Blizzards and the Birth of the ATM

March 31, 2008  

“Build it and they will come.” We hear that mantra a lot. But with innovation, it is often more like, “Solve a pain and they will come.” The ultimate success of the automated teller machine (ATM) is a great example of this.

The other night I was having dinner with someone who in the mid-1970’s worked with Citibank, the second largest bank at the time. He shared with me the story of the birth of the ATM, at least from his perspective.

In 1977, after investing hundreds of millions of dollars in ATM technology research and development, Citibank decided to install machines across all of New York City. But at first, they were not very popular. The technology was confusing to first-time users, the machines were not always accurate (they sometimes dispensed the wrong amount of money), and they were impersonal. I was told that customers who used ATM machines were so frustrated that many closed their accounts.

The ATM may never have been an instant hit if it weren’t for a natural disaster.

January 1978 will always be remembered for a blizzard that dumped as much as 4 feet of snow in the Northeast. In New York City, nearly 2 feet of snow brought the city to a halt. Banks didn’t open. Instead, people got their money from supermarkets. But most of those quickly ran out of money.

This created a massive “pain.”

Where did people turn? The ATMs. It is estimated that during the storms, use of the machines increased by over 20%. Soon after, Citibank started running TV ads showing people trudging through the snow drifts in New York City. That’s when the company introduced their wildly popular slogan, “The Citi Never Sleeps.” This was the real birth of the automated teller machine.

I found an interesting Fortune article that corroborates his story. The article claims that by 1981, Citibank’s market share of New York deposits had doubled. A lot of this growth could be attributed to the ATM.

This story illustrates an innovators dilemma. Brilliant innovations are not necessarily taken up by the masses. Some ideas just need time to incubate and gain acceptance. But can your business survive long enough to see the success? Too many ideas, like Webvan, could not endure the incubation period. Sometimes your innovations need a little boost.

As I have pointed out in previous blog entries, people take massive risks to eliminate their pains, but play is safe when it comes to adding convenience. ATMs were primarily about convenience. What did it take for them to become a success? A pain caused by a natural disaster.

Are your new ideas solving a pain? Or are they just a nice to have? If they are just a convenience, what can you do to create a pain – without having to rely on a natural disaster?

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6 Responses to “Blizzards and the Birth of the ATM”

  1. Jon Casher on April 2nd, 2008 7:28 am

    Very accurate except that the blizzard occurred in February.

  2. Logical, Emotional, and Creative Thinking | Stephen Shapiro on Innovation, Creativity, Goals & Performance on June 11th, 2008 11:02 am

    [...] We often make decisions based on emotion rather than logic. Especially in times of crisis (like our current financial situation), we choose options that address our “pains.” [...]

  3. 7 Ways Innovation Can Recession-Proof Your Business | Business Innovation Speaker and Consultant Stephen Shapiro on October 23rd, 2008 9:14 am

    [...] is more powerful…during any economic condition.  You may also be interested to learn why the ATM machine was headed for failure…until it was seen as solving a specific [...]

  4. Gas Guzzlers Top Selling Cars | Business Innovation Speaker and Consultant Stephen Shapiro on December 20th, 2008 3:48 pm

    [...] also plays nicely into my research on pains versus gains. The premise is that people take massive risks to eliminate their pains/losses yet will play it [...]

  5. Pitchmen, Pain and Positioning | Business Innovation Speaker and Consultant Stephen Shapiro on April 27th, 2009 10:16 am

    [...] I discuss the need to solve a pain extensively in my previous articles, including one on why a blizzard was the catalyst for the success of the ATM and why the best selling cars are gas [...]

  6. The Walk More, Wait Less Innovation | Business Innovation Speaker and Consultant Stephen Shapiro on August 20th, 2012 7:27 am

    [...] also wrote an article on why a blizzard was the key to the ATM’s success: although people were not interested in the convenience of cash machines, when a blizzard prevented [...]