Innovation Strategies

Patrick McConnell

Innovation is ever-present in financial markets, and some firms deliberately decide to pursue strategies of innovation for growth and profits, in particular technology innovation. This chapter describes a number of cases where firms, such as Egg Plc, failed to manage the risks in their innovative technology strategies. The chapter also considers the strategic risks taken in pursuing innovations in products and processes. However, the case studies on these two types of strategy are not, as in other cases, about a single firm but are at the industry level. In particular, the chapter describes the failed process whereby many banks were involved in misselling PPI products. Another case describes the change in market-wide processes that led to the FX benchmark manipulation scandal. While these are primarily “operational risks”, boards of major financial institutions were deficient in not setting up the frameworks to manage the risks in developing new products and processes.

INNOVATION STRATEGIES

Chapter 4 described four main types of strategy that are used to “actively” position a firm within the context of a generic strategy (Porter 1980), one of which was a so-called innovation