A Strategic Approach to the Study of Innovation in the Financial Services Industry: The Case of Telephone Banking

Abstract

During the 1990s the introduction of new technology, and in particular of low cost delivery channels, has accelerated the pace ofinnovation taking place within the UKfinancial services industry and has created a need for amore strategic approach to the study ofinnovation within this industry. In this paper, the case study of telephone banking is used to describe the main aspects of strategies adopted by the first and second movers, when implementing this delivery dlannel. It shows that the successful innovator – First Direct – adopted the logic of ‘value-innovation’, whilst the second movers have followed the ‘conventional’ logic. In contrast with previous studies, the strategic approach applied in this case study also reveals that differentiation in the financial market place is not achieved with the implementation ofdistribution channels or just technology, but bringing to the market ‘unprecedented value’. Finally, the implications for the general theory of innovation in relation to financial services organisations are highlighted.

keywords:

• innovation
• market positioning
• strategic management
• differentiation
• banking industry