Mastering Innovation in Financial Services: How Fintech is Changing the Game for Wells Fargo

The financial services industry is increasingly seeing new technologies arise, from mobile banking and automated advising to Bitcoin and blockchain technology. On the debut episode of Mastering Innovation on Sirius XM Channel 111, Business Radio Powered by The Wharton School, we asked guest Ryan Miller to share how Wells Fargo fosters a culture of innovation that can keep up with these changes.

Miller touched upon three key components of their innovation strategy: tolerance for failure, customer feedback, and networks across industries. According to Miller, Wells Fargo approaches their initiatives with the intent of learning. A new concept might not launch, but if that means they’ve prevented an investment that was pre-mature or unsuited to customers’ needs, they’ve succeeded. That’s why customer feedback is so essential, whether it’s creating digital platforms for younger investors or assessing if cryptocurrencies improve the customer experience.

A lightly edited transcript follows.

Transcript

Mastering Innovation Hosts Nicolaj Siggelkow, Harbir Singh, and Saikat Chaudhuri

Nicolaj Siggelkow: Hello and welcome. You are listening to Mastering Innovation, our new show here on Sirius XM Business Radio powered by The Wharton School. I’m your host, Nicolaj Siggelkow, professor of management at The Wharton School and co-director of the Mack Institute for Innovation Management. I’m thrilled to be joined today in the studio by my colleagues and co-hosts for the hour, Harbir Singh and Saikat Chaudhuri, both professors of management at The Wharton School and the co-director and the executive director of the Mack Institute. Coming up in just a few minutes, we’ll be joined by Ryan Miller. Ryan is a senior vice president at Wells Fargo. He’s leading a design and delivery team within Wells Fargo’s innovation group. But first, we’d like to tell you a little bit about this new program, Mastering Innovation. Maybe most importantly, we’ll be live every Thursday at 4 p.m. east and 1 p.m. west, and of course, we’ll have replays a few times throughout the week.

The Central Question

The central question that we really want to address in this program is how do established organizations foster the kind of innovation that allows them to be successful to live year after year? This is a topic we’ve studied for many years at the Mack Institute, and we want to draw on our diverse global network of practitioners and academics to, you know, shed some light on this question for our listeners. We’ve called this show Mastering Innovation to stress that there are really two parts to the innovation problem. First, there are the innovations themselves, and in some shows, we want to focus on them. Secondly, there is the mastering of the innovation. After all, the three of us are professors of management, so the management issues are quite salient to us. Questions we want to address in this show include how to identify innovation opportunities, how to develop strategies for innovation, and what are the leadership and organizational issues that arise managing the innovation process in organizations?

To start the conversation on innovation, we don’t have to look very far to see the important role: that innovation place. There are lots of rankings out there on firms, and one of the most recent ones we’ve seen was performed by the Drucker Institute. They came out with their top 250 companies, and they created a holistic score that brought together 5 dimensions of corporate performance. It was customer satisfaction, employee engagement and development, innovation, social responsibility, and financial strength. Not to take too much stock into the exact ranking, just let me give you the top 10 in alphabetical order. There was Alphabet or Google, Amazon, Apple, Cisco, IBM, Johnson & Johnson, Microsoft, Nvidia, Procter & Gamble, and 3M. Quite the interesting and diverse set of firms, but all kind of with a common theme. All have been really innovative. So, Singh, you know, when you saw this list, what was your first reaction to this?

Harbir Singh: Well, the first reaction was all these companies emphasize innovation, and all of them have actually capitalized on innovation to respond to market change. So that was the first point. And actually, if you look at this list, Amazon, Apple, Alphabet, J&J, IBM, Microsoft, P&G, 3M, Cisco, and Nvidia, what you see is 4 companies that are about 100 years old and 6 companies that are less than 40 years old. And this tells you a lot. This tells you that among the most admired companies, 6 of them, 60%, are in fact younger companies. The second point is balancing exploration and exploitation.

Cisco, for example, grew through over 100 acquisitions. Procter & Gamble created an innovation ecosystem of partners through which it created a lot of new products. And of course, we know that Google and Alphabet are really highly innovative companies. And Apple’s success really is from its apps and its ecosystem. So, the second point I want to make is capitalizing on external innovation; that innovation has to grow beyond the boundaries of the firm. The last point is balance. You’re balancing customers, employees, innovative resources, short and long-term payoffs, social responsibility, and still making money. So that sense of balance is a critical success factor.

Siggelkow: That’s fascinating. Now, Saikat, you also teach a number of classes on managing technologies. What did strike you as interesting in this list?

“To break that inertia and remain innovative over time, it’s important to be willing to really disrupt yourself in many ways and cannibalize yourself.” – Saikat Chaudhuri

Saikat Chaudhuri: I agree with Harbir on the observations. What’s interesting to me is that a number of these companies look very different today from what they looked like originally. IBM used to be a PC company and server company, a hardware company essentially, and today, it’s a services company that’s actually sold the original product divisions that it had. So that’s what’s interesting. In other words, to break that inertia and remain innovative over time, it’s important to be willing to really disrupt yourself in many ways and cannibalize yourself, and that’s challenging.

Also, if you look at it, what’s happened is different kinds of innovation have allowed firms to remain on top over time. It’s not just product innovation, but often process innovation and business model innovation. Clearly, when it comes to the Amazons of this world, they’ve been doing it and they’ve been around for some time. But Microsoft is another example. Microsoft had been a company that people had written off a few years ago, but it’s moved to the software as a services model in recent times. So that’s been very, very successful. In a nutshell, I think it’s more the strategy and the organization which influences how well you can evolve over time to adjust to these changes and not necessarily, per se, technology.

Siggelkow: Interesting. Now, this brought out nicely two aspects of what we’re really trying to do in this show. One is to think about innovation really broadly. It’s not just the technology. It might be business model innovation. It might be the innovation in the ecosystem around the firm. And the second, what it brought out, is the challenges that existing large firms have with this innovation. Now of course, some of these, Harbir, as you were saying, some of these companies are younger, but clearly, they are now not the youngest guys on the block anymore, right? They are probably facing some similar challenges. What have you seen of what used to be the new, young, hip companies like Google? How are they struggling now, being large, established firms in their own right?

Singh: Exactly. So, look at Google, look at Microsoft. These are now gigantic companies. They have over 100,000 employees in Microsoft’s case. And what they have to do is still get the elephant to dance, and that’s challenging, right? That’s why Microsoft was being written off and has roared back. But, the big issue really, and P&G is facing that problem, is to respond to analyst pressure while still innovating. That balance of fiscal responsibility and spending on innovation — that’s the hard part. And these companies are big now, so they can’t behave like small startups. They have to get this game right.

Siggelkow: Fascinating. Saikat, you’ve also done a lot of work on thinking about how firms can source these ideas from outside the organization. Do you see any kind of common patterns here among these most innovative firms, or revered firms?

Chaudhuri: Absolutely. I think that, Harbir, as you were mentioning, there are two. It’s very difficult to navigate these challenges, especially when it comes to changing mindsets, processes, actual talent, and doing those all in-house. So, tapping into the vast pool of external sourcing, which can include bilateral alliances, ecosystems, acquisitions, venture capital investments, is critical. Here, we have a good example. Cisco, in fact, is a firm that has over and over and, again, over the course of this time, periodically been able to not only get access to new products and technologies, but get new types of talent, new ways of thinking, infuse that into the organization to break that inertia. I absolutely agree that’s very important, and we see that.

What I want to comment on is Google. I think what both of you were talking about with the evidence of what happens when you grow big and established. It’s not something which is foolishness, right? We often think of Kodak or other companies like that, “Oh, how foolish were you?” It’s not that. You grow to a certain size and scale; it makes sense to be operationally efficient, but if conditions change, your core capabilities, perhaps, become rigidities and change over time. Google’s splitting up into Alphabet, and the earlier part of Google, is a nice example of the firm trying to grapple with it. I’m not sure if that’s the final solution, but that’s an attempt to deal with that problem.

“If conditions change, your core capabilities, perhaps, become rigidities.” – Saikat Chaudhuri

Siggelkow: Interesting. Now, Harbir, you wear many hats here at The Wharton School, and one is being vice dean for Global. Are there some aspects about global strategy here that we can also pick up? Because clearly, these are all global companies, and they would not have gotten to the top of the list if they just had been just in one market.

Singh: So, two observations. The first one is: is Apple really an American company? If you think about Apple, more than five times the employees are outside the U.S. A lot of it is production and assembly, and so on and so forth; Apple’s success factors, in fact, low-cost production, primarily in China and now in other places; and at the same time, the ecosystem for innovation. Look at Amazon and, again, many economies, India in particular now, the online retailers are being challenged by Amazon. Amazon’s business model is actually really challenging the high-flyers in the Indian internet space. So these, in fact, are global companies.

Siggelkow: Interesting. And Saikat, you’ve done a lot of traveling as well. And thinking about how firms around the world are competing, is there anything particular in these firms that you can pick up on?

Chaudhuri: Well, for sure, there’s a global strategy, but I think what you’re referring to is the sourcing of innovation globally. There are interesting opportunities. We tend to think of firms as having a central R&D which does all the work, but we can actually leapfrog by leveraging the advantages of different locations. So, if you look at some of these companies that are here, say, the 3Ms of this world or the J&Js of this world, they will develop products — for instance, medical devices that have different needs, portable for instance, in markets like the emerging markets such as India — and then bring them to the market initially, in those similar markets, but eventually also globally. Sourcing innovation globally is a very, very important part of the disaggregation of the firm and thinking about multiple centers of excellence and not just centralized ones.

How Wells Fargo Approaches Innovation

Guest Ryan Miller (SVP Innovation Group, Wells Fargo)

Siggelkow: Great. All right, that was a great start, thinking about some of these issues on innovation. We’re thrilled to welcome to the show Ryan Miller, who joins us on the line. Ryan is the senior vice president and leads the design and delivery team within Wells Fargo’s innovation group. Before joining Wells Fargo, Ryan worked for Bank of the West as innovation and strategy leader and at Capital One as group manager for digital product and strategy. Ryan, welcome to the show. Thank you so much for joining us today.

Miller: Thank you very much for having me. Congratulations on the inaugural episode as well.

Siggelkow: Thank you. Ryan, tell us a little bit about yourself. What’s your current role at Wells Fargo? What are you exactly responsible for?

Miller: Wells Fargo’s innovation group is an enterprise function. My team, specifically, is charged with helping put forth our mandate across the company. We look at new ideas, new concepts. We get involved early in the life cycle of innovation and help structure proofs of concepts, so that we can collect insights from our customers and then take those learnings and feed them into whether or not the idea or the concept is feasible and viable. As we move through that process, we ultimately work towards putting a strategy, a vision, a road map, and a rollout plan in place, as well as developing a business case, so that we can secure the enterprise funding to scale and deploy these solutions across the organization.

Siggelkow: Great. So, tell us a little bit about how you interact with different parts of Wells Fargo. This is a huge organization, and as we all know, creating innovation in large organizations is difficult. And so, you have an innovation group. How do you interact with the other parts of Wells Fargo?

Miller: There’s a number of ways. It’s very traditional in the sense that there’s a lot of pushing and pulling. Sometimes, because of where we sit in the company and what we see in the external ecosystem, we hear of something interesting. Then we reach out to one of the businesses and present that idea to them, bringing them into the conversation, seeing if they’ve heard about it or if they want to explore it further, and we offer to assist them in that journey. Other times, it’s quite the opposite. We’ll hear from a number of business partners organically that they want to explore a particular topic, or maybe they feel as if they’re at risk of being disintermediated or disrupted, and as a result of that, we’ll reach out and ask for some support in exploring some of these new business models or technologies. And then, we’ll put a team together and help them work through that.

Siggelkow: Good. You mentioned two key words: disintermediated and disrupted. If we are thinking about the financial services industry, it’s clearly one of the industries that, right now, is being quite under attack in different ways. We’ll have plenty of time to talk about this, but maybe let’s just start out with the normal day-to-day interaction that a customer has with a bank because this has fundamentally changed when I think about how I used to interact with a bank and how I now interact with a bank. What changes have you seen that really have fundamentally created challenges for you in how you operate a bank?

Miller: I think it depends, the answer to that question, on how far back we go.

Siggelkow: Sure, you’re right.

“Because of the speed at which technology is changing…the way that you interact with your bank and your money is changing as well.” – Ryan Miller

Miller: As you were saying, we didn’t really have contact centers and automated teller machines. Now, everybody doesn’t even know that’s what they stand for. They just call them ATMs. If we go back really far, it’s changed pretty significantly. As we look at the broader innovation ecosystem, the pace with which things are changing is just increasing. Over the last couple of decades, we’ve become more digital, and over the last decade, we’ve become more mobile with smartphones. We’ve got more computing power in our iPhone or Android devices today than we used to have in a whole city block’s worth of computers. Because of the speed at which technology is changing and the way that we’re utilizing it and incorporating it into everyday life, the way that you interact with your bank and your money is changing as well. We’re seeing a lot of the traditional things that I imagine many others in the financial services space are seeing.

People are not coming into the branch for the same thing. I’m not sure that I necessarily subscribe to they’re not coming to the branch at all. We see lots of customers and prospects coming into our physical brick and mortar presences today, but they’re coming in for different things. And when they want to self-service, then they’re expecting that they have the ability to do that. So they want more capabilities, digitally. They want to have access 24/7 the way they want, when they want, how they want for the things that they want. We need to be able to take what is a very, at least from a Wells Fargo perspective, complex set of businesses and all the products and financial services that a customer may want, and find a simple, easy, delightful way to deliver that to them in any way that they need or want.

Siggelkow: Can you give us some examples of ways in which you’re changing your interaction with the customer? Is it mobile apps or is it other approaches?

Miller: From a non-innovation perspective, Wells Fargo has a pretty complete spectrum of interaction points: everything from our physical channels with our branches and our ATMs, our contact centers. Digitally, we’ve got online banking that you can access on desktop, mobile, tablet, and some unique experiences within that.

From an innovation perspective, we’re constantly exploring new technologies, new devices, and developing an opinion for the organization on how, when, or if we should choose to move more into those spaces. So, should we have a presence on Alexa or Google Home? If we do, what does that look like? When we move in those directions, then what are the additional considerations that need to be fully thought through?

It sounds great to be able to conduct banking seamlessly while you’re in your car, for example. Rather than being distracted, you just talk, ask a question, and get a response. Fantastic, but how do we authenticate you in that situation? And do we need to be concerned if there are other people in the car? All of those little nuances then require a lot of time and attention to figure out, so that we can continue to protect and safeguard the information of our customers, while still delivering these really seamless and delightful experiences.

Siggelkow: So clearly, you have a number of technical challenges that you have to surmount there. Are there business model changes that you can imagine? For example, you were mentioning, people conducting transactions over other platforms like Alexa or in the car. Would this impact the way that you perhaps, as a bank, make money?

“As people look at owning fewer cars or as those ownership models change, they’re impacting traditional revenue streams that banks have had.” – Ryan Miller

Miller: Certainly. There’s a number of business models, and we’re seeing this a lot with startups. Even outside of the fintech space, they’re challenging some of these models. One of the things, in particular, that is fascinating right now: my team’s been spending a lot of time looking at the future of mobility and transportation, and the impact that ridesharing companies and subscription services have on buying and owning a car, which is further exacerbated by some of the generational attitudes, how folks feel about that, and then also the density within urban environments and how that’s juxtaposed with more rural settings, where some of these services may not be as widely available or as widely utilized. As you look at things like ridesharing and subscription services, those are business models that, at least today, have been introduced outside of financial services. And as people look at owning fewer cars or as those ownership models change, they’re impacting traditional revenue streams that banks have had around auto finance.

But the interesting part, what we’re starting to see as we got more into this space, is that even if a bank — and let’s forget for a moment whether these models are being developed inside or outside the traditional financial institution — the bank is still very much a part of this process of the spectrum in the journey that the customer goes through. If you’re going to have a subscription service, you’re going to take an Uber or Lyft. Whatever the case is, there’s still a payment that’s associated with it, and that payment is likely, at some point, routing through a bank through your debit card or your credit card. As a result of that, we still need to figure out how to interact with those players and how to respond and meet the needs of those companies, as well as the consumers that use those financial services and still want to interact with us at the same time.

Making Tough Choices

Singh: I had a question about making choices. It’s wonderful that you’re doing lots of things, and one has to, given the rate of change in financial services. But innovation strategy is about making choices. How do you decide where to allocate resources, what needs to be shored up, and what needs to be let go? I think you were starting to talk about that. And who is involved in that discussion? Clearly, you would be, but then, business leaders would be as well. So, can you shed some light on that? That’s something we talk a lot about as academics.

Miller: Absolutely. There’s a couple of things that play into that decision for us, specifically. One of the core tenets of our innovation strategy is to put the customer first. And so, a lot of what we do, and what we try and leverage, is looking at everything we could focus on and trying to make those tough decisions around which we place a few small bets. A lot of it is driven by talking with customers, figuring out what their needs are, where they want us to be, what their expectations are of us, and then channeling all of that input into where we spend our time and resources. So that’s clearly one gating mechanism for us.

Then, another is: as we start to go down the path of placing a number of small bets through proofs of concepts and prototypes and other explorations that we do, we start to look at the feasibility and the viability of these different capabilities or technologies.

“A lot of what we do is looking at everything we could focus on and trying to make those tough decisions around which we place a few small bets.” – Ryan Miller

Perhaps it’s a great idea, but it’s not necessarily mature enough right now. So, we put it on the back burner for a little while, and we watch it. Or, maybe it’s really mature, and then we start to actually build out the business case. We look at the organizational readiness for something like this and then start to move those forward. As we end up more in that camp, there’s a broader stakeholder audience — the company that we pull in, all of our partners from legal and risk, our finance teams, and the businesses that interact directly with the customers and others — so that we can have these conversations and ensure that what we’re putting forth makes sense, not only from an innovation standpoint within our agenda, but for the company at large.

Singh: What are the performance measures? It looks like you have probably non-financial performance measures initially when you place the bets. And eventually, financial measures come into play. Can you talk a bit about how we know how well we are doing early on in the bets?

Miller: Sure. At the very beginning, a lot of how we measure success is through that customer feedback. In the innovation group specifically, we’re looking a lot of short sprints, to use an agile term. If we’re spending a couple of weeks or a couple of months on some initiative, and we put it in front of customers at the beginning and at the middle and then at the end. And at the end we’re seeing what we’ve built, developed, designed as being validated, then that’s success, right? If we get to the end, and we hear wildly different feedback, I’d still say it’s success, but from a different perspective because it allows us to capture those learnings with minimal investment fairly early on versus a much longer timeline.

Siggelkow: Very interesting. Ryan, you said earlier, something quite interesting about how you’re not convinced that people don’t want to come to the branch, but they’re coming for maybe different things. I guess the big term is omnichannel, right? Everyone talks about omnichannel. If you could just elaborate on that a little bit more because there’s a fascinating shift of how people have been thinking about the impact on digital. Everyone was thinking, “Gosh, every retail outlet or every kind of bricks and mortar will be outdated in a couple of years.” Now there seems to be a little bit of a renaissance, in some sense. And we see Amazon buying up Whole Foods and engaging in real estate investment. So, can you tell us a little bit about your thinking and your experience that you’ve had at Wells Fargo?

Miller: That’s right. With Amazon specifically, long before they bought Whole Foods, they started setting up little pop-up shops inside of malls and other places as well. So for a company that wanted to be digital-only, at least initially, they’ve done a pretty decent job in the last few years of moving into the physical world. Part of that, too, is a result of the human nature to want to see and touch things. It’s where the term “showrooming” was coined, and a lot of other retailers saw that. You’d go into a Best Buy or a Costco, and you’d look at a product, you’d touch it, you’d feel it, you’d want it. Then you pull out your phone, and you’d see that Amazon had it cheaper, and you just buy it there. But from a Wells Fargo perspective, we’ve got over 6,000 branches. We’re very proud of that footprint. All of the ATMs and other touch points that we have, we see customers wanting to do a lot of their initial research online because, in some cases, it’s easier. It’s more convenient for them.

They get home from work. They’ve got other things they need to focus on. It might be 10:00 at night, so they can start to look into a mortgage product, different rates, different investment options, but then they have a question. So, they want to come in and get advice there from someone in person. They want to have those planning conversations with someone that they can look at. Or at a minimum, when they have a question, they want to know that someone’s there for them. When we start to break down some of these different product areas, we see that when there are things that can be done from an easy self-service fashion. There’s a lot of transactions that are moving to mobile for things like remotely depositing a check or making those bill payments — things like that. But, when you want to have a conversation around buying a home or planning for retirement, you might do some research online. But, you’re still going to come in, and look for the advice and guidance from a financial advisor, a mortgage officer, or someone like that.

Siggelkow: We learned that you’re also thinking about things like robo-advisors. We’ve seen Wealthfront, Betterment, other firms, and Vanguard going into more automated advising, which is of course a different way of giving advice rather than coming into a branch and talking to someone. So how will this play out? What do you think, Ryan?

Miller: No, that’s right. I think you’re referring to Intuitive Investor, which we recently announced, and from a Wells Fargo perspective, we’re launching a product to meet today’s younger investors where they are, which is online. We want to be able to deliver a convenient and low-cost way to participate in the markets and enable them to pursue wealth over time. One of the things that really differentiates our offering in the broader marketplace is that because we have this extensive network that’s not just digital-only, we’re able to say, “When you want to interact digitally, when you want to go and walk into a certain allocation, you can do that. If you ever need to talk to a person, then maybe that’s the choice you make. But when you want to pick up the phone, we’re here for you.” And so that solution is coupled with a robust phone bank of financial advisors who are able to talk with folks and answer their questions. It’s that holistic approach that’s really differentiating Wells Fargo and some of the offerings that we have relative to some of the others in this space.

Siggelkow: Well, this is really interesting, and we’ll probably talk more about this a bit later, because I think quite often the strategy is driven by the imagery of, “The only customer we have is single and millennial and lives in the Bay Area.” And that’s clearly not the case, right? Thinking about all the different customer segments that you are facing is really important.

Singh: Ryan, I was really intrigued by your point about these different projects or different stages. Some, even if they don’t work out, we get something out of it. The question I have is, how do we think about things that don’t work in terms of failures? Failure’s too strong a term, but not every innovation is going to deliver the expected value. Most companies struggle with this, and this is a challenge at the same time in research projects. You find many things fail, so just some thoughts on how you think about that in your company?

“Innovation needs to help push the boundaries. We need to help surface new business models, trends, and technologies, and be that catalyst for transformative change.” – Ryan Miller

Miller: It’s a great question and it’s incredibly valid, especially as we look at some of the different innovation models that exist across financial services and other companies. One of the things that some colleagues and I spent a good deal of time talking about is that innovation needs to help push the boundaries. We need to help surface new business models, trends, and technologies, and be that catalyst for transformative change.

From a Wells Fargo perspective, specifically, leveraging the customer is a way of saying what’s right for us. But as we’re going through that process, we simply can’t disassociate ourselves from the business and where the business is looking to go.

I think that that’s something that other companies have struggled with. They’ll end up with an innovation team, and they decide to put them off onto the sides — separate work space, separate access, separate computers, all of that stuff — so that they’re unencumbered by the traditional confines of the organization. They come up with some great idea, then they bring it back in, and they haven’t talked with anyone in six months. They find that what might be this really whiz-bang idea can be very difficult to move forward for a whole host of organizational reasons. And so, part of what we do is going through the process of really looking at where to move the organization. We bring all of our partners along with us, so we can ensure that they know what we’re thinking of and can ingest their thoughts early on. Part of that is the learnings that we collect as well. It’s the customer, and it’s our internal customers, and it’s everyone else. Specifically, to what you are saying around these failures, the company has to have a culture that’s accepting of it. I’ve worked in a lot of places before where the success metrics are often working against innovation.

It really comes down to what incentives drive the right behavior. If you set yourself up as a company to say ­— and by no means am I advocating that there has to be a quantitative metric, but if you say, “Hey, we need to have five successful proofs of concepts this year. Launch five new things,” I’m not sure that that’s best way to approach it. It’s about, “Did we collect learnings? Did we inform the process? Do we feel that we’re better situated as a company because we’ve learned something from this?”

We’ve maybe prevented the company from making an investment in the technology that is not mature enough, or that goes against some form of target architecture, or that a customer wouldn’t ever use. We look at success as really ensuring that the customers’ needs are met, and if they are, then maybe some proofs of concepts go away, some initiatives are stopped, and others move forward. That’s the right gating mechanism to use. For us, that culture exists at the company, and that fear of failure is one that we hopefully have removed from all the folks that are contributing to innovation.

“The company has to have a culture that’s accepting of [failure]. I’ve worked in a lot of places before where the success metrics are working against innovation.” – Ryan Miller

Chaudhuri: Ryan, you’re touching upon something very important that we scholars also care about a lot. Clearly, companies like Wells Fargo, which have a storied history, especially in being very successful, have a certain way of doing things, which they get caught up in. It’s the inertia which builds and makes it hard to then change the ways of thinking in order to adapt to changes that might be coming in markets. You make it sound very easy, though many companies struggle with this, in making these kinds of changes. How do you orchestrate a change in culture, for instance? You know, incentives are one mechanism. Is there anything else that you’ve seen going on at Wells Fargo to deal with this challenge of inertia?

Miller: I only make it seem easy because this is radio, and you can’t see the battle scars on my face.

Singh: So true.

Chaudhuri: You’re a master of innovation.

Miller: It’s easy if you always have the right North Star. But day-to-day, it’s difficult because there’s always going to be some hurdle that needs to be overcome. And so, that’s one of the things that we look for as we try and recruit talent for the company as well: people that are curious, people that are thoughtful, people that are flexible because the broader ecosystem is changing pretty rapidly, and dramatically in some cases, but also folks that have a great work ethic, folks that are able to be coalition builders, that are collaborative and communicative. As we have these ideas, we can not only collect those insights from customers, as I’ve mentioned, but we can socialize them across the organization; bring our risk, compliance, and legal teams, our business partners, our marketing and communications teams along with us, so that we’re pushing forward and trying to encourage the company to leapfrog in certain areas. Nobody wants to, even within the company, hear that something’s launching tomorrow, and now their day-to-day job or their responsibilities are going to change. But if they know about it in advance, then we’re all part of the same journey together. For us, we try and manage that cultural element by ensuring that we can help push the organization to think differently. By doing that, we bring all of our partners along with us, and we encourage them to be a part of that process of thinking differently.

“We try and manage that cultural element by ensuring that we can help push the organization to think differently. By doing that, we bring all of our partners along with us.” – Ryan Miller

I think that’s really critical because as we look at the innovation group (and maybe coined slightly differently, the enterprise innovation group at Wells Fargo), we don’t feel like we hold the sole mandate on innovation. We’re really helping set part of the organization’s strategy and advancing certain principles, but we encourage all of our businesses to advance innovation within their respective worlds. We leverage design thinking principles and a whole host of other tools to ensure that the entire company feels as if they can be innovative and that they can help move this forward. Then we’re there to help and to assist and to move everything along together.

The Fintech Effect

Siggelkow: Good, Ryan. You’ve been really wonderful in stressing the mastering of the innovation or the management aspects. Let’s, maybe for a second, move back to the innovation part and the technology part. And it would be completely remiss to have someone from a bank here and not talk about Bitcoin or at least the blockchain technology. What do you think? What’s going on? How will this affect your business model? How will this affect the financial institutions?

Miller: Sure. I woke up this morning, and I think myself, like probably with many others, saw an article talking about how Bitcoin soared past $15,000, almost approaching $16,000 before dipping back to somewhere closer to $14,000 and change. It’s certainly fun to watch, I’ll say that. From a Wells Fargo perspective, we feel that the needs of our customers are met by the existing fiat currencies that exist today. We don’t support cryptocurrencies and Bitcoin specifically, but we’re very interested in watching the underlying technology that supports it because we think that it’s part of our responsibility to our customers to explore emerging technologies. Blockchain is something that has interesting applications in spaces like trade finance and settlement. If that improves the experience for customers, consumers, or corporates that leverage those types of financial services and products , then that’s great. We’re very interested in exploring blockchain and other emerging technologies, and we’ll see where they go.

Siggelkow: Ryan, you just mentioned all these new technologies that come up: Bitcoin, blockchain… Earlier, you talked a little bit about the robo-advisors, and you talked about the new mobile apps. How do you keep track of all of these new technology trends? How do you monitor this? There’s so much going on. Probably, you’re not alone. Do you have people around you? Just interesting. How do you keep on top of all of this?

Miller: It’d be nice, right? We walk in every day, we push a button, and all of a sudden the computer just tells us everything we need to pay attention to. Unfortunately, it’s not that simple. It’s a complex process, I suppose, of building a set of networks within the ecosystem. Across all of the different business groups that Wells Fargo has, we have a lot of internal thought leadership and knowledge that exists within the company. We try and leverage that, but we don’t always just look inward. It’s going out, attending meetups, which, for myself in San Francisco, is a relatively easy thing to do. It’s talking to startups, talking to VCs, and talking to traditional players. All of the Amazons and Microsofts that you’ve been talking about earlier on the program today, IBMs and Oracles, and others of the world that are also all trying to figure out what innovation means to them and how to continue to adapt in this world.

By having those conversations, we understand what and how they’re thinking about these trends, as well as how they are looking to potentially influence them. And through everything that we’re able to capture internally, as well as externally, through partnerships and conversations with universities is how we got here today. It informed us to say, “What do we look at? What’s happening? Where do we go next? Can we take it from there?”

Singh: Along those lines, one of the interesting questions is ecosystems. It’s a concept that has become salient in many industries. What are financial services, broadly defined, learned from ecosystems in other industries that may be further ahead or may have shaken out in a certain way? I’m thinking about, of course, telecom and apps and so on, but even airlines, for example.

Miller: I was reading something — this is probably a year or so ago now — about how, because of the technology that exists today, we can anticipate 100 years of medical innovation within the next 10 years.

It’s pretty crazy, right? I mean, what would it look like if we eliminated or eradicated the common cold and cancer? What we could do with prosthesis and a number of other things. And so, as we look at those other industries, there are some good examples of how to leverage innovation and technology, and there are also some other examples where we can learn what not to do. It’s about trying to figure out how to always keep the customer at the center of where we’re moving in the direction of, while ensuring that we’re also very safe. It may be unfortunate, but if your favorite social media network goes down for an afternoon, it’s inconvenient. You’re not able to share what you had for lunch maybe. But you don’t have the same type of anxiety as if your bank goes down for a day: not able to pay for lunch or pay any of your bills.

“As we look at other industries, there are some good examples of how to leverage innovation and technology, and there are also examples where we can learn what not to do.” – Ryan Miller

Singh: That’s very true.

Miller: And so, we have to make sure that while we’re constantly advocating on behalf of the customer, we’re also doing so in a system that keeps it safe and secure, and folks have trust in us and in that system. It’s for those reasons we take a look at what’s happening in the other ecosystems. We learn from them what works, and we learn from what doesn’t. Then we apply that through the lens of the financial services.

Chaudhuri: You mentioned a few interesting points here. One is trust and also stability in the financial system. This is clearly important when it comes to thinking about fintechs, not so much in the blockchain type of sense. But more, we see a lot of social media apps, for instance WeChat and so forth, which have become intermediaries — financial intermediaries in some sense — with people lending money to each other. Clearly, there are some concerns around that, but also some opportunities if people can loan each other money over these apps, and it doesn’t go through a banking subsidiary.

Now, I can imagine that in certain markets such as Europe and the United States, with the financial crisis being so recent, regulators might be very cautious about allowing that. But if you go to, say, China or parts of Africa or parts of India, there are these sandboxed examples of where countries are experimenting with allowing alternative forms of trading and lending to take place, which could disrupt the intermediaries. But they’re doing it because there’s the potential of financial inclusion, essentially to leapfrog the approaches that are taken in some other markets. Clearly, there are more risks associated with that. Any thoughts on this?

Miller: Well, from a domestic U.S. perspective, I think that as we look at marketplace lenders or alternative lenders, one of the things that we’ve really learned, from the surge we’ve seen in the last 10 years in that vertical, is that a lot of these companies are targeting specific niches that were unmet or underserved. There’s a lot of opportunity in some of those niche markets. And so, that’s both something that’s from a traditional financial services perspective we need to be aware of, but it also presents a huge opportunity for us to look at relationships with some of these fintechs.

And that’s where Wells Fargo, again, is somewhat unique. We’ve got a startup accelerator program where we’ll actively reach out to fintechs and other startups and encourage them to apply. We host them through our virtual mentorship program and help work towards exploring if we can leverage their solution and make them a vendor of the organization. That’s a great way where we can help some of these new companies learn how to grow and scale at an enterprise level, which is clearly important to us, but we can also be a little bit closer to some of the innovation on the front line.

Customer-Driven Strategy

Siggelkow: Great. A man after my heart comes back to talk about strategy, which we think a lot. That was very interesting for you to say. Again, there are segments in the market that are maybe underserved, and that’s kind of where these new entrants are popping up. Strategy is about making decisions: what to do and what not to do. You already mentioned Bitcoin itself, for instance, is not of interest to us, or other cryptocurrencies. Blockchain very much is. Are there other pieces where you’re currently saying, “This is actually something where we don’t want to go?”

Miller: I think we make those decisions very, very point in time. We’ll have an idea, we’ll explore that idea, we’ll collect a whole host of feedback, and maybe we decide that it’s not right right now. But I don’t know if there’s too much that’s ever permanently off the table because the industry and the expectations of consumers and other customers is always changing. You need to be able to meet them where they need, when they need.

Siggelkow: I think that’s sort of in part the issue of, let’s say, once you get so much information about your customer, there are possibly lots of new business opportunities that you might see, right? And you say, “Well, but at the core, we are a financial institution, and we’re dealing with payments, and we’re dealing with asset management. But all of a sudden, I have information that might help me to have insurance, or that might help me to do other things.” And so, that’s what I was sort of thinking about. As you are coming out with new business ideas, are there some guidelines, or are you really truly, “We can do whatever comes up to mind, wherever we think that might be helpful for Wells Fargo?” That’s what I was just sort of thinking about.

Miller: It’s a very provocative question. It’s one that comes back to the mission and mandate of the company. We can look at Facebook as a really good example of this. One of their early mission statements, which they really haven’t deviated from too far, is they want to help connect people. And so, you can see that all of the developments that they’ve introduced into their platform and the acquisitions that they’ve made, they all come back to helping connect people. It’s not necessarily all messaging driven, although that’s one of the main ways they look to deliver on that promise. But they started to move into other areas as well because they feel like, albeit on the periphery, it’s delivering on that core to help them help people connect better.

From a Wells Fargo perspective, we want to help people achieve their financial goals and objectives. We want them to be more financially healthy — to go back to what you were mentioning earlier around how some of these alternative lending companies, especially in other countries, are helping with financial inclusion and financial health. To the extent that we, either within the innovation group or within Wells Fargo at large, can identify business models or products that we feel help people become more financially healthy and better able to meet or achieve their financial goals and objectives, then I think they’re on the table. But as we stray too far from that…you know, will Wells Fargo ever manufacture refrigerators? Probably not, because I don’t think refrigerators are really delivering on that brand promise, right? Those are some of the guardrails that I guess we’d put in place.

Siggelkow: Great. Well, Ryan, thank you so much. That was amazing. I think we all learned a lot about this very interesting evolving space. We very much enjoyed our conversation with you, so thank you again for joining us today.

Miller: My pleasure. Thanks for having me.

Siggelkow: All right. Harbir and Saikat, that was exciting. Some comments, some thoughts on this big evolving space?

Singh: I was actually very impressed with three main points because these are all stumbling blocks for innovation. The first one is tolerance for failure. I think they actually have a position on that, which is great. Even then, tolerating failure is hard, but at least there’s an acknowledgement that this project could not work, and we should then focus on learning or cut back on investment. The second one was this customer-led idea, which, again, strategic innovation. At least it’s focused on a particular important application, so that becomes an arbiter on where to invest. The third one is recognizing the importance of ecosystems. I guess a question for another time, or thinking further about this across all of our discussions, is, how do firms source innovation? He gave one set of answers, but every interviewee we have will probably have an answer on that.

Chaudhuri: I was very impressed with Ryan because he is very thoughtful of and very deliberate in what he’s doing. You know, we started the show thinking about the attributes of those firms, which have been successful over time and have been able to navigate these changes and remain innovative. He seems to really, in his organization, embody that. If you think about the strategic and organizational imperatives, it seems so well thought out that we need to organizationally have a different group. But if it’s completely separate, for instance, then it’s not going to achieve the purpose of actually changing the rest of the organization, which is the classic ambidextrous organization, and the problem with it. But how can we link it with incentives in order to adjust the process to be able to gradually infuse that change into the organization? I personally would love to learn more about that.

Siggelkow: That last point really struck a chord with me as well, as he was discussing how some firms are trying to do this. We create this very creative, independent organization that does innovation, and they come up with some really great breakthrough ideas, which we then find out are completely unimplementable for our organization. And bringing that sensibility to it, particularly in these large organizations where maybe these new innovations are not just standalone innovations, but have to be integrated, right? He said, “How many branches do we have? Right, 6,000 branches.”

Thinking about this as a systemic change is really not easy. Quite fascinating. Now, again, what I also very much liked about this was really this, on the one hand, it’s clear new technologies in terms of all the new ways of connecting to the customers through technologies, underlying new digital payment systems, robo-advising, blockchain. And then a whole bunch of managerial issues of, how do I actually manage a big organization and lead that organization in that direction? All right. Maybe one more thought on the ecosystems because, Harbir, you brought that up.

Singh: The bets, at least their thinking about it is great. And he began talking about going to these events in the Bay Area about other ecosystems. One of the things that ecosystem players all need to learn is your ecosystem is a lot broader than your industry. So how do you actually go beyond your industry? How do you actually pick up an idea from a different domain that you bring in? I think they are geared for it, but that’s an interesting challenge.

Chaudhuri: Let me push that idea a little bit further, which is that everybody in their own industry thinks that the challenges they face are unique, but actually they are not. When you hear about the basic strategic and organizational aspects, they are very, very common. And so that was fascinating to hear. To your point, Harbir, I think to look beyond and see, “Well, disruption hasn’t been happening much in financial services, but it has happened elsewhere,” would be useful.

About Our Guest

Ryan Miller is the Senior Vice President leading the Design and Delivery team within Wells Fargo’s innovation group. Before joining Wells Fargo, Miller worked for Bank of the West as an Innovation & Strategy Leader and at Capital One as group manager for Digital Product and Strategy. His team develops proofs of concepts and business cases for new ideas, securing enterprise funding to scale and deploy these solutions across the organization.

The Mack Institute debuted its first episode of Mastering Innovation on Thursday, December 7. Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.

Somina Lee is a Production Assistant for the Mack Institute’s radio show, Mastering Innovation. She is a junior in the Huntsman Program, concentrating in Finance and Marketing & Operations Management at the Wharton School and majoring in International Studies in the College of Arts & Sciences.

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