Strategic benchmarking:: innovation practices in financial institutions

Financial firms often attempt to benchmark competitors or related service industries to improve new product development (NPD) and other key business processes. Although much has been learned about innovation in banks and other financial institutions in recent research studies, gaps in knowledge of best practices and cross‐industry differences remain. A Canadian survey reveals variations in strategic management of new products and innovation in banking and other financial sectors. Banks should exercise caution in interpreting the findings of benchmarking projects before adopting practices from other industries. The study also compares innovation successes and failures. Critical factors were identified which have received relatively little attention in previous work. Human resource strategies such as recruitment, evaluation systems, rewards and incentives appear to be very important for success. Investment in R&D, broadly interpreted to include process and administrative innovation, is also crucial. Joint ventures and cycle time reduction are found to be positively related to success. The study confirms the importance of a proactive and organized approach to innovation in practice.