|
Charles Schwab: From a
Small Firm to the World's Leader
Charles Schwab pioneered seamless stock trading
on Internet in 1996. They went from a tiny firm to
the world's largest financial services company.
On their journey, first, they developed
criteria –
Charles Schwab's Guiding Principles – for
making fast decisions.
Second, they realized that they should
own their competitive advantage
to be able to bring financial products to the market faster than their
competitors. They did so, and proved their ability to innovate faster that
others. Finally, they managed to
institutionalize innovation.
By late 1994, Chuck Schwab, the firm's Founder
and Chairperson, and Dave Pottruck, President and co-CEO of the
company believed that online trading was going to become huge and created
the Project Hawk. Acting with lightning speed, Charles Schwab introduced
online trading service e.schwab to the market in May 1996 – within months of
conception. The company signed up 25,000 customers within two weeks – their
target for the full year. Being fast made paid off for Schwab. By the start
of 2000, Schwab had an average 25% market share, was handling one of four
stock trades in the United States, was receiving nearly 80 million hits on
pick days, had open up more than 3 million online accounts, and was doing
more than $10 billion weekly in e-commerce. In 1999, market capitalization
of Charles Schwab reached US$51 billion. On January 1, 2000 the market
capitalization of Charles Schwab surpassed that of Merrill Lynch, and Schwab
became the world's largest financial services company.1
3 Strategies of Market Leaders
Differentiating Between
Noble and Stupid Failure
David Pottruck, co-CEO of Charles
Schwab, says: "The idea that failure is okay is ridiculous. I am not going
to go around the company and reward someone for failing. But here at Schwab
we differentiate between noble failure and stupid failure."1
Charles Schwab has a set of
criteria for defining noble failure.
Noble failures
occur when:
-
you have a good plan and know
what you're doing, you've thought everything through carefully, and have
implemented with sufficient management discipline, that if you look back
in review, you'd conclude it was thoughtfully done
-
you have a reasonable
contingency plan to deal with any initial failure and the contingency
plan must have been implemented
-
you need to debrief yourself and
ask what you can learn from the experience that will lead your company
to be smarter next time.
Charles Schwab journals their
failures and lessons they've learned. They maintain also a display of
failed innovations and created a videotape for employee orientation. "When
celebration of noble failure becomes institutionalized, people within the
organization are more willing to
reassess
earlier decisions1" and take corrective measures.
The Jazz of Innovation: 11 Practice Tips
Customer-driven
Innovation
Dave Pottruck, co-CEO of Charles Schwab, says that
most of Schwab's
huge innovations have come from asking customers questions:
Charles Schwab
Timeline...
Creating Customer
Value...
Value Innovation...
Discovering
Opportunities...
Making Fast
Decisions...
Setting Guiding
Principles...
Charles Schwab's
Guiding Principles...
Changing Directions Based
On the Guiding Principles...
Owning Competitive
Advantage...
Introducing Innovative
No-transaction Fee Financial Services...
Venture Acquisitions by
Charles Schwab...
Forming Global Strategic
Alliances...
Leading Innovation...
Continuous Focus on
Innovation...
|
