DOCSLIB.ORG

Digital Innovation in Retail Banking Sector | Accenture

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Digital Innovation in Retail Banking Sector | Accenture GET COMFORTABLE OUTSIDE YOUR COMFORT ZONE RETAIL BANKS | Well-prepared for Digital Innovation Retail banks consider digital capabilities foundational to their competitiveness—and therefore their success. As fintech firms, online-only banks, and non-financial platform companies move into this segment of the financial services industry, retail banks are making technology a major strategic focus: according to our latest research, 87% have a formal, long-term plan for digital innovation. Accenture and Oxford Economics surveyed Banks understand the importance of 90 technology executives in the financial overcoming those obstacles, as they keenly services sector, including a statistically feel the pressure from new rivals and shifting significant sample from the retail banking consumer expectations. Two-thirds of survey segment. Our survey results show that respondents say that within five years, for banks, digital transformation isn’t consumers will do most of their saving, just a matter of improving efficiency or investing, and borrowing online, through controlling costs. Retail bank executives companies like Amazon.com, Inc., Google expect technology to accelerate their LLC, Venmo® (PayPal, Inc.), Earnest LLC, company’s growth. Among the key findings: and SoFi (Social Finance, Inc.). Falling behind on the technology curve is not an option. • 43% of retail bank executives expect their technology investments to improve “Customers want real-time information, customer loyalty—critical in an industry and they expect us to come to them that’s all about asset-gathering. anywhere. So we want to make sure we’re building services that allow the customer • A third of banks think technology will to get all the capabilities we have to offer boost their market share. in a seamless way,” says Scott Dillon, chief • More than a quarter (27%) expect technology officer at Wells Fargo & Co., one it to create new revenue streams. of the executives interviewed for this study. But retail banks face hurdles in implementing Our survey results suggest retail banks are their ambitious digital plans. More than half working to meet these higher consumer (53%) worry that upgrading their technology expectations in an industry where change systems will disrupt daily business activities. comes slowly. Harnessing digital innovation Other pain points include regulatory to boost customer loyalty, without disrupting concerns, a siloed IT function, and lack day-to-day business activities, presents of change management expertise. a challenge. But to remain competitive, retail banks have little choice. 2 RETAIL BANKS THE GROWTH GOAL ‘Sticky’ Customers The financial services industry has moved beyond viewing technology as primarily a means to cut costs. Asked to name their top three goals for The focus on AI makes strategic sense. digital innovation, 43% of retail bank Smart technology, which can personalize a executives say they expect their investments music playlist or fill a gourmet’s refrigerator, to improve customer loyalty; 33% think is proving to be a powerful force in retail technology will increase market share; and banking. Indeed, 77% of bank respondents 30% think it will improve employee retention think that in five years, virtual assistants* (Figure 1). These results suggest banks will substantially handle more than half are prioritizing the right mix of objectives of customer interactions. for their technology investments— In anticipation of that sea change in deeper customer loyalty and growing customer relationships, banks are market share are key to competitiveness, devoting significant resources to digital and to maintain growth, employees transformation. As we have noted, nearly need to be engaged and committed. nine in 10 respondents have a coherent Banks have already seen a payoff from their strategy for technology innovation across technology investments. For example, 86% their entire business. In addition, 80% of respondents investing in data analytics have developed metrics that they apply say these tools have been critically important consistently to monitor the value of their in helping them reach their goals. In fact, technology investments, and two-thirds a majority say their company is getting the maintain an in-house team dedicated to most bang out of foundational technologies digital innovation. These results suggest like data analytics (63%) and cloud most retail banks aren’t just throwing capabilities that improve efficiency (53%). money at the latest trendy technology. They are carefully measuring how digital But banks see their technology needs transformation is moving the bottom line. evolving, and know that cloud and data analytics are key enablers of next- Nearly half of retail banks expect their generation tools like artificial intelligence technology investments to improve (AI) and machine learning. More than half customer loyalty, and a third hope for (53%) think that in three years, AI-based increased market share. These results technologies to improve operations will align with previous Accenture research have the biggest impact on their bank, and into customer loyalty. 47% say the same about client-facing AI. * To find out more on the potential of responsible AI please see: https://www.accenture.com/ t20180319T114329Z__w__/gr-en/_acnmedia/PDF-74/Accenture-Realising-Economic-Societal-Potential- Responsible-Ai-Europe.pdf, Realising the Economic and Societal Potential of Responsible AI in Europe. Well-prepared for Digital Innovation 3 Figure 1: Retail banks expect technology to boost customer loyalty Thinking of the technologies you are investing in today, how do you expect those technologies to improve your company’s competitiveness? Retail banking respondents, top-three ranked responses. Imrove customer loyalty 43% Increase maret share 33% Imrove emloyee retention 3% Create new revenue streams 27% Imrove IT security 27% Protect current revenue streams 23% Enhance enterrise rofitaility 23% Reduce oerational costs 23% Comete with fintech 23% insurtech startus Reduce cost of customer 2% acuisition Reduce systems downtime 17% (lanned and unlanned) Increase technology scalaility 1% 4 RETAIL BANKS BUILDING THE FOUNDATION FOR TOMORROW’S PLATFORMS Our survey data suggest that retail banks are laying the foundations for long-term digital transformation. The sequential approach is a prudent one And in three years, 43% of retail banks in this heavily regulated industry: banks see themselves investing heavily in should extricate themselves gradually operational and customer-facing AI. from legacy systems, make sure they are Conversely, the percentage of banks getting strong value from proven tools investing in cloud-based technologies like cloud computing, then strategically to generate business value looks set to bring emerging technologies like artificial drop significantly, suggesting that by intelligence and agile development 2021, most retail banks will be using into their digital mix. For many, this is cloud as a core enabling technology a tall order. More than half of our retail supporting more advanced digital tools. bank respondents say updating their Banks expect technology’s impact to grow technology without disrupting day-to-day in all areas of their business. For example, business activities is a major challenge. while only 33% of survey respondents say Wells Fargo’s Mr. Dillon is levelheaded about technology is having a significant effect the challenges banks face. “Old processes on their home mortgage line of business don’t work in the new way,” he says. “You (LOB) today, that percentage more than might have four things that helped in doubles, to 70%, when respondents the legacy environment in the past, but envision their mortgage business three now a platform can transform those four years from now. And 77% of retail bank things into one. That takes a lot of rigor. respondents say technology will have a It’s not going to happen overnight, and significant impact on their commercial it’s where we see a lot of our peers fail.” lending business in three years. According to our survey, retail banks are using increasingly sophisticated tools to reach their goals (Figure 2). Their current and planned investments reflect this technology continuum. Today, 47% of banks say they are investing heavily in customer-facing blockchain. That percentage drops to 13% in three years— perhaps because by then, respondents expect to have fully integrated these capabilities into their business. Well-prepared for Digital Innovation 5 Figure 2: Technology investments move from foundational to cutting-edge Please indicate which technologies you are investing in or plan to invest in significantly. Retail banking respondents. AIased technologies 23% to imrove oerational rocesses 43% Cloudased technologies 27% to imrove oerational efficiency 23% Customerfacing 47% locchain 13% Cloudased technologies 47% to generate usiness value 13% Data analytics 23% 17% AIased technologies 17% to imrove clientfacing rocesses 43% Internal locchain 17% alications 33% Agile develoment 13% 3% We are not investing or 7% lanning to invest in any of these technologies 3% Investing today Plan to invest in three years “We want to make sure we’re building services that allow the customer to get all the capabilities we have to offer in a seamless way.” Scott Dillon, Chief Technology Officer, Wells Fargo & Co. 6 RETAIL BANKS VAULTING THE HURDLES All financial services providers operate within a tight regulatory framework. Retail banks can ill afford to miss a compliance
Load more

Recommended publications
  • Review of Innovation Practices in Small Manufacturing Companies
    Review of Innovation Practices in Small Manufacturing Companies Anthony Warren and Gerald Susman Smeal College of Business The Pennsylvania State University With the assistance of Jonathan Butz Anupam Jaiswal Prashant Jhaveri Tolga Sakman Prepared for National Institute of Standards and Technology United States Department of Commerce Table of Contents Executive Summary......................................................................................................................5 1. Background..........................................................................................................................9 2. Definition of Innovation As Applied to This Project.........................................................14 3. Models of Innovation.........................................................................................................15 4. Taxonomy Derived by Testing Factors Related to Innovation Success ............................17 4.1 Development of Primary Categories and Key Factors .............................................17 4.2 Research Methodology .............................................................................................21 4.3 Results.......................................................................................................................22 5. Support for Factors Included in the Empirically Derived Taxonomy ...............................27 5.1 Manufacturing OR Service? .....................................................................................27 5.2 The Role
    [Show full text]
  • Microscope Innovation Issue Fall 2020
    Masks • COVID-19 Testing • PAPR Fall 2020 CHIhealth.com The Innovation Issue “Armor” invention protects test providers 3D printing boosts PPE supplies CHI Health Physician Journal WHAT’S INSIDE Vol. 4, Issue 1 – Fall 2020 microscope is a journal published by CHI Health Marketing and Communications. Content from the journal may be found at CHIhealth.com/microscope. SUPPORTING COMMUNITIES Marketing and Communications Tina Ames Division Vice President Making High-Quality Masks 2 for the Masses Public Relations Mary Williams CHI Health took a proactive approach to protecting the community by Division Director creating and handing out thousands of reusable facemasks which were tested to ensure they were just as effective after being washed. Editorial Team Sonja Carberry Editor TACKLING CHALLENGES Julie Lingbloom Graphic Designer 3D Printing Team Helps Keep Taylor Barth Writer/Associate Editor 4 PAPRs in Use Jami Crawford Writer/Associate Editor When parts of Powered Air Purifying Respirators (PAPRS) were breaking, Anissa Paitz and reordering proved nearly impossible, a team of creators stepped in with a Writer/Associate Editor workable prototype that could be easily produced. Photography SHARING RESOURCES Andrew Jackson Grassroots Effort Helps Shield 6 Nebraska from COVID-19 About CHI Health When community group PPE for NE decided to make face shields for health care providers, CHI Health supplied 12,000 PVC sheets for shields and CHI Health is a regional health network headquartered in Omaha, Nebraska. The 119 kg of filament to support their efforts. combined organization consists of 14 hospitals, two stand-alone behavioral health facilities, more than 150 employed physician ADVANCING CAPABILITIES practice locations and more than 12,000 employees in Nebraska and southwestern Iowa.
    [Show full text]
  • The Relationship Between Innovation and Tourism: the Case of Smart Tourism
    International Journal of Applied Engineering Research ISSN 0973-4562 Volume 12, Number 23 (2017) pp. 13861-13867 © Research India Publications. http://www.ripublication.com The Relationship between Innovation and Tourism: The Case of Smart Tourism Dr. Demet Tüzünkan Assistant Professor Woosong College Sol International Hotel & Foodservice Department. 171, Dongdaejeon-ro, Dong-gu, Daejeon, Korea, 34606. 0000-0003-0440-294X Abstract Innovation can be an idea, practice, process, or product that turns a problem-solving idea into practice (Ottenbacher and Innovation, derived from the Latin word "innovatus", means Gnoth, 2005: 206). Indeed, Drucker considers innovation as to turn an idea into a product that can be sold or developed an opportunity (Sipe and Testa, 2009: 2). Therefore, (goods or services) (TÜSİAD, 2003:53). Innovation means to innovation is not just a concept for concrete products, but also start using new methods in the social, cultural and for businesses that provide services to customers, such as administrative environment and it is covered with words such restaurant or hotel management. as renovation or renewal. However, the meaning of innovation is too broad to be expressed in a single word. According to the In today's increasingly competitive environment, scientists, Oslo Guide, innovation is the implementation of a new or researchers and practitioners focus on the necessity and significantly improved product (good or service), or process, a importance of innovation to achieve sustainable competitive new marketing method, or a new organizational method in advantage and focus on improving products, processes, business practices, workplace organization or external techniques or procedures and constantly changing their relations and thus transforming it into economic and social managerial understandings (Oerlemans, Buys and Pretorius, benefits (Demirkaya ve Zengin, 2014:107).
    [Show full text]
  • Strategic Innovation in Tourism. a Conceptual and Review Approach
    International Journal of Research in Tourism and Hospitality (IJRTH) Volume 2, Issue 4, 2016, PP 5-10 ISSN 2455-0043 http://dx.doi.org/10.20431/2455-0043.0204002 www.arcjournals.org Strategic Innovation in Tourism. A Conceptual and Review Approach Almaz Sandybayev Faculty Member, Business Administration Department, Abu Dhabi Men’s College, Higher Colleges of Technology, UAE Abstract: Tourism is one of the fastest growing and promising areas of management with a high economic and social importance for the economy of many countries. Current conditions of tough competition in the tourist market, economic and political instability in many regions, the fast-growing needs and demands of tourists are proposing a new challenge of transition to an innovative path of tourism development industry. The article discusses the issues of strategic innovative activity in the sphere of tourism and presents the main areas of innovation in the tourism sector, as well as factors affecting the innovative development of tourism. According to the author, the number of factors underlying features of innovative activity in the sphere of tourism includes specific properties of the tourism product, producers and consumers of tourism services. The purpose of the article is to describe the principles and basic requirements for the management system of innovation in tourism in the macro- and microeconomic levels. Keywords: tourism, innovation, innovation in tourism, management. 1. INTRODUCTION Innovation is considered as a major source of competitive advantage and economic growth (Porter and Ketels, 2003). Innovation is a set of scientific, technological, organizational, financial and commercial activities aimed at commercialization of existing knowledge, technologies and equipment.
    [Show full text]
  • Electric Power Grid Modernization Trends, Challenges, and Opportunities
    Electric Power Grid Modernization Trends, Challenges, and Opportunities Michael I. Henderson, Damir Novosel, and Mariesa L. Crow November 2017. This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 United States License. Background The traditional electric power grid connected large central generating stations through a high- voltage (HV) transmission system to a distribution system that directly fed customer demand. Generating stations consisted primarily of steam stations that used fossil fuels and hydro turbines that turned high inertia turbines to produce electricity. The transmission system grew from local and regional grids into a large interconnected network that was managed by coordinated operating and planning procedures. Peak demand and energy consumption grew at predictable rates, and technology evolved in a relatively well-defined operational and regulatory environment. Ove the last hundred years, there have been considerable technological advances for the bulk power grid. The power grid has been continually updated with new technologies including increased efficient and environmentally friendly generating sources higher voltage equipment power electronics in the form of HV direct current (HVdc) and flexible alternating current transmission systems (FACTS) advancements in computerized monitoring, protection, control, and grid management techniques for planning, real-time operations, and maintenance methods of demand response and energy-efficient load management. The rate of change in the electric power industry continues to accelerate annually. Drivers for Change Public policies, economics, and technological innovations are driving the rapid rate of change in the electric power system. The power system advances toward the goal of supplying reliable electricity from increasingly clean and inexpensive resources. The electrical power system has transitioned to the new two-way power flow system with a fast rate and continues to move forward (Figure 1).
    [Show full text]
  • Mckinsey on Semiconductors
    McKinsey on Semiconductors Creating value, pursuing innovation, and optimizing operations Number 7, October 2019 McKinsey on Semiconductors is Editorial Board: McKinsey Practice Publications written by experts and practitioners Ondrej Burkacky, Peter Kenevan, in McKinsey & Company’s Abhijit Mahindroo Editor in Chief: Semiconductors Practice along with Lucia Rahilly other McKinsey colleagues. Editor: Eileen Hannigan Executive Editors: To send comments or request Art Direction and Design: Michael T. Borruso, copies, email us: Leff Communications Bill Javetski, McKinsey_on_ Semiconductors@ Mark Staples McKinsey.com. Data Visualization: Richard Johnson, Copyright © 2019 McKinsey & Cover image: Jonathon Rivait Company. All rights reserved. © scanrail/Getty Images Managing Editors: This publication is not intended to Heather Byer, Venetia Simcock be used as the basis for trading in the shares of any company or for Editorial Production: undertaking any other complex or Elizabeth Brown, Roger Draper, significant financial transaction Gwyn Herbein, Pamela Norton, without consulting appropriate Katya Petriwsky, Charmaine Rice, professional advisers. John C. Sanchez, Dana Sand, Sneha Vats, Pooja Yadav, Belinda Yu No part of this publication may be copied or redistributed in any form without the prior written consent of McKinsey & Company. Table of contents What’s next for semiconductor How will changes in the 3 profits and value creation? 47 automotive-component Semiconductor profits have been market affect semiconductor strong over the past few years. companies? Could recent changes within the The rise of domain control units industry stall their progress? (DCUs) will open new opportunities for semiconductor companies. Artificial-intelligence hardware: Right product, right time, 16 New opportunities for 50 right location: Quantifying the semiconductor companies semiconductor supply chain Artificial intelligence is opening Problems along the the best opportunities for semiconductor supply chain semiconductor companies in are difficult to diagnose.
    [Show full text]
  • The Product Innovation Engineering Program and International Collaboration
    AC 2009-1134: THE PRODUCT INNOVATION ENGINEERING PROGRAM AND INTERNATIONAL COLLABORATION Martin Grimheden, Royal Institute of Technology Page 14.1243.1 Page © American Society for Engineering Education, 2009 The Product Innovation Engineering Program and International Collaboration Abstract This article summarizes efforts undertaken within the Swedish Product Innovation Engineering program (PIEp), in the area of education for product innovation. A key aspect of the program is to create a systematic change in higher engineering education in product development, to move toward a focus on innovative product development, where entrepreneurship thrives and student ideas are brought to reality. Examples include the introduction of new undergraduate and graduate courses in innovation engineering, close integration between project courses offered at PIEp partner universities, joint research projects, and workshops that allow entrepreneurs and companies to better utilize student ideas and projects. During the first years of PIEp, in the build-up phase, a large effort has been placed on creating an international network of ‘innovation friends’. The founders strongly believe that the ‘wheel should not be invented again – rather that there is an obligation to search for, find, and gather all relevant actors within this field, on a global arena. Within the rather limited network of partners and friends established this far, several common interest areas have been explored, including activities such as university-spanning workshops and collaborative projects. Introduction – The Product Innovation Engineering Program, PIEp The Product Innovation Engineering program (PIEp) is a Swedish national research and development program with the purpose of enhancing product innovation capability within Swedish universities and companies. PIEp was launched in late 2006, with governmental funding, 1 as the Product Innovation Engineering Program, PIEp.
    [Show full text]
  • Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing
    White Paper Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing In collaboration with McKinsey & Company January 2019 World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 Email: [email protected] www.weforum.org This white paper has been published by the World Economic Forum as a contribution to a project, © 2019 World Economic Forum. All rights insight area or interaction. The findings, interpretations and conclusions expressed herein are a re- reserved. No part of this publication may be sult of a collaborative process facilitated and endorsed by the World Economic Forum, but whose reproduced or transmitted in any form or by any results do not necessarily represent the views of the World Economic Forum, nor the entirety of its means, including photocopying and recording, or Members, Partners or other stakeholders. by any information storage and retrieval system. Contents Foreword 5 Executive summary 6 1. Lighthouses: Sites Embracing the Megatrends of the Fourth Industrial Revolution 8 Seeing the light: A radical leap forward for Fourth Industrial Revolution front runners 8 Identifying lighthouses 8 2. Overview of the Global Lighthouse Network 10 3. Understanding Lighthouses: Characteristics, Differentiators and Success Factors 14 Lighthouse characteristics 14 Injectors of human capital 14 Industry leaders that are resetting benchmarks 14 Open innovators and collaborators 15 Large and small companies 15 From emerging and developed economies 15 High impact with minimal replacement of equipment 16 4. How Do the Lighthouses Achieve Impact at Scale? 17 Charting a course for scale: Two routes 17 Value drivers for impact at scale 18 Scale-up enablers 18 The current state of lighthouses 18 Three tools to scale Fourth Industrial Revolution technologies in production and overcome 19 pilot purgatory 5.
    [Show full text]
  • Advanced Manufacturing: Innovation Institutes Have Demonstrated Initial
    United States Government Accountability Office Report to Congressional Committees May 2019 ADVANCED MANUFACTURING Innovation Institutes Have Demonstrated Initial Accomplishments, but Challenges Remain in Measuring Performance and Ensuring Sustainability GAO-19-409 May 2019 ADVANCED MANUFACTURING Innovation Institutes Have Demonstrated Initial Accomplishments, but Challenges Remain in Highlights of GAO-19-409, a report to Measuring Performance and Ensuring Sustainability congressional committees Why GAO Did This Study What GAO Found Manufacturing USA is a national Since December 2016, the Manufacturing USA network has grown from 11 to 14 network of manufacturing innovation manufacturing innovation institutes that are implementing a wide array of institutes. Commerce, DOD, and DOE activities aimed at developing manufacturing capabilities in promising new have together provided $1 billion to advanced technologies, as shown in the figure. As of March 2019, most institutes establish the network’s institutes and to were operating under an initial 5- to 7-year period of federal financial assistance. promote research, development, and commercialization of advanced Additive manufacturing (or 3D printing), an example of advanced manufacturing. manufacturing technologies. The Revitalize American Manufacturing and Innovation Act of 2014 includes a provision for GAO to assess the Manufacturing USA program. This is GAO’s second report in response to the provision. Among other objectives, this report (1) describes the status of the Manufacturing USA network; (2) evaluates actions taken by Commerce, DOD, and DOE to assess progress of The Department of Commerce, through a national program office, along with the the Manufacturing USA program; and Departments of Defense (DOD) and Energy (DOE) have developed long-term (3) examines planning for institute goals for the Manufacturing USA program, such as increasing the sustainability beyond the initial 5 to 7 competitiveness of U.S manufacturing, but have not developed measurable years of federal financial assistance.
    [Show full text]
  • Development of the Optical Microscope
    White Paper Development of the Optical Microscope By Peter Banks Ph.D., Scientific Director, Applications Dept., BioTek Instruments, Inc. Products: Cytation 5 Cell Imaging Multi-Mode Reader An Optical Microscope commonly found in schools and universities all over the world. Table of Contents Ptolemy and Light Refraction --------------------------------------------------------------------------------------------- 2 Islamic Polymaths and Optics -------------------------------------------------------------------------------------------- 2 The First Microscope ------------------------------------------------------------------------------------------------------- 2 Hook and Micrographia --------------------------------------------------------------------------------------------------- 2 Van Leeuwenhoek and Animalcules ------------------------------------------------------------------------------------ 5 Abbe Limit -------------------------------------------------------------------------------------------------------------------- 6 Zernicke and Phase Contrast --------------------------------------------------------------------------------------------- 7 Fluorescence Microscopy ------------------------------------------------------------------------------------------------- 7 Confocal Microscopy ------------------------------------------------------------------------------------------------------- 8 BioTek Instruments, Inc. Digital Microscopy ----------------------------------------------------------------------------------------------------------
    [Show full text]
  • Meat Industry Implemented Important Protocols and Procedures to Protect Its Workforce from the Threats Posed by the Pandemic
    December 17, 2020 Significant Events and Progress Involving the Meat and Poultry Industry during the COVID-19 Pandemic Summary President Trump declared the Coronavirus pandemic (COVID-19 or pandemic) a national emergency on March 13. The meat and poultry industry, and the livestock sector more generally, has been at the forefront of much of the discussion regarding the pandemic’s adverse economic impact and worker safety. The North American meat industry implemented important protocols and procedures to protect its workforce from the threats posed by the pandemic. The learning curve dealing with this unprecedented disruption was steep at times and challenges were presented regarding testing and acquiring personal protective equipment (PPE). But from the pandemic’s inception meat and poultry companies have worked with federal, state, and local health officials to exchange information and implement practices and procedures to best protect workers. Those efforts have paid dividends, as evidenced by the limited number of COVID-19 cases in meat packing plants over the past several months, even as the number of cases nationally surged beyond those seen in the spring. The perceptions regarding worker safety based on April 2020 conditions likely do not match the September 2020 realities of worker safety in meat packing plants. The adverse economic impact of the pandemic also is undeniable. Economic experts in April estimated COVID-19’s cost to the cattle and beef sector to be $13.6 billion, and that number likely is low. Similarly, economic experts estimate the cost of the pandemic to hog producers, who were expecting 2020 to be a positive year, to be $5 billion or more.
    [Show full text]
  • The Music Industry As a Case Study for Enabling Disruptive Innovation in Consolidated Markets
    THE MUSIC INDUSTRY AS A CASE STUDY FOR ENABLING DISRUPTIVE INNOVATION IN CONSOLIDATED MARKETS David Balto & Matthew Lane 1 INTRODUCTION Disruptive innovation is a term of art coined by Harvard Professor Clayton Christensen in his book The Innovator’s Dilemma.2 The term has been used for innovations that establish new markets by finding new customers or transform existing markets by introducing simplicity, convenience, accessibility, and affordability.3 Disruptive innovations will eventually disrupt the existing market and value network and displace the previous technology. Disruptive innovation is important because it marks the creation of a significant amount of value for the general public. This is what differentiates disruptive innovations from other kinds of innovations. The invention of the automobile was revolutionary, but it wasn’t disruptive. The disruptive innovation in automobile technology was when Ford lowered the cost of the automobile through the use of mass production. This made the Model T affordable to the general public. It was the innovation in affordability of automobiles that completely changed the transportation industry. The creation of an affordable car is but one example of how disruptive innovation benefits consumers. Disruptive innovation is typically marked by a transfer of control to consumers, an increase in affordability, an increase in choice, making a technology more accessible, or giving consumers a voice. Disruptive technologies offered by businesses like Skype, Craigslist, Google, eBay, Amazon, Uber, and Twitter have some or all of these characteristics. However, how does disruptive innovation occur in a consolidated market where entrenched market participants have control over vital inputs? In these markets a disruptive innovator must deal with market participants in order to provide a product or service.
    [Show full text]