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The idea exchange at UBS

London Business School MLab
Management 2.0 Labnotes, Issue 12, June 2009

How do you bring innovation into the mainstream of essentially conservative organisations? Simon Caulkin reports on a groundbreaking initiative at UBS Investment Bank.

Most banks are creatures of hierarchy, tradition and conformity. They are not alone in this, of course – so are most companies, full stop The idea exchange – but they are alone, as we now know only too well, in the severity of the consequences when such management conservatism is tested to destruction by the systemic complexity of the industry's products and processes.

Thankfully, there are exceptions to the norm: Svenska Handelsbanken, consistently the most successful Nordic bank, and UBS's Wealth Management arm have both made innovations in the area of planning and budgeting that change the way managers think about their business. But it is fair to say that on the whole management innovation has not been high on top bankers' agenda.

This makes the attempt by a group of "renegades" at UBS Investment Bank to bring innovation into the mainstream doubly interesting. Not only was the notion of liberating the ideas, feelings and opinions of the wider employee base unfamiliar in itself; in addition, it started as a bottom-up, grassroots experiment.

"We would have liked top-down sponsorship, but when we started on our innovation journey in 2007, there were so many changes under way at the top that it wasn't available," Reto Wey, who took the operations lead in the group, explained at a recent MLab round table. "So we opted instead to pursue a grassroots movement, with all the obvious costs and benefits this approach implied."

Jam Jolt
Behind the initiative were two driving thoughts that came into focus across two days of an inaugural innovation jam at MLab in July 2007. One was the jolt (partly of recognition) felt by all the participants at Gary Hamel's oft-repeated statement that a mere 16 per cent of employees come to work fully engaged. The bank was full of clever, hard-working people with strong views about their work; if they could be energised to bring more of themselves to the office, the effects would potentially show up in every area of the business, from recruitment to retention.

Engagement knit neatly with the second notion. Most banks, reasons Francesca Barnes, a member of the investment bank board at the time and who soon became the mentor to the group, follow me-too strategies. They are good at identifying where they are, quite good at restructuring to make up ground, but not good at envisioning where they could go apart from catching up with industry leaders. The beauty of the lab, she says, was that it gave people the chance of talking about creating gaps rather than closing them. "Instead of trying to be in the top fi ve in every area, what would happen if we were really, really good at the things that we want to do? The lab gave us the opportunity to ask the question – to step off the cliff without killing ourselves."

The underlying feeling that there had to be a better way of managing the bank, of course, has only been reinforced by the market mayhem that has broken out since.

The you in genius
Inspired loosely by the wisdom of crowds, the idea the group came up with was to build a process for tapping into the "collective genius" of the organisation via a Facebook-style online tool that came to be called the UBS Idea Exchange. Having assembled a team of a dozen self-selecting volunteers across a number of business areas – itself not easy, says Barnes, when everyone was already working a 12-hour day – the group spent the next few months working underground both to put flesh on the proposal and to collaborate with the Californian software firm Brightidea to customise the necessary web software.

To gather learning, the team decided to run two pilots in different parts of the investment bank. The first ran in the Exchange Traded Derivatives (ETD) division, a unit with around 250 people based in Zurich and London. ETD lent itself to experimentation for a number of reasons, not least the ready support of top management and the fact that it was asking itself many questions as it strove to meld existing USB departments with others acquired in the break-up of the Dutch bank ABN AMRO.

The experiment, coordinated by ETD Idea Champion Zoë Evans, took the shape of a timeboxed campaign – two weeks, extended later to three – to generate ideas and sort priorities around the theme of "working smarter": an issue that resonated strongly with the division as it endeavoured to pull the new entity together.

In a microcosm of the original MLab jam it kicked off with a short and focused physical meeting of 50 ETDers to brainstorm ideas, which were recorded and then used to populate the online Idea Exchange. The exchange was then opened up to everyone in the division, who were invited to contribute new ideas and/or help develop existing ones. They were also encouraged to vote, in effect creating a system for prioritising the ideas. An encouraging seventy per cent of ETD employees went online, according to Evans, while 20 per cent contributed new ideas. A very high proportion voted.

Not surprisingly, reflecting the fluid situation at the time, a large number of the 85 ideas generated concerned cultural management issues rather than specific processes – the need to get to know each other and for senior management to be more visible, for example. Such messages were valuable indirect benefits for senior management even where they did not lead to specific innovations. In total some 60 per cent of ideas were taken forward in one form or other.

Learning to talk
One important takeaway from the experiment was the need for intensive communication and follow-up right through the process. Those who attended the kick-off event in London were highly engaged with the campaign while a number of those who didn't spent little time online because they judged that the initiative did not come from the top and therefore wasn't important. Paradoxically, even a bottom-up initiative needs to have visible top management endorsement if it is to succeed. "We gained a lot of insights from the process," acknowledges Evans, "particularly around communications and explaining how ideas get to the implementation stage". But with the right support and infrastructure, the potential is there to make the whole organisation more entrepreneurial and responsive, she believes. It's now a matter of timing to consolidate and prove it at a larger scale.

Some of the learning from ETD was incorporated in the second pilot, which took place in the bank's Data Services Group. A larger division of some 400 people spread around the world, DSG was a relatively new grouping responsible for USB's core data functions. The ideas solicited in the DSG pilot focused on "excellence in service delivery" – basically reducing cost while maintaining and improving data integrity. While the new campaign followed the same general format as in ETD – priming and refining ideas in Idea, followed by a screening process leading to implementation of the most promising – it benefited from a wider, higher profile launch: a simultaneous video-linked introduction session to around 100 people London and New York featuring a presentation by the division head, and a subsequent webinar with a further 50 staff in Asia.

If anything, the second pilot was even more successful than the first, generating 130 ideas, more than half of which have gone forward to the next stage. One potentially saved enough to pay for the original MLab jam. Like Evans, Elana Goetz, the DSG lead, agrees that leaving aside the direct results the exercise yielded valuable side-benefits in giving expression to the opinions of the wider employee base about management in general. Underlining that, the team found that a scheme to give small thank-you awards to people who participated added little to the campaign impetus – the motivation came instead from the process itself, the opportunity to gain recognition from and engage with senior managers on subjects that they cared deeply about.

Goetz echoes a general view by underlining the need to prevent the initial enthusiasm from being dissipated by an extended evaluation and decision period. Preliminary sorting, then scoring and giving feedback on such a large number of ideas took a huge amount of time and effort by category owners and subject matter experts. Although excited by the ideas coming through, she cautions that the biggest learning is the need to have a repeatable, dashboard-style reporting system for quantifying results and keeping the momentum going. "Delivery is key," she says. "If the sponsorship and management infrastructure aren't there, even if the person at the top says yes, without that support it won't go anywhere. We need to bring down the level of work to make it happen."

In the box thinking
One way of doing that was hit on by another innovation team, a group of young high-potentials whose challenge was to analyse the pilot results and see how they could be taken further. They came up with the idea of a "Campaign in a Box", a template based on the pilots for a complete campaign, including formats for communication and feedback, to be made available to the whole organisation and usable at any level.

The Idea Exchange, emphasises Reto Wey, is just one part of a wider innovation effort at UBS. The bank is already using linked innovation pipeline management software to track and drive new business initiatives from start to post-launch review. The Idea Exchange has further to go – very few banks have formalised innovation or R&D procedures, and institutionalising them across a far-flung global structure is hardly made easier by a current climate that puts the emphasis on a more command and control/military style of management, sighs Wey. Accordingly, the present effort must focus on doing everything to keep the initiative alive. Accepting that "we're just scratching the surface at the moment", Wey can envisage the Idea Exchange two or three years down the line "as a widely used and totally accepted way of involving the whole employee base in generating new revenues and creating efficiencies, and in constantly thinking about what they are doing and why. Hopefully, bringing people in will increase their engagement too." He points to the example of BT, Brightidea's largest client, which has several campaigns or challenges under way at any one time, and where 140,000 people have access to the tool.

In the medium term, Wey sees voting being taken to a new level by the issue of an Idea Exchange currency which would encourage engagement by giving employees "skin in the game"; and opening up the Exchange to the user base, for instance on systems improvements, "so that everyone would have an equal say in determining which top five of 20 improvements would be best to roll out first. That would be a much more democratic way of determining next steps, always taking into account statutory requirements and strategic issues". For her part, Francesca Barnes, now chair of the Bridge Academy Board having left UBS, is even more convinced of the need to keep ideas bubbling up through the Exchange than she was at the start. In today's turbulent conditions, she says, "no organisation can afford not to do this stuff". It may look risky to some – but it's a lot less so than doing nothing.

Simon Caulkin writes the management column in The Observer.

© Management Lab (MLab) 2009.

Original article.