Bank One’s was one of the most successful launches of an online bank, with an advertising blitz that attracted 50,000 customers in three months. It also represented a bold move by a traditional bank to enter internet-only banking. But a short time later, Wingspan ran into turbulence. Its CEO resigned and advertising slowed. In a presentation at Wharton, CIO William Wallace described the strategies that led to the rapid rise of Wingspan. In an interview, Forrester Research analyst James Punishill discusses some of the reasons for Wingspan’s later troubles.

Part 1: Wingspan’s Rapid Ascent

When Bank One, the Columbus, Ohio based banking giant, decided to build an internet bank, its large corporate structure and image were a liability. Executives knew they had to move quickly to outpace competitors who were racing to build their own online banking businesses. Company leaders also knew they had to break out of the corporate business model and brand to succeed. And with nearly a third of banking expected to migrate online by 2005, they couldn’t afford not to enter. "We knew it was important to establish the brand," said William Wallace, CIO of the company’s, speaking at a meeting of the Board of Wharton’s SEI Center for Advanced Studies in Management. "We felt there were a lot of other players that were going to launch something of significance this year. We wanted to be out in the marketplace with a real product before those other guys." was brought online in just 123 days, an independent company that was a direct attack on the business model of the existing firm. "You are attacking the moral fiber of the company," Wallace said. "We had to face that issue in launching Wingspan." But the opportunities were great and the risks of standing still even greater. "It was a chance to redefine the economic model, the fundamental unit price and unit cost of running a bank," Wallace said.

What were some of the keys to getting the business off the ground successfully? Among the issues Wallace highlighted were:

  • Separate organization: The new venture was envisioned as a start-up, even though it had the resources (and burdens) of being part of a large corporation. The new venture was set up as a separate organization and given the breathing room to take off in its own direction. "Bank One allowed five managers to go off and act like five guys in a garage, to be a startup," Wallace said. "We cannot be constrained by some of the existing thinking the large institution needs." They settled in an old train station in Wilmington, Delaware, gutted the inside and created the feel of a web-oriented company. Because the new business was a threat to the existing one, it required strong support from senior management to succeed. "We believed someone out there was going to do this," Wallace said. "Rather than let five guys in a garage cannibalize our business, we wanted to do this ourselves."
  • New brand image: The new company invested time and resources in developing a brand image for the new bank. As a pioneer in this new area, it wanted to build a strong share of mind. The company deliberately set up a separate brand, even though both Bank One and First USA, the leading credit card issuer that Bank One acquired in 1997, have a web presence. But the two other brands have very different images. Wallace said they selected "Wingspan" because it has a broad connotation that could be expanded beyond banking (as Amazon has done in moving beyond books). Company executives found, however, that they had to add the word "bank" to the site name to reassure potential customers that Wingspan was, in fact, a bank.
  • Concurrent engineering: The project was "a case study in concurrent engineering," Wallace said. The new company pulled together the technology, marketing and services in a very compressed schedule. It used partnerships and outsourcing to meet outrageous deadlines.
  • Using partners: The company selected partners that could "move at internet speed and meet the customer experience on the internet," Wallace said. It looked for partners who could be creative and put together the pieces. The company also sought "legoware" that could be plugged in and unplugged as needed. For example, the Wingspan site offers a common look and feel but parts of it are delivered by different companies. "You are solving a puzzle and have to know where all the pieces fit," Wallace said. "You also have to communicate your goals to the entire team of vendors so they can see where they fit in the process."
  • Focus on the customer: "The winners are going to be the people who really can redefine the customer experience," Wallace said. Banks force customers into "artificial thinking" and complex arrays of credit cards, loans and mortgages. "People who can put some simplicity back into customers’ lives will be the most successful on the web," he said. Even though he is CIO, Wallace doesn’t hesitate to say, "The business solutions come first, technology is secondary."
  • Focus on learning: In an environment with low cost of entry, advantages are fleeting. Continuous learning is what keeps the company ahead of rivals. "If we can test and learn faster than the other guys, we will be able to give customers the experiences they want," Wallace said.

Are customers ready for banking on the web? Some will never be, said Wallace, but rounds of mergers and acquisitions in banking have eroded loyalty. More mobile and wired workers often prefer an electronic connection. By 2005, an estimated 31% of banking will be online.

Do Bank One’s online businesses benefit from one another? Wallace noted that Bank One offered Wingspan customers free use of their ATMs, and the heads of the three divisions regularly share insights from their different businesses.

Part 2: Wings Clipped: A Cautionary Tale was a textbook example of how to build an online bank, but Bank One’s separate online banking division turned out not to be separate enough, according to James Punishill, an analyst at Forrester Research. As advertising slowed and CEO James Stewart and other key staff resigned from the project at the end of 1999, it revealed an underlying weakness in the structure and funding of the new online bank.

"Bank One did a lot of things right," Punishill said. "For a while Wingspan was a poster child for the practice we call ‘proactive destruction,’ being willing to undercut existing channels and organizations in anticipation of shifting customer demand." The company recognized that older Bank One customers would still want branches and tellers, but there was a separate market emerging for online-only customers. Bank One placed the new startup in its First USA division, which had expertise in direct marketing and didn’t think like a bank.

"Given that we now have two customer segments, you need two strategies," Punishill said. "It was a great move on their part." But the problem in his view is that the Wingspan budget was actually hidden inside First USA’s marketing budget and staffing was shared.

When First USA ran into its own financial problems, it had the ability to pull back on resources for the startup, and it did. "You need a separate subsidiary, separate employees and separate money," Punishill said. "This was by and large an organizational problem."

In contrast, when Procter & Gamble set up, its online beauty initiative, employees had to resign from P&G and take a job at the new startup. The budget was completely separate and the staff relocated from Cincinnati to Silicon Valley. "This way they are able, willing and eager to undercut the existing way of doing business."

What are the prospects for online banking? It is a rocky road. A study by CyberCitzen Finance found one-third of U.S. online bank customers discontinued their accounts during the previous 12 months. Punishill said large banks and other corporations have been skilled at creating "dot corp" presence on the Web–giving their existing customers online access through sites such as They face much greater challenges in creating true "dot com" companies that appeal to internet-only customers. "Banks don’t get it," he said. "They don’t get that it is different. It is not business as usual with new channels. It is a new way of doing business."