Chase Home Equity: Innovation from the inside out

The home-equity loan industry is crowded with competitors, making it tough for mortgage companies to hang onto market share — much less grow revenue, according to Brad Connor, president of Chase Home Equity, who recently spoke at the 18th Annual Compete Through Service Symposium, sponsored by the Center for Services Leadership at the W. P. Carey School of Business. But helmed by Connor, Chase Home Equity has managed to grow market share and profits this year. How did he do it? With a creative strategy focusing on new services and products, an emphasis on employee-generated innovation, clever marketing and a whole-hearted plunge into high tech.

The home-equity loan industry is crowded with competitors, making it tough for mortgage companies to hang onto market share — much less grow revenue, according to Brad Connor, president of Chase Home Equity. With subprime loans sliding into default, the industry faces increasingly tough challenges in the short term, Connor added. Unfortunately, the accelerating foreclosure trend will worsen before reversing, with foreclosures peaking in mid- or late 2008.

But helmed by Connor, Chase Home Equity has managed to grow market share and profits this year. One of the largest home lenders in the country, his company offers more than $130 million in available credit to consumers. How did he do it? With a creative strategy focusing on new services and products, an emphasis on employee-generated innovation, clever marketing and a whole-hearted plunge into high tech.

Employee innovation

"This business is generic. A home loan is a home loan. But we can add value to our product and service, especially by using technology," Connor explained at the 18th Annual Compete Through Service Symposium. The symposium was sponsored by the Center for Services Leadership at the W. P. Carey School of Business. Surprisingly, the loan company's high-tech plan, focused on Internet transactions, includes only minimal outsourcing, an increasingly common bottom-line booster.

Instead, the company relies heavily on implementing products and services conceived of by its staff, from interns to senior management. An example of a staff-generated idea made reality is the Chase program offering a home equity line on a credit card, hugely popular with consumers. Another is the thirty-second loan approval conveyed via BlackBerry, an idea "so innovative that one manager thought it had come from outside the company, not from a fellow employee," Connor continued.

Sometimes a good idea gets short shrift, only to get revisited later. Connors offered this example: two years ago, an employee suggested using online chat functions to interact with customers. The suggestion went nowhere. "Then we found out that when a customer comes online, he or she is five times more likely to fill out an application if they chat. We almost missed this idea," he noted.

Then there is "New Additions," a no-interest loan for customers who want to adopt babies or children and need cash to fund the adoption process. Through its airline partner, the company has also arranged for discounted airfare to China, where many Americans are able to adopt children. Another business, Toys "R" Us, is considering some sort of partnership for Chase Home Equity customers who adopt.

Make innovation part of culture

Employee innovation works best when it's part of the company culture, rather than being a discrete function tied to a formal reward program, Connor said. "You've got to make it easy for people to participate, so we talk about it all the time. We say, 'give us your thoughts, your ideas.' We talk about other companies' innovations," he added.

One way of blending idea generation into a company's culture is to link it to employees' annual performance evaluations. At Chase Home Equity, the tie-in carries more impact for supervisors, then managers and finally, executives, since they are responsible for researching and implementing new or modified products and services.

While fostering innovation means encouraging employee input in an ongoing, informal way, the smart company puts guidelines in place to make sure ideas actually translate into revenue increases, Connor said. For instance, to move an innovative idea from lunchroom brainstorming to the funding stage, the employee must find an executive sponsor, which means securing the formal support of a senior vice president.

The logistics of innovation

Incorporating innovation into company culture usually requires other changes in the way an organization operates, he noted. "We used to waste time doing five-year business projections. Now, we focus on the more immediate future. That means writing a "mini-scope" document of one or two pages that lays out nine items required for an idea to pass 'the sniff test,'" Connor continued.

"We kill initiatives that require too much complicated thought." The next step is writing a "business case" or plan for the new idea, and figuring out what role high tech will play in its implementation. As a result, the IT staff plays an increasingly important role in planning and budgeting. Believe it or not, all this is the easy part of turning a good idea into a saleable product or service, Connor said.

Most organizations are a flop when it comes to innovation due to flawed implementations, he said. "Ninety percent of organizations fail due to implementation. Even here, we have plenty of ideas and struggle with the follow-through," he continued. To push ideas into implementation, Chase Home Equity developed a steering committee that studies and scores suggested innovations.

If a suggestion makes it through committee, a professional project manager is assigned to develop it, and finally the new product or service is launched. As Connor concluded, "with the right process, anyone can innovate." Chase Home Equity is owned by JPMorgan Chase, a financial services firm based in New York, N.Y., that operates in 50 countries and employs more than 170,000 people worldwide.

Bottom Line:

• Now that home prices have stopped spiraling up, the current mortgage foreclosure crisis was predictable. "It is as bad as the media says, and it will continue to worsen, peaking in mid- to late 2008," Connor said. "We learn more about how to deal with this every day, and we have to act on that. We're trying to learn, rather than run and hide."
• Consumers can fill out an online application for a Chase Home Equity loan or line of credit in approximately 15 minutes, and get an answer within 90 seconds. Other consumer-pleasing online tools include calculators to figure out payments and terms on debt consolidation or an auto loan, as well as pages to predict tax savings or payoffs.
• In addition to home loans, credit cards and other consumer financial services, JPMorgan Chase deals in investment, small business and commercial banking, financial transaction processing, asset management and private equity.