Innovation Strategy, Process and Performance in the Commercial Banking Industry

Abstract

Faced with rapidly changing markets and deregulations, most commercial banks are increasingly relying on new product development for growth and profitability. However, the success of a new product may depend on choosing the right mix of new product strategy and the development process. Extant literature has examined these two key factors individually rather than investigating their interrelationships. Likewise, the focus of the literature has been on the overall financial services rather than banking services alone. This study addresses these gaps in the literature by conducting a survey of 138 product managers of the major commercial banks and proposing that a bank’s choice of new product strategy and product development process are interrelated as are the impacts of those choices on new product performance. The findings reveal that the moderately innovative products are likely to be more successful than highly innovative and low innovative products. Idea generation and screening efforts, forming a cross-functional team and proficiency in commercialisation activities are essential to the success of a banking product.