Robo-advisors – prototyping for researching the unimaginable

Now available for download: a case study about conceptual prototyping from Michael. 

I caught up recently with my partner Michael Dolenko, head of Phase 5’s innovation group, expert in the financial industry and our resident gourmet chef, to find out what innovations the banking world is cooking up.

Steve: What's different about doing new product work in the banking industry?

Michael: One of the differences in recent years is how much disruptive change is going on. There's obvious stuff that you see on an everyday consumer level, payment systems like Apple Pay is an easy example, but there are also things like robo-advising, that your average consumer doesn't know much about.

Steve: Robo-advising, Robo-cop? 

Michael: There's probably that association. Robots of some sort. It's not a consumer friendly name.

So what happens when you're researching new-to-market products is that suddenly your respondent needs a lot more context to understand what you're thinking about.

It used to be, back in the day, the changes were less dramatic. Let's say we were doing product development research on a new credit card. We'd get our respondents recruited -- they're all 20-somethings with a certain income -- and I could basically show them on a sheet of paper or present to them in a few sentences what the new product was: "The interest rate’s going to be 12%. If you use it at these merchants you’ll get a special accelerator. The spending limit is X."

So you just basically had a list of product features that were written out. You gave them those features, and they immediately get what the product is so you can go on and have a more in-depth conversation about the details.

Steve: So it used to be more about incremental product change.

Michael: Exactly, as opposed to the disruptive change in robo-advising and other areas of fintech.

Steve: So how can disruptive product development work be improved?

Michael: One of the most effective things we've done is present respondents -- for example in this robo-advising category -- with a concept that's a little more interactive and a little more built out.  Working with the client, I had the UX team put together a concept that could show "This is how I might set up a portfolio" or "This is how they might get information about me and my time horizon." The respondents sat and interacted with this. It's not like there was any back end, and we weren't at all testing UX elements, like which button should go where -- it was purely conceptual. But because we had something that could demonstrate how robo-advising could work, we were able to get much richer feedback in a shorter amount of time.

Steve: Could the client have created the prototype instead of our UX team?

Michael: Sure and we've done that. In this case the client might have been able to do it but didn't have the bandwidth at the moment. But also, rapid conceptual prototyping is not a skill every organization has. There was another bank I remember -- we were helping them develop a tool that would allow small business customers to send invoices directly to their clients. Then using the online invoicing, you could do analytics like model cash flow and see if you were in danger of a cash crunch and so on.

Steve: Predictive modeling kinds of stuff? 

Michael: Yes, some predictive analytics. So we introduced this, and after some initial contextual interviews, it was clear that our respondents were having a hard time understanding the analytics. How did the invoicing link back to their accounts? How was this going to work and would it really help?

I suggested to the client that the analytics component might have legs but we would need to show it to respondents or they're not going to get it. They liked that idea and went to their IT department, who said it was going to cost $200,000 and take six months.

Steve: Yikes! I assume we beat that price by a reasonable margin?

Obviously that wasn't going to work. So I went to Arnie (Arnie Guha -- head of Phase 5's UX team) and said, hey, could your team build 8-10 screens that would show how this thing is going to work? He said sure, and what they built over the course of a few days was essentially a wireframe with some design elements in the back, but it was quite workable for understanding the proposed functionality at a conceptual level.

As soon as we put that model in front of respondents the lights went off. It was like "Oh, aha! That's how it's going to work." And they could give us much more useful feedback, saying "This is great" or "This is something I'd never use because I never know when people are going to pay me" and so on.

So bottom line, the prototyping approach is really useful when you're looking at something that's more net new, rather than expanding within an existing category.


Written by Steve Hansen

Steve Hansen, MBA, is the President of Phase 5 US. With almost 2 decades of experience in client-side marketing strategy, market research, and product management, Steve brings a client’s mindset and drive for actionable results to each project. He has extensive experience in capturing the view “from the outside” with a special focus on product and service innovation. Steve is based in Minneapolis, Minnesota.