Turning a Vision Into a Reality

By Anna Maria Virzi  |  Posted 2004-06-08 Email Print this article Print
 
 
 
 
 
 
 

How Charles Schwab's CIO has reaped dividends from his team.

Technology is partly about looking ahead and seeing something dramatic that can be done before it's even created. And then making it happen with a large number of people involved with a lot of different moving parts.

You have to take a vision and turn it into products, starting with requirements, then a design and code. It's a backward-working process similar to decorating a house. I can look at a room and tell you that it's French country. If you said to me, "Make the room French country," I wouldn't have the faintest idea where to start.

At Charles Schwab Corp., we have smart people in business and technology who create offerings to better serve our clients. When they consider implementing new features or an entirely new offering, they ask: "What do we have to do to our systems to produce that? What does that actually mean?"

For example, we developed Schwab Equity Ratings, which gives our clients an independent opinion about stocks—which ones to sell and buy.

To do that, we built a computer model that looks at 3,000 stocks every week, including their fundamentals and underlying business. And the system assigns a rating from A to F, with "buys" rated at A and B, and "sells" at D and F.

We've been running that system for two years, and it has successfully predicted stocks that have done well and those that have not. In 2003, more than 200,000 households a month viewed Schwab Equity Ratings on schwab.com. The system also enables us to give consistent advice to customers instead of advice broker-by-broker. And it's considerably more cost-effective. It allows us to improve the client experience and enhance our advice offerings, and it has proved to be quite a success.

How did we do this? We found people who had developed that model, and we brought them into the firm.

It's one thing to build a model; it's another thing to run it for millions of clients. Our big job was making sure everything around that model would work well week after week on a rock-solid platform. We had to make sure that many inputs into that process, such as the market data, were correct and could be fed out to schwab.com and our investment counselors on a timely and effective basis.

Ensuring the accuracy of data in the ratings system is of paramount importance, and the application was designed to account for the automated checking and rechecking of data sets. Additional security was implemented, including ongoing procedures for auditing records, documenting the steps in daily processes and controlling how information gets fed into the system, or changed after it's in.

This, of course, is designed to ensure that ratings are fair, accurate and not subject to any distortions by individuals (well-meaning or not) or unexpected calculations.

Indeed, in this or any other project, there are clear turning points where people affected go from doing things one way to another. Before making a decision, I like to have as much context as possible. I read a lot. I listen to people. I put stuff out on the table and ask, "What do you think and why?" When you do all that preparation, the decision usually becomes very clear. I don't very often say, "OK, team: Here's what I've decided …." Because going through this process, the team reaches the conclusion.

Opening Schwab Bank followed this decision-making model. We got in a room, talked honestly about the pros and cons, and thought about the benefits from our clients' perspective. We had a big discussion about how much technology we'd build in-house and how much we'd buy from a vendor. We bought the right technology, put a technology team here at Schwab in charge, and met a pretty aggressive timeline that many thought was impossible. Now, one year after its launch, Schwab Bank has $3.6 billion in assets, so the timing seemed to work out pretty well on this one.

Communicating is about listening as much as talking.



 
 
 
 
Executive Editor
avirzi@ziffdavisenterprise.com
Anna Maria was assistant managing editor Forbes.com. She held the posts of news editor and executive editor at Internet World magazine and was city editor and Washington correspondent for the Connecticut Post, a daily newspaper in Bridgeport. Anna Maria has a B.A. from the University of Rhode Island.
 
 
 
 
 
 

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