Harry Chapman Principal Bay Area Consulting Group LLC Hchapman@baconsulting.net (415) 971-5746

1. Case Study No. 7 Wells Fargo Case Study Harry Chapman Principal Bay Area Consulting Group LLC Hchapman@baconsulting.net (415) 971-5746 15

2. Introduction to the Case • Wells Fargo Overview: • ~ $ 100 Billion is Assets (1997) • 1,900 retail branches; 4,400 ATMs • Early providers of electronic banking (started in 1989) • 20,000 e-banking customers in 1994 • December, 1994, Wells Fargo launches Wellsfargo.com and creates the On-Line Financial Services Division (OFS) • Early 1998 – 450,000 online customers

3. Stock Price for WFC Case Study Largest Shareholder is Berkshire Hathaway owning 411 million shares

4. Introduction to the Case The Status at the Beginning of the Project: • Recognized as a market leader • Riding the crest of the “Dot-com” boom • Interested in retaining its position as a market leader, but had far too many opportunities to pursue than resources available

5. What Was the Situation? • Internal/Cultural Perspective: • Innovative Culture • Cost Management – Decisions Driven Financially • On-Line Financial Services (OFS) Formed to Exploit On-Line Channel • External/Competitive Perspective: • Legislative Changes – New Ways to Compete • Mergers & Acquisitions - Enabled Economies of Scale • Technological Changes – Rapid Growth of Internet • Wells Fargo Rated “Best Bank”

6. Why Were OFS Customers Attractive? • Right Demographic: • Average Age 38: • Wealth Accumulation Mode • Heavy borrowers • High Median Household Income • Profitable: • Lower “churn” (they stayed with the bank longer) • Carried Higher Loan Balances • Low Cost Channel

7. What was OFS’s Situation? • Management Wanted to Remain the “Best” Online Bank but Recognized the Limitations of its Own Culture: • OFS is a Cost Center in a Culture Driven by Financial Metrics; Goal would be to Reduce Costs • Short-Term Decision Making Would Lead to the Wrong Long-Term Answer • Need an Objective Set of Measures Linked to OFS’s Strategy • ……and it Needed to be “Balanced”

8. What Were the Outcomes? • Common Language – Common Understanding • Cross-Functional View • “Buy-in” Across the Organization • Long-Term Perspective

9. Why Did They Choose the Balanced Scorecard? • Balanced – Across many functions • Objective • Measurement-based

10. “Add and Retain High Value and High Potential Value Customers” “Increase Revenue Per Customer” “Reduce Cost Per Customer” Maximize Profit Grow Revenue Financial Reduce Cost Per Customer for the Bank Increase Revenue Per Customer Add & Retain High Value and High Potential Value Customers Cross-Sell WB-Branded Products and Services Migrate Western Bank Customers to OFS Migrated New Grow Revenues from Non-Branded Sources Customer Value Proposition Basic Requirements Differentiators Increase Fees and Balances Migrate WB Mass Consumers to On-Line Increase Customers’ Use of On-Line • Time Savings • Security • Price • Reliability • Multiple Channels • Service • Features/Ease of Use • Products Grow Internal Revenues Increase Efficiency Within OFS Manage Attrition Develop and Implement Cost-Effective Marketing Plans, Sales Tools and Evaluation Techniques Including the Effective Use of Data Maximize Reliability Streamline Manual Processes Manage Alliance Costs Identify and Develop Third Party Relationships Develop and Implement Cost Effective Marketing Programs Internal Continue Leadership in Superior Product and Features Development Automate OCS Processes Develop Customer Self-Help Develop Customer Self-Service Develop Superior Service Capability Attract and Retain Key OFS Players and Staff in General Enhance OFS Bench Strength and Succession Planning Increase Manager Competency and Functional Technical Competency at All Levels Continue Development of OFS Organization and Culture Deploy Scorecard and Embed in OFS Learning & Growth Here is the “Strategy Map” for OFS

11. Questions • Do you think that the Balanced Scorecard approach useful for OFS? -- Why? • Are there other approaches that OFS could have used? – specifically…. • What are the reasons that this particular approach (based on the Balanced Scorecard) was so effective? • Is this a typical application of the Balanced Scorecard? • Is this case applicable to an IT organization?