Innovation Processes and the Perceived Role of the Chief Executive Officer in the Banking Industry

Abstract

The research was undertaken to establish innovation processes and the perceived role of the Chief Executive Officer in the banking industry. The thrust of the study was to find out whether the CEO seek to encourage innovation, factors influencing innovation processes and the main barriers to bring innovation to market. To gain insight into this proposition, primary data was collected using survey design from two classes of respondents in each of the 40 clearing banks; the Chief Executive Officer (CEO) and Business Development Manager (BDM). Factors that influence innovation such as bank objectives and strengths (both core and distinctive) were also investigated. Fifty-five percent of the BDMs and 65 percent of CEOs responded positively. The results were analyzed by use of descriptive statistics, while t-test was used to gauge perception. Sixty-five percent of the CEOs and 50 percent of the BDMs perceive the CEO as a facilitator of innovation process to realize value. Fifty-nine percent of the cases indicated that the CEO is responsible for driving innovations, whereas in 50 percent of the cases, the responsibility was on cross-functional committees. Thirty-nine percent of the CEOs and 50 percent of the BDM consider innovation as the most important factor in achieving competitive advantage, yet 36 percent of the cases indicated that they were only able to commercialize less than 20 percent of the promising ideas. Good human resource base, expansive network and technology capability are considered distinctive competencies among the Banks. Innovation is encouraged within the organizational setup to the extent that in 59 percent of the cases, innovation formed part of the employees' assessment program. But a number of constraints were identified as limiting efforts to bring good ideas to market. These include budgetary constraints, resistance to change, insufficient number of people who can be freed and unclear strategy and often conflicting priorities. Despite the resource and capability limitations, less than 10 percent of the cases indicated that they always used external resources to bring innovation to market. -....• iii To accelerate value realization, the research recommends Disruptive Growth Engine: First, the CEOs will have to create a strong innovation context setting a clear innovation agenda with tangible goals and promoting an innovation culture, build performance management and learning infrastructure to track the effectiveness of innovation investments and diffuse them effectively through the organization. The CEOs should restore confidence through empowerment - replacing denial with dialogue, blame with respect, isolation with collaboration and helplessness with opportunities for initiative to create a winner's attitude in people, even before victories. Secondly, there is need to use external resources in general and outsourcing to augment resources and accelerate value creation, free up management to focus on key aspects and to tap into economies of scale from shared infrastructure and to flexibly scale operations to add muscle to innovation execution capability. Though high resistance was displayed by the respondents in data collection, an important area open to further research is to evaluate the extent of outsourcing of innovations among the banks and the level of innovations that are commercialized to value by relying on internal resources compared to outsourcing.