Assessing Innovation readiness for Financial innovations in the pre-diffusion phase

While innovation has always been viewed as a way to create sustained competitive advantage, the need to innovate has never been more for the financial sector. The financial industry, especially the financial service industry has been dominated by traditional institutions: Banks, in the past. However, with the advent of the digital transformation era, the distinction between different industries hardly stands. Tech companies are challenging established financial firms through high tech financial products and services. This creates a highly competitive innovation environment for Banks to compete in. Innovation was not a high priority for banks previously, however now they see themselves fighting against technology companies on unfamiliar battlegrounds. To compete with technology companies, the financial industry is shifting its focus to products and services based on emerging breakthrough innovations. Innovations centers are being set up in organizations that experiment with several technologies simultaneously. This study is aimed to help innovation centers at financial organizations in their innovation efforts, more specifically in understanding when the innovations are ready. When several innovations are being developed in parallel, it is easy to lose sight of what qualifies as mature. Past literature, in the field of innovation management, has suggested Innovation readiness assessment as a method to understand the maturity/readiness of innovations. However, most of these studies have been fragmented, with no application in the financial sector. Based on these gaps this study is used to answer the research question “How can innovation centers at financial institutions evaluate the readiness of emerging technologies in the pre-diffusion phase?” Through an intensive literature review, four dimensions are identified as crucial to innovation readiness: Technology, Organization, Market, and Regulation. The Regulation dimension is later combined with the Market dimension to keep this study more generalizable. Based on these dimensions, an initial framework is developed combining factors from each of the four dimensions. The initial framework consists of 28 factors: Six technology factors, ten organization factors, and twelve market factors including factors for the regulatory aspect. The initial framework is later tested in a financial organization using three case studies. Each case study is considerably different from the other. These cases are investigated from a dyadic viewpoint, considering opinions from both technology and business actors in the organization. The data is collected via semi-structured interviews and is predominantly qualitative. Furthermore, Data is codified and analyzed using a Computer Assisted Qualitative Analysis Software (CAQDAS). The results from the analysis are presented in the form of individual case reports followed by a cross-case study of all distinguishing factors. The framework is readapted into a tool, based on the insights generated. Known as the Financial innovation readiness tool (Financial IRT), it delineates readiness factors into Pivotal, Indeterminate, and Differential. While Pivotal factors are highly relevant to innovation readiness, the Differential category accounts for factors with fluctuating relevance across cases. This tool is supplemented with a process for its application. The process allows innovation centers at financial centers to surface relevant readiness factors associated with an innovation and compare different innovations. As an addition to the existing decision-making process, the tool allows exploration and identification of potentially successful innovations. Prioritizing ideas allows time, effort, and investment to be directed towards projects with more chances of being a final product. Hence, with the use of the Financial IRT, the innovation process at financial organizations could be made more efficient. Although the results are quite encouraging, the generalizability of the tool is weak. The tool needs to be tested for its applicability across industries. Moreover, the tool is in no way definite in its application. The study was explorative in nature. There may exist other concepts that were not covered in this study. This opens the possibility for further investigation.Management of Technology (MoT