Reflections on Capital One’s Acquisition of Adaptive Path

Rami Tabbah - October 10th, 2014

I started to follow Jesse James Garrett when he published "The Elements of User Experience" diagram in 2000. His concepts were revolutionary because they looked at the design as a layering exercise that bring structure and order at the time design was transitioning from a guideline and pattern rich Windows environment to a very unstructured Web which lacked these patterns and clear guidelines.

It was great addition to the user experience community when Garrett founded Adaptive Path in 2001 with a focus on building a better web. Later they went beyond the Web and focused on other aspects of user experience. Adaptive Path started at a time when user experience was mainly about usability research. Windows did not allow for creative work other than splash screens and web sites were basic. Adaptive Path used a structured web design process with a focus on the creative side in the form of Design Studio and that was a great contribution at the time. Since then, Adaptive Path grew and became a renowned UX consulting firm that helped businesses such as NPR, Flickr, Harvard Business Review, Twitter, Airbnb.

On October 2, 2014, Garrett announced that Capital One acquired Adaptive Path and wrote:
"Somebody came along who finally, truly, seemed to get it. A company with a great culture that shares and values our intellectual curiosity and design sensibilities, that wants us to continue doing great work inside their organization, but also continue helping others do great work too, by fostering dialogue and teaching what we have learned. And that somebody, remarkably, turned out to be Capital One.
I know, weird, right?

Believe me, no one here was more skeptical than I was. I simply could not imagine that a huge bank would be able to foster an environment of creativity in which we could truly flourish. But honestly, when it comes to truly human-centered thinking, Capital One is among the top tier of all the organizations I have worked with in 15 years of consulting."
 Garrett detailed why he finds Capital One a good match:
  1. Successful Approach: Garrett found Capital One to have "a particular mindset or approach to the work that seems to go hand-in-hand with success."
  2. They laid the groundwork: Capital One "already laid the groundwork. They’ve built sophisticated practices in digital product design, design thinking, and experience research and development that we can build on and cross-pollinate with our own practices."
  3. Good talent: "They’ve hired tremendously talented people – but more than talent, what they bring is that mindset."
  4. Culture of collaboration, iteration and experimentation: " They have a culture that favors collaboration and iteration. ... They want to try new things, both at the level of big strategic moves and at the level of experimenting with new tools and methods."
A large enterprise acquiring a user experience consulting firm is definitely a pivotal moment for experience design. It is not about one consultancy acquiring another to extend its services, it is about a client that got so convinced the UX services are important that he wanted to internalize AP’s best practices and use all the talent AP has permanently. That is the best indicator that Adaptive Path made it and this is the beginning of a new era for user experience. 

Kerry Bodine stressed in her blog on the big void Adaptive Path will be leaving, which may open the door for an invasion by European service design firms. But that is another discussion.

She wondered "how long will the honeymoon last" and gave a good example: "Accenture’s acquisition of the agency Fjord started out with similar declarations of love and rainbows, but cultural differences have made for a bumpy integration and grumbling employees (many of whom have already made their way out the door)." She warned Capital One: "You’ve got an amazing new asset that has the potential to change not only your organization, but the world. Don’t screw it up."

The concern is about the nature of experience designers and the free creative environment they require to excel and keep interest. Will Capital One be able to keep the spirit or will it break it like most big enterprises do? Will Adaptive Path designers find a sweet home or will they run away?

Let`s look at what prompted Capital One to make this move. I found interesting points in a couple of articles published by Dan Freed in The Street ("How Banks Are Trying to Become More LikeTech Companies" and Mary Winsniewski in American Banker ("Capital One Seeks CreativeSpark with Purchase of Design Firm"). It seems that there is increasing interest in tech-focused acquisitions among financial institutions and Capital One made several acquisitions in the tech field in recent years. The more timely and interesting is that Apple Pay and Google (GOOG) Wallet take these tech companies to the banking territory, and Capital One just launched its digital wallet application with Adaptive Path's help. 

What I am hearing is that if banks do not transform themselves, technology companies will do it for them, or instead of them ... This is not new. Technology transformed the music publishing industry and many other industries. Banking won`t be an exception.

Looking at the acquisition from this angle shows that Capital One is serious about innovation and change. It is worth mentioning that Capital One hired Dan Makoski as its vice president of design. Previously, Makoski worked for Google. This is not the first time a financial institution hired a VP for user experience. Fidelity Investments hired Tom Tullis as VP of User Experience Research before Adaptive Path was born. The difference here is the technology factor, not the user experience. Acquiring a company that understands how to design for new technologies is the real story here. User experience is very important but comes second to this ability to offer new technologies. 

I am sure that the good intentions exist at Capital One. However, my experience with big enterprises tells me that Adaptive Path designers are up for a rough ride. Working from within will limit Adaptive Path designers' influence on the bank. Being thought leaders and running conferences gave them not only visibility but influence that made it easier for clients to follow their recommendations. Inside the organization, they report to a senior person and everyone has to respect the hierarchy, not exceed limits and play by the rules. In this environment strategy and priorities change. Even AP’s management style will change and adapt and there is no guarantee the ideal conditions will last, even with a VP of design from Google. Adaptive Path designers risk loosing their mojo and may slowly become followers instead of leaders.

The real reason behind the acquisition is a technology catch-up driven by competitive market forces and this is worrisome unless they can orchestrate an organizational transformation to become a user centric organization. 
Let’s look at the arguments Garrett published.
  • The fact Capital One built "sophisticated practices in digital product design, design thinking, and experience research and development" is not enough. These practices seem to all live under the VP of Design umbrella. Is cross-pollinating these practices with Adaptive Path practices enough? The whole cross pollination will still live under the same umbrella...
  • Hiring good talent has never been enough. Many big enterprises have amazing talent and do not know how to manage it and use it effectively.
  • The culture of collaboration, iteration and experimentation exists in many big enterprises. The question is what is outcome? Does it lead to new products and services or projects that do not see the light or get distorted under the weight of technical constraints, time, budget and mis-management.
For this "integration" to succeed, Capital One needs to absorb Adaptive Path's philosophy. They need to put users first even as they design for new technology. Here I am referring to Garrett's definition of users. It takes an organizational design strategy that also focuses on call centers, internal applications and every touch point with internal and external users. This cultural shift needs to change development frameworks. Capital One will also need to hire a savvy VP of Information Technology possibly from Google as well to build an entrepreneurial spirit that can allow great design ideas to be transformed into new products. They will need advanced project management skills able to develop and launch projects fast without compromising quality. They will need strong product managers to manage lines of products from a technical perspective and not just from a banking perspective as we see in many banks. They will need to have highly skilled architects to select appropriate infrastructures that adapt to future changes and have skilled developers and analysts able to understand and integrate new technologies.

Ultimately, to make this transformation a success, Capital One needs to become a software company and excel at the game Google and Apple are playing.
I truly wish the best to Adaptive Path folks. I categorize Capital One's move a welcome step forward. Finally, I will be watching how other banks react. They should be feeling some heat.