R&D Comes to Services: Bank of America's Pathbreaking Experiments (HBR OnPoint Enhanced Edition)

At the heart of business today lies a dilemma: Our economy is increasingly dependent on services, yet our innovation processes remain oriented toward products. In this article, Harvard Business School professor Stefan Thomke points out the challenges of applying the discipline of formal R&D processes to services. Most service companies have not established rigorous, ongoing R&D processes, Thomke says. But the author provides an in-depth look at a five-step process that Bank of America has used to create new service concepts for retail banking. The company has turned a set of its branches into, in effect, a laboratory where a corporate research team conducts service experiments with actual customers during regular business hours, measures results precisely and compares them with those of control branches, and pinpoints attractive innovations for broader rollout. The article describes the program's workings, its successes, and the obstacles the bank faced. The effort reveals an enormous amount about what a true R&D operation might look like inside a service business, he concludes.