The evaluation of new business development projects in commercial banks

This thesis examines the management of new business development (NBD) projects in commercial banks, and focuses on the evaluation process. NBD consists of the development of new products to satisfy new customer needs. For firms operating in changing markets, and using changing technologies, this is of great importance in sustaining competitive advantage. Successful NBD results from the skilful selection and implementation of projects. Evaluation is an important feature of this process. The study was designed to achieve three broad aims. First, to describe the nature and influence of evaluation in NBD projects. Second, to classify projects according to differences in evaluation. Third, to test for associations between project success and failure, and the relative importance of internal and external evaluative criteria. The fieldwork consisted of ten case investigations of recent NBD projects in the Treasury divisions of six large commercial banks. The main findings were: The evaluation processes observed were predominantly unstructured and unsystematic. The use of evaluation was generally ad hoc, and neither in great depth, nor of great influence on the development process. This is due to the great uncertainties involved, and the relatively small investments in such projects. Project managers tend to make assumptions rather than systematic evaluations, and subsequently to make any necessary changes after development and launch. The evaluation process is typically selective rather than comprehensive, and judgmental rather than analytical. NBD projects can be classified according to the sophistication of the target customers and the degree of standardisation of the offering. Failed projects typically involved mismatch between these factors, due to poor evaluation. Limited support was found for the hypothesis that evaluation focusing heavily on external criteria leads to project success. A clear association was observed between a general lack of evaluation and failure. The need for further research is identified in the following areas: i) differences between the processes of developing new "products" and new "services"; ii) the theoretical distinction between new product development and new business development; iii) the nature of project evaluation and selection in other unstructured NBD contexts