frazier will deliver a presentation at Bank Innovation Ignite in Seattle in March 2019. Click here to register.