The Bankwatch

Tracking the consumer evolution of financial services

Who actually benefits from innovation?

This is a fascinating post at ASI that is intriguing. The concept is that the benefit of innovation lies with the consumer, and NOT with the innovator.

This actually resonates (in a bad way) and would support banks’ sticking with the status quo. Have to study this more – there is a paper in the links.

Missing the point on innovation | Adam Smith Institute

It’s actually only 2.2 % of the value that goes to the innovators. The rest goes to the users of the products.

Written by Colin Henderson

November 30, 2008 at 03:13

Posted in Uncategorized

3 Responses

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  1. […] Wem nutzt Innovation The Bankwatch fragt sich, wen Innovationen nutzen. […]

  2. The findings were that successful innovation leaves the innovator with about 2.2% of the overall value created. But that is no argument for maintaining the status quo.

    Surely it means that successful innovation solved significant customer problems that unlocked substantial value downstream. So, the return to the innovator was a small percentage of a much bigger number than if the innovator hadn’t solved a significant problem, or had simply stuck to the status quo.

    From a consumer standpoint, retail banks have essentially stuck to the status quo because they only view the world through the lens of their own products, and only try to solve their own immediate problem of how to sell more of those products at lower cost. So any innovation has been in the back-office, which may have lined the pockets of IT firms and individual specialists, I guess. Yet the theory referred to here should mean that if banks focused their activities on solving customers’ problems, they’d stand to make more money and – more importantly today than ever – create much more value in the wider economy.

    This is a great time for government policy to focus the banks on solving their customers’ problems in a highly innovative way.

    Simon Deane-Johns

    December 1, 2008 at 07:25

  3. […] Link to the original site […]

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