Nowadays, the most important criteria for success in financial services organisations are the ability to successfully identify and develop new products. This activity can be divided into two aspects, the product development process and the ability to maintain the level of innovation to keep on the long-term success, this achievement depends on the management of the team and the team work spirit applied within the organisation. According to Mullins (2007), "Team work integration of functional and departmental efforts, delegation and pro-action are the four goals to be achieved with the new-products strategy".
5.1 Product Innovation and New Development
A successful product development launch depends on the level of the organisation's innovation, following market segmentation and market research. Traditional innovation suggests that financial organisations innovate by improving or developing new products to the market. Innovation in banking lies more in processes, product development and organisational changes, to the ability to meet short and long term performance targets.
Innovation is more challenging for financial organisations than for companies in other sectors. Only a superior innovation capability can create a sustainable advantage. It is virtually impossible to create sustainable competitive advantage with a single innovation. Most innovations in financial services can and will be copied by competitors.
The key role of the leadership is to manage the matrix of market and product by combining the aspects of products and service delivery in the innovation process, which increases complexity. For example, internet banking turned everyone in financial services to think and act differently. It brought information to the customer's fingertips, much more that the PC ever did. IT drove customers closer to financial services institutions.
For a leader to be successful he or she has to choose the right strategy to build the right innovation for product development. Strategic business processes include innovation strategy and product strategy. Product or service development process includes idea and concept generation, testing, analysing, marketing and finally launching. Innovation strategy is shared and understood throughout the company, knowledge and ideas are shared by appropriate incentives.
When a product development is undertaken, the organisation management will assign responsibility to a new leader and form a new team called New Product Development team (NPD). From an early stage in the product development cycle, the leader within this team is responsible to facilitate informal communication, sharing of requirements, constraints and ideas. The product development process is detailed in 'Appendix B'.Â Â
5.2 The Importance of Product Development in Financial Services Organisations
Product management in financial services institutions is responsible to develop new products and services in new areas were growth is available. In order to stimulate growth, the product management activities should be linked to the corporate strategy.
In the financial services industry, product management includes all the activities associated with customer's financial needs. The product leader finds out what customers want, drives the creation of products that meet customers' needs, and preferably generates profit.
In today's world, product development will increasingly shape the organisation and determine the types of managerial skills needed to obtain and develop new products to survive in the middle of a highly competitive market. The success of the organisation's corporate goals depends on the creativity with which financial institutions are managed.
"The Marketing concept is not a theory of marketing but a philosophy of business. It affirms that the key to meeting the objectives of stakeholders is to satisfy customers. In competitive markets this means that success goes to those firms that are best in meeting the needs of customers". (Doyle, 1994)
5.3 Case Study
A local bank in Malta dealing with mortgagees faced a sharp downturn in the local market. After analysing the problem, it was concluded that unless the financial organisation gets a true ability to change and turn out new products and follow the waves that came along, the financial organisation would keep on loosing its market share.
The senior management refined a new organisational model to start building critical capabilities to improve time to market and organisational agility. Internal interviews and external research were conducted to evaluate the organisation's vision against the strategic goals and assessed a number of options to create a revised organisational vision. Based on initial analysis, the joint team developed an organisational model that balanced four key objectives:
Structure: Aligning the business and culture to the new vision and processes; identifying the appropriate functional leaders and process owners.
Information: Building the appropriate management tools to support the organisation; distributing information to the right people at the right time.
Motivators: Designing appropriate compensation policies and plans; aligning incentive structure with the objectives of the vision; providing adequate training for the new roles.
Decision Rights: Determining accountability and responsibility matrices; designing the decision making approach for day to day operations
Finally, leaders had to manage transformational change by:
Leading the change; building the leadership team and mobilising stake holders, establishing the case for change and development
Identifying and empowering key agents of change; rolling out communications plan and articulating clear decision rights
Create ownership and implement change programs; monitoring key processes and results achieved.
A structure was in place to manage the change. A motivated and empowered management team started to lead the change. The organisation was ready to obtain the benefits of its vision which included: improved flexibility and an ability to scale volumes as demand changes, improved cost efficiency through an ability to leverage the economies of scale across geographic locations, standardised processes and technologies.
The understanding of organisational culture is a vital skill for leaders trying to achieve strategic results. The perspective of strategic leaders in an organisation is the best position to view the dynamics of the culture, they can influence of what can be retained and what needs change. This is the core of strategic success. Successful organisations engage and empower their people, build their organisation around teams, and develop human capability at all levels.
Finally, the results of this report are limited and constrained by the measures adopted to determine organisational culture, leadership style and product development. It seems likely that the relations between these three will remain confusing to both practitioners and theorists. Indeed, Schein notes that "leadership and culture are so central to understanding organisations and making them effective that we cannot afford to be complacent about either one" (Schein, 1985)