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1. Introduction
It has been claimed that BBVA has implemented an open innovation, “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” says Chesbrough (2003)1. BBVA is seeing itself positioned right and succeeded for innovations. It is suspected that whether the innovation at BBVA is successful and highly recognized open innovation approach.
This essay will examine how BBVA build their capabilities to embed an open innovation approach in their organisation and outline some challenges when BBVA moving forward to more open innovation in the near future. 1.1 BBVA’s Key Characteristics
BBVA (Banco Bilbao Vizcaya Argentaria) is a multinational Spanish banking group, providing a wide range of financial services for both businesses and consumers.
BBVA is ranked as the second largest bank in Spain. As it’s headquartered in Madrid, BBVA mainly resides on Latin American countries. It also has a strong presence in southern Europe, and has expanded into the United States and some countries in Asia.
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In 2012, BBVA employed more than 115,000 people and served over 53 million customers in 32 countries with around 8,000 branches2. BBVA implements customercentric approach as its core business and positioning of the BBVA brand3. Not only BBVA focus on a strong customer orientation but also a dedicated innovation. 2. Innovation at BBVA
2.1 Core activities and principles
Over the last decade, BBVA has inclined more customer-centric and gave a lot of attention to innovation. In 2007, the BBVA innovation centre was established in Madrid, where many different innovative projects were born and passed through an experiment procedure, beginning from prototype phrase to testing process.
Following this, the 1
Chesbrough, H. 2003. Open Innovation: The New Imperative for Creating and Profiting from Technology. Cambridge, MA: Harvard Business School Press.
2
BBVA Group Highlights [online], BBVA, Available from: <
http://shareholdersandinvestors.bbva.com/TLBB/micros/bbva2012/en/Highlights/BBVAGroupHighlights.html> [2 October 2013] 3 BBVA Annual Report 2012 [online], BBVA, Available from:
[2 October 2013]
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outcomes are analyzed and valued before launching the innovation projects, which are formed under BBVA’s innovation and customer orientation approaches. It has been claimed that the following three main principles are extremely helpful to BBVA in the successful development of new services. (Ramis-Pujol and Dröege, 2011)4 1) Continuous customer orientation and expertise
• Start with the analysis of the customers (customer insight) 2) Proactive outward-looking
• Look for and welcome the ideas from the outside to the company • Start-up fairs and sponsor ideas competition
3) Teamwork and concurrent feedback loops for fast decisions on innovation project progress
• Good communication within team
• Each innovation project is reviewed and questioned weekly However, it is doubted that with these underlying principles how BBVA ensure that their lead from innovation is maintained.
2.2 Innovative Projects
According to BBVA innovation center, there are a number of continuous successions of innovations offering to their customers’ needs. Most of BBVA innovative projects were idea-led and technology-enabled. When BBVA considered its projects, it is apparent that those projects were driven from the unmet needs or customers’ needs that are not available on the market, which Von Hippel E. defined as “user-driven innovation”5 As Ramis-Pujol and Dröege (2011) studied innovation at BBVA, they found that BBVA developed a large number of new banking services within only two years.
They also examined some projects relevant to innovation practice (see table 1) that described how BBVA identified the market and developed these projects before launching to the market. After implementing, some projects were highly successful but some were not. Despite a lack of achievement in some projects, BBVA is still able to exploit the experience made within the projects and to share valuable knowledge to other innovative projects.
4
Ramis-Pujol J. and Dröege H., 2011. Case study of Innovation at BBVA. ESADE University. Von Hippel E. (20 August 2013), User-driven innovation [online], BBVA Innovation Center, Available from: [1 October 2013]
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Table 1: Some of the innovative projects in BBVA6
Projects
Type of Project
tu ceuntas
Online personal finance
management service
Partner
Strands.com
(24% acquisition)
TV casting show
Small IT firm
Partner operate
separately
Searching and networking web
for SMEs
Swendish design company
N/A
POK
tpresento
econta
Accounting service for SMEs
Virtual Doc
ATM
Stored Document Online
Study on customers’ use of
technology
ATM software and hardware
developments
econta & external expert
(70% acquisition)
Virtual Doc
(70% acquisition)
IDEO
(Signed contract)
ATM Manufacture
Involvement
Joint project team
Actively involved
Partner operate
separately
Internal expert get
involved
Instead of doing all processed itself, BBVA seeks partners or external experts such as the technologists outside of BBVA, who had experienced in this area, to help it embed the technology around its innovative ideas that BBVA wants to deliver to the markets. Although it has the partnering companies in their innovation, it has been argued that some of the BBVA innovative projects may seem to be outsourcing than open innovation. According to Belcourt M. (2006)7, “outsourcing refers to a contractual relationship for the provision of business services by an external provider”. The followings are the example for this argument:
1) “POK” - once BBVA had the idea to introduce TV casting show in order to get closer to younger target groups, BBVA hired a small IT firm to independently develop the social media technology and marketing for “POK” project. 2) ATM – the service was built in partnership with IDEO, the best-known product and service Design Company, by signed the contract. IDEO provided the detailed study of customer’s needs and observation of how people behaved at ATMs. 3) Tpresento, the yellow pages website for SMEs, BBVA selected the Swedish design company to provide a website design for this project.8.
6
Summarized from Ramis-Pujol J. and Dröege H., 2011. Case study of Innovation at BBVA. ESADE University. p.7-16. Belcourt M., 2006. Outsourcing – The Benefits and the Risks. Journal of Human Resource Management Review, 16(2), 269-279. 8
Ramis-Pujol J. and Dröege H., 2011. Case study of Innovation at BBVA. ESADE University. 7
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According that the small IT firm, IDEO and Swedish Design Company were paid to work for BBVA, it was probably evaluated that BBVA externalized those companies and these BBVA’s innovative projects look more like outsourcing than open innovation. Moreover, regarding a service differentiation that “provides prioritized service qualities to multiple classes of client requests” says Zhu H. et al., 2001)9, it can be seen that BBVA tried to differentiate their services related to innovation to serve their multiple customers (innovation shoppers). Although BBVA tried to make them look very different, the service itself is exactly the same. The example for this is the ATMs, BBVA differentiates the ways customer access to the bank but still provides core banking service to the customers.
2.3 Open innovation at BBVA
BBVA has embedded an open innovation as described above in their organization. They were aware that good ideas and expertise did not always reside inside the organization but the collaboration side by side with internal and external expertise. Chesbrough H. et al. (2006)10 founded that this practices “will extend to suppliers, customers, partners, third parties, and general community as a whole.” It is considered important that open innovation would relate to a degree of engagement between internal knowledge and external partners.
Chesbrough (2012)11 points out that there are two important kinds of an open innovation. The first one is “outside-in” open innovation, opening up the process of company’s innovation to many external inputs and contributions. In case of BBVA, it seeks out potential partners, who already had experience have experienced in new technologies, and then form a productive relationship with them. The example for this is Tu cuentas project, a unique service concept providing online money management. BBVA invested 24% acquisition in Strands.com (the innovative IT Company), relying on this company in order to develop and maintain an application of the personal finance analyzer.
9
Zhu H. et al., 2001. Demand-driven service differentiation in cluster-based network servers. In: INFOCOM 2001, ed. 20th Annual Joint Conference of the IEEE Computer and Communications Societies. Anchorage 22-26 April 2001. IEEE, 679 – 688, vol.2. 10
Chesbrough H et al. 2006. Open Innovation, Researching a New Paradigm. New York, NY: Oxford University Press, 1-12. 11
Chesbrough, H. 2012. Open Innovation. Research-Technology Management, July-August 2012, 20-27.
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The second kind of an open innovation is “inside-out”, which organisations are required to allow the unused ideas to flow outside the organisations for others to apply in their businesses. Chesbrough (2012) discovered while doing his research that Xerox traded their misfit or unsuccessful projects into the market. It also found that those “false negative” projects that did not provide benefit to the Xerox’s core business model might have
essentially more value if they could be commercialized through a different business model. Unlike Xerox, BBVA actively absorb external technology but they do not transfer unused projects to external partners.
The example of the organization that applied both outside-in and inside-out open innovation is Procter & Gamble, not only they embrace outside-in open innovation via its Connect+Develop approach12(the practice of tapping external intellectual property development to accelerate internal innovation) but also share their internal asset development and know-how to help others outside the company.
On the other hand, the antithesis of the open innovation is a close innovation, which “internal innovation activities lead to internally developed products and services that are then distributed by the firm.” (Chesbrough 2006, p.20). Some researchers (Lichtenthaler U, et al., 2011)13 mention about employee attitudes that a close innovation is characterized by high level of employee attitudes that would not like to acquire technology from external sources, and instead would like to emphasize on internal development of new technological knowledge.
They also would not like to transfer company’s technologies. The company that embedded with those attitudes would not pay particular attention to open innovation initiatives. Therefore, the negative attitude of acquiring external knowledge might impede the open innovation approach. In order to weight which approaches between the open and the close innovation applied to BBVA, how BBVA implemented implementation whether pure open or close innovation is needed to be considered thoroughly as follows. Regarding the BBVA’s innovative projects, it does not exactly acquire new technological knowledge from the 12
P&G Open Innovation (2013) What is Connect+Develop? [online], P&G, Available from: < http://www.pgconnectdevelop.com/home/pg_open_innovation.html> [7 October 2013] 13
Lichtenthealer U. et al., 2011. Is your company ready for open innovation?. Journal of MIT Sloan Management Review, 53 (1), 4548.
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outsiders or the outsiders only partly transferred the knowledge to them. BBVA builds relationship with external partners in order to strengthen and speed up their internal innovation process but they do not really gain the new knowledge and know-how from them. In some projects such as POK and tpresento, BBVA just paid money and assigned their partners to work for them. This leads to a low level of engagement between BBVA and partnering companies. In addition, there is a small evidence of the customer engagement in the innovation process be seen as another indication of the open innovation.
As mentioned earlier, BBVA intends to move forward to the open innovation and it has embedded the environment of the open innovation through their organization. It is likely that what BBVA has being done go beyond the close innovation. Therefore, it can be concluded that the innovation at BBVA has been a “slightly open innovation” approach but how could BBVA think about a system that was more open is still questionable.
3. Challenges in moving towards to an open innovation
Uncertainty in the future might lead to a number of managerial challenges. The followings are some potential dangers that BBVA might be aware of when keep moving towards to more open innovation approach.
3.1 Potential Dangers in the future
Centralising innovation
According to the innovation centre in Madrid, the customer insight department and all innovation projects are centrally manage within this centre. Although the centralisation brings BBVA the effectiveness of authority control and uniformity in action, BBVA should be aware of localised control of customer service and customer satisfaction. Successful launching new services in Madrid do not mean the success in anywhere else of the world. For better customer satisfaction, having localised innovation centres and synergies between customer insight and innovative department would enable better understanding of local customer needs. However, localisation might bring a higher cost to support their needs.
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High costs of investment
Although the more collaboration with external partners would be able to strengthen an open innovation, it also raises the costs of idea generation and expenses of more employee involvement. Increased investments are required to create a number of innovative projects. BBVA should consider implementing mechanisms for reducing the investment costs.
Intellectual property (IP)
As BBVA has launched many innovative projects, it is crucial that it has to focus on strategy that prevents the imitation from its competitors. BBVA may attempt to protect its innovations through patents, trademarks, copyrights or trade secrets. However, creating a barrier dependent on its unique skills should also be considered. The company’s belief in literatures regarding the open innovation framework This is a big danger of the company that believes in innovation literatures or theories. Some academics are still publishing the success cases of the innovation, sending the message that the implementation of the open innovation will be beneficial and bring more customers.
Then the company will be able to provide better services. It is suspected that those literatures might base on the research conducted via interviewing the existing customers by leading questions. Carlsson C. and Walden P.(2007)14 discovered that although the research on TV mobile showed the evidence that there would be a higher demand, the situation went wrong when the product was launched into the market and found that the demand was not actually there. So, it is important to consider the reliable of the literatures.
Employee’s attitudes
Since the management team has embedded open innovation environment in BBVA, it may seem that its employee’s attitudes would concur with both outside-in and inside-out open innovation approaches. However, there is a lack of an evidence to prove that most 14
Carlsson C. and Walden P., 2007. Mobile TV - To Live or Die by Content. In: HICSS 2007, ed. 40th Annual Hawaii International Conference, Waikoloa January 2007. Finland: System Science 2007, 1-9.
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or all of BBVA’s employees agree with those approaches, or they would have to accept it because they have to follow the management’s policy. They might not be willing to support the company approach. It is therefore important that the BBVA’s management needs to encourage all employees to be continuously innovative and to get involved in the open innovation, not only the innovation centre but all sections in the organisation.
3.2 More open innovation at BBVA
Launching a number of innovative projects, BBVA builds an international innovation network with many leading technology companies, academic institutions, and commercial organisations15. BBVA has to ensure that each of their partners is a bridge towards the inside and outside of the organisation. Moreover, in order to develop and speed up the pace of the open innovation in BBVA’s core business banking, BBVA may let the outsiders offer new technological knowledge or new innovation.
Then, do business with those innovation suppliers and acquire that knowledge into BBVA’s innovation processes. Both BBVA and the suppliers would more directly engage with their core business that they set off parallel with banking innovation. BBVA’s Mobile banking service called “Compass” 16. is best described as the high level of partnership engagement between BBVA and many mobile phone companies. BBVA does not know about technology on mobile phone.
Likewise, mobile phone companies do not know how doing banking service, but the intellectual afford defined the project and linked them to work together. This is the open innovation because they try to learn more details and understand each core business. This new service might be a differentiation but it does not change in fundamental of banking business service.
15
Ensor B. (9 November 2012), Innovation Lessons from BBVA [online], BENJAMIN ENSOR’s BLOG, Available from: http://blogs.forrester.com/benjamin_ensor/12-11-09-innovation_lessons_from_bbva [1 October 2013] 16
PRNewswire (7 August 2013), Mobile banking update allows BBVA Compass customers to pay people using text, email [online], Yahoo Finance , Available from: < http://finance.yahoo.com/news/mobile-banking-allows-bbva-compass-152200662.html> [7 October 2013]
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4. Conclusion
Although BBVA is claimed that it does not implement a fully open innovation, what BBVA has done by launching a number of innovative projects and increasing level of engagement of both outside-in and inside-out partners, might be proven that BBVA is ready to move forwards to a truly open innovation. However, outsourcing and service differentiation issues have been argued among the BBVA’s innovative projects. This might be led to a conclusion that BBVA has implemented a “slightly open innovation” approach. In addition, it is not to say that managing an open innovation approach is without challenges. BBVA should have to prepare possible strategies to cope with potentials risks that might stem from both internal and external factors.
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5. References
BBVA, 2012. BBVA Annual Report 2012 [online], BBVA, Available from: [2 October 2013]
BBVA, 2012. BBVA Group Highlights [online], BBVA, Available from: < http://shareholdersandinvestors.bbva.com/TLBB/micros/bbva2012/en/Highlights/BBVAGroupHighlight s.html> [2 October 2013]
Belcourt M., 2006. Outsourcing – The Benefits and the Risks. Journal of Human Resource Management Review, 16(2), 269-279.
Carlsson C. and Walden P., 2007. Mobile TV - To Live or Die by Content. In: HICSS 2007, ed. 40th Annual Hawaii International Conference, Waikoloa January 2007. Finland: System Science 2007, 1-9. Chesbrough, H. 2003. Open Innovation: The New Imperative for Creating and Profiting from Technology. Cambridge, MA: Harvard Business School Press.
Chesbrough, H. 2012. Open Innovation. Journal of Research-Technology Management, July-August 2012, 20-27.
Chesbrough H et al. 2006. Open Innovation, Researching a New Paradigm. New York, NY: Oxford University Press, 1-12.
Cloyd G. and Euchner J., 2012. Building Open Innovation at P&G. Journal of Journal of ResearchTechnology Management, July-August 2012, 14-19. Ensor B. (9 November 2012), Innovation Lessons from BBVA [online], BENJAMIN ENSOR’s BLOG, Available from: http://blogs.forrester.com/benjamin_ensor/12-11-09-innovation_lessons_from_bbva [1 October 2013]
Lichtenthealer U. et al., 2011. Is your company ready for open innovation?. Journal of MIT Sloan Management Review, 53 (1), 45-48.
PRNewswire (7 August 2013), Mobile banking update allows BBVA Compass customers to pay people using text, email [online], Yahoo Finance , Available from: < http://finance.yahoo.com/news/mobile-banking-allows-bbva-compass-152200662.html> [7 October 2013]
Von Hippel E. (20 August 2013), User-driven innovation [online], BBVA Innovation Center, Available from:< http://www.centrodeinnovacionbbva.com/en/news/26230-user-driven-innovation > [1 October 2013]
Ramis-Pujol J. and Dröege H., 2011. Case study of Innovation at BBVA. ESADE University. P&G Open Innovation (2013) What is Connect+Develop? [online], P&G, Available from: < http://www.pgconnectdevelop.com/home/pg_open_innovation.html> [7 October 2013] Zhu H. et al., 2001. Demand-driven service differentiation in cluster-based network servers. In: INFOCOM 2001, ed. 20th Annual Joint Conference of the IEEE Computer and Communications Societies. Anchorage 22-26 April 2001. IEEE, 679 – 688, vol.2.
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Bbva case study analysis. (2016, May 04). Retrieved from https://studymoose.com/bbva-case-study-analysis-essay
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