(PDF) Managing Innovation: Assignment

MONZO
(Managing Innovation)

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Theories of Innovation...........................................................................................................1
Critical analysis of contributory factors towards the commercial success of a business.......8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Innovation means something new which no one can imagine or see. Innovation is
happening in every aspects of Humans life. Also organization too is not untouched by
Innovation. Innovation in organization can take place through launching new products or
applying new technology or using new process for production or changing business model into
new model etc. Monzo is a digital based mobile banking company, which was founded in 2015
by Tom Blomfield, Jonas Huckestein, Jason Bates, Paul Rippon and Gary Dolman. Report will
highlight the theories of Innovation and application of these theories in the context of MONZO.
MAIN BODY
Theories of Innovation
DIFFUSION OF INNOVATION THEORY -
Diffusion of Innovation Theory was propounded by Everett M. “EV” Rogers in 1962.
This theory basically explain the organization that how a buyer accepts the new products over
time.
According to Rogers, Diffusion is the process of communicating the new ideas among the
potential buyers over time. This theory explains that how a innovative idea attracts the buyers,
how they plan to buy this and after some times, how they diverse from it. This theory is highly
focus on Human Capital. This theory is used by many organization when they plan to launch
new products.
To make clear understand of this theory, Rogers proposed four elements which influence the
spread of innovative idea. These 4 elements are as followed -
Element 1 – INNOVATION – It is an idea or product or process which is new for buyers.
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Element 2 – COMMUNICATION CHANNELS – It is a medium through which innovative
ideas carry and spread across people.
Element 3 – TIME – It refers to the length which is taken in spread of innovative ideas.
Element 4 – SOCIAL SYSTEM – It refers to the group of components which together construct
the society and who adopts the innovative ideas.
On the basis of Adoption of new ideas, Rogers classified the social system into 5 categories -
Category 1 – INNOVATORS – They are those people who want to try the new products first.
They are so much interested in new products. They are small in group.
Category 2 – EARLY ADOPTERS – They are those people who first influence with the new
products and know much more about the products already. They are larger in group.
Category 3 – EARLY MAJORITY – They love new trends but before making any buying
decisions, they do wait and see if innovative products work or not. Because of this group,
products' demand get increase.
Category 4 – LATE MAJORITY – They do not love change. They generally buy new products
only when products has been tried by majority of buyers. At this point of time, the demand is
decreasing.
Category 5 – LAGGARDS – They are bound by traditional. They will only innovative products
only when they do not have the choice except to buy this.
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Illustration 1: Elements of Diffusion Theory
Source: Diffusion of Innovation Theory, 2018.

On the basis of these categories of social system, there are 5 major factors arise, which affect the
social system. These 5 major factors are as follows -
1. Relative Advantage – It refers to the extent to which an innovation is seen as better idea.
2. Compatibility – It refers to the extent to which an innovation is consistent of the values of
potential adopters.
3. Complexity – It refers to the extent to which an innovation is difficult to understand.
4. Triability – It refers to the extent to which an innovation is experimented before plan to actual
buy.
Observability – It refers to the extent to which an innovation is giving the tangible results.
LIMITATION OF DIFFUSION THEORY -
It is not a participation approach.
It ignore the individuality.
It is not good theory when apply on public health (Chen and et.al., 2019).
IMPLEMENTATION OF THIS THEORY IN THE CONTEXT OF MONZO BANK
Application of Roger's Theory in Monzo Bank reflects that their most customers are in
category one “INNOVATORS” as their target market is those people who are youngest in age,
very social, willing to take risks and having great financial background. Thus, customers of
MONZO comes under first category (Diffusion of Innovation Theory, 2018).
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Illustration 2: Categories of Adopters
Source: Diffusion of Innovation Theory, 2018.

PORTFOLIO MANAGEMENT INNOVATION THEORY
This theory states the priority, selection and control over the projects and programmes
established in the Monzo. This helps in delivering the strategic objectives of the enterprise in the
form of projects and presentations. Basically it helps in determining the effectiveness of
innovation and also identifying the risk and return on the investment. In order to improve the
success rate of the innovation projects within organisation this theory is one of the most
fundamental framework that allows the manager to do right project. It helps in balancing the
short term and long term innovation investment of the company. There are basically Four steps
are involved that help in understanding the strategic objectives and operational objectives of
innovation. First step consists of short, mid and long term strategies. Second step consists of
portfolio management that allows the resource allocation of the Strategies involved in
innovation. Third step comprises Operational Portfolio Management which allows the allocation
of resources involved in the effective implementation of strategies. Forth step allows the
execution and implementation of the project. This process can be enhanced by the use of the IT
based platform within the company. Portfolio Management of Monzo may be assessed according
to the qualitative and quantitative criteria. Qualitative and quantitative can be termed as number
of contributions in corporate strategy where assessing the risk level qualitative and project's
expected financial return are the quantitative (Rank, Unger and Gemünden, 2015). This is an
integrated part of the strategy definition and project based execution. Various benefits associated
with the implementation of Portfolio theory in business is as follows:
 It helps in evaluating the right project for the overall strategic objectives of the company.
 Incorporating the innovation within the core business is very essential for the future
growth and sustainability of the firm.
 It also helps in analysing the potential growth rate and failures of the innovation project.
 This theory also detects the redundancy of the overall project and also maximises the
overall profits by reducing the cost.
 This theory also helps in sequencing the plans and actions of the team.
 It also determines the best management methodology that incorporates all the units of
innovation.
 This theory also maintains the portfolio budget of the Monzo and manages all such
resources that carry out the innovation activities.
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 Portfolio Management also helps in identifying the gap between overall lists of projects
that are concerned with the innovation within business.
 It also helps the manager to reduce the perceived risk which is mainly associated with
implementation of the innovative project within enterprise.
 Leader also gets the clear idea of providing the effective direction to the whole team in
order to achieve the main objectives related with the development of innovation within
business.
Those companies who are working on the multiple projects at the same time need to consider the
portfolio view in order to determine the status of the company (Meifort, 2016). Also, such firms
who are developing innovation programmes also need to consider the portfolio management.
2) To apply each of your chosen theory or theories in explaining the
Historical development of one or more products and/or services, and the possible future
development pathways of your products or services.
Portfolio management theory – this theory is use by MONZO for making decisions
about investment, investment match with their objective, assets allocation of individual and
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Illustration 3: Portfolio management and project based execution
Source: (Portfolio management, 2018)

balancing risk against performance. Through this they make decision of increase returns and
profit through investment at a given level of risk. It main objective is collect lower risk assets of
investment and observe market conditions. MONZO take decision for choose one opportunity
among many opportunities. Who gives better and more return with low risk. They follow this
theory for maximize their return and increase their investment but they also focus on low risk. So
its helpful in meet objective and target of MONZO and also make plan about future so it make
short, mid and long term strategy for achieve goal and returns. So through adopt this theory
MONZO increase their innovations for high returns. Then they make strategy about objectives
and then they allocate assets. Because if investors invest their capital so they evaluate that
balance of risk and return. So MONZO should also give freedom in rates and risk to investor for
increase their profit. After implement this theory the management of MONZO begins their
process and its includes monitoring and investment and measuring the portfolio performance.
MONZO's all director and manager also providing effective idea for increase their sales and
improve their investment with high returns (Howaldt, Kopp and Schwarz. 2018).
Diffusion of innovation theory – this theory use by MONZO for spread ideas among
people. Through this it adopts innovations, new ideas, product and practice. This theory helpful
in adopt new innovation for development and sustainability. This theory has three elements.
Innovations, communication channels, time and social system. Innovation is helpful for MONZO
creates new ideas by an individual for adopt changes for increase in investment and profit.
Communication channel is helpful for MONZO is transfer message one person to another so it
advertise their new scheme of investment and attract people for increase their capital. Time of
MONZO measures that how much time consumes for people get adopted to innovation in public
and people take new ideas in how much time. And social system is used by MONZO for
problems solve of society because if new innovation is enter among people so it create many
problem so MONZO solve problem of people through these system.
Through this theory Monzo give digital services to customers. Through this it changes
traditional banking to modern banking. They provide services through mobile banking, internet
banking so people attract from these types of facility and do all their banking at global level.
They also use latest technology so they solve problem instantly and provide customer support. It
communicates with their team directly from the app within seconds.
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Through this they build strong relationship with their customer. It also gives 24*7 services to
their customers so customer feels belongingness with MONZO and attract. So its direct put
effect on increase their investment and turnover (Sørensen and Torfing, 2017).
Both theories how to help past and future of MONZO
Above theories helps to MONZO in past that more time consumes in everything. It
innovate any new scheme for attract customer and increase their investment so its face more
difficulties. So it shows everything in graphical way and curve. Risk also measures through
formula. But in future MONZO capability will more develop for new innovations and its will be
helpful in measure risk and return so much easy. In future it make easy to calculate and easy to
attract investor with latest innovation and make strategy also become easy. In past time diffusion
of innovation not work because technology was not developed so investors and employees of
MONZO face many difficulties because they could not sent information related to their schemes
so investor face also difficulties to measure risk and return. But in future innovations increase
that make easy to work of investment because MONZO adopt more innovations and technology
for make easy to their work. And measurement and planning of investment risk and return is
easily in seconds (Tabrizian, 2019).
Innovation model
A process of any invention or idea into a service or goods in order to create value for the
customers to pay. Invention need to be done and replicated at an economical cost that satisfy all
the needs of the company or customers. There are several types of innovations present for an
organization that proves that there isn't a single of doing any innovation. Innovation normally
falls under three categories such as business innovation, technology innovation and marketing
innovation. Business model innovation is all about the ability to think new ways of revenue
stream in order to maintain competitive advantages for the current business (Wirtz and Daiser,
2017). It can be done by either improving current existing business model or by thinking of new
ways of providing values.
Many companies uses technology as a great source of seeking competitive advantages in
order to increase their competitive profit margin. Technology innovation is to generate new
ideals based on new technology, knowledge, capabilities in order to produce new real solution
for their current existing business. It can be used to accelerate innovation process, realize new
market responsibilities, test and experience new concepts. Marketing innovation is said to be one
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of the most important has it might help the company to reduce expenditure of money and time on
marketing. Companies like Monzo should focus in technology innovation as their complete
business runs on mobile application. So, it is very much important to them to focus on
technological innovations.
There are three types of innovation models which are: Diffusion, compound and linear
model of innovation. Out of which Monzo can use linear model of innovation. Linear model of
innovation is one of the oldest model which is designed to understand relationship between
technology and science which normally begins with basic research which then is used in applied
research then in development and finally in diffusion (Zott and Amit., 2017). It is currently
divided into three phases which are: first is invention, second is innovation and third is diffusion.
This model focusses on how an invention can trigger innovation that can be diffused into the
organization.
In order to achieve successful innovation few facts much exist such as: Clear and aligned
goals must be defined, mutual and equal participation of all the stakeholders must be done,
continuous a and accurate monitoring of results must be done, clear, open, transparent and
trustworthy communication must be done and lastly access to accurate information must be done
(Cortimiglia, Ghezzi and Frank., 2016).
Monzo can implement linear innovation model in their business by implementing that
model at pilot level i.e. implementing that model at smaller scale in order to see whether it will
be success or not. If the model fails then what mistakes were done in implementation of that
model should be identified and then it should be implemented in larger scale. Then according to
the needs, goals and objectives of Monzo organization they should choose the type of innovation
they want to implement and focus on.
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Illustration 4: Linear Model of innovation

Critical analysis of contributory factors towards the commercial success of a business
According to Park and et.al., (2015) there are various contributory factors which can lead
to the success of Monzo's product, service or process is that the success of a new product
depends upon the mission of management related to a new product and objectives based on it. It
is based on the model that what is the purpose and expectations of a products, service or process
introduced by the company. It has also to define the responsibilities of the employees, budgets
and frameworks.
As per the view of Khan and Muhammad (2016) there is a strong competition within the
industry and Monzo is exposed to fierce competition for its rivals across UK. So Monzo have to
take in to consideration the competition within the industry and should make proper competitive
analysis within the industry which can help if commercial success of a product or a service of a
bank which can help in moving a product. A company has to make innovations their products
and services which could lead to social impact on the intended audience. For the purpose of
commercial success in the product or a service an organisation should establish a strong network
by building a strong relationship with customers and suppliers too.
The main purpose of the innovation should be such that a product or service should be
able to satisfy the customer and make them feel delighted. A company should spend its time and
money in innovation such that it should have better end results for the customer and even for the
company which can result in the success of new innovations. Also another contributory factor is
Value, a new product or a service should be able to add value for the customer which is the main
root for the growth of a company which could send a positive message to their intended
audience. Also, another contributory factor is that it should make continuous improvements in
the products and service which are offered to customers, by making continuous improvements in
their new products and services it lead to the success of a business and deal with the competition
in an industry. According to Zinaida (2017) the improvements made by the company
should be done by taking customer lifestyle and preferences into consideration which can have
social impact on the targeted audience as customers expectation is increasing day by day so it is
the responsibility of Monzo to fulfill their expectations. Also company should establish such a
business plan in future which should pay attention towards the customers which should keep
them attracted towards online banking. It should have establish a good online business presence
on various social networking sites like Facebook which can help in establishing a social
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connection with the customers. It can also help the company in expanding their online banking
and help in reaching vast audience which can help in the growth of a business within the
industry. All of these contributory factors can help Monzo to achieve the success for making
innovations in their products and service and also will help in targeting a large audience within
the industry.
CONCLUSION
From above study it has been summarized that portfolio management and diffusion of
innovation theory is very important for companies because its make easy to work and save time
of measurement. And company also care about investors for increase their investments so that
they maintain their rates and risk. Innovation is make easy to all operational activities of
organization. And make strategy for future so its main purpose is meet objective and increase
their productivity for increase profit. It also make easy to communication of investors and
employees of organization and helps in getting information about all schemes of investments.
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REFERENCES
Books and Journals
Chen, J., and et.al., 2019. The Routledge Companion to Innovation Management. Routledge.
Cortimiglia, M.N., Ghezzi, A. and Frank, A.G., 2016. Business model innovation and strategy
making nexus: evidence from a cross‐industry mixed‐methods study. R&D
Management. 46(3). pp.414-432.
Howaldt, J., Kopp, R. and Schwarz, M. 2018. Diffusion von Innovation. Handbuch
Innovationsforschung. pp.1-17.
Khan, A. and Muhammad, J., 2016. Neoteric Performance Challenges for Islamic Banks: An
Elucidation. Journal of Modern Accounting and Auditing, 12(12). pp.612-620.
Meifort, 2016. Innovation portfolio management: A synthesis and research agenda. Creativity
and Innovation Management. 25(2). pp.251-269.
Park, J.H and et.al, 2015. Methods of producing stabilized solid dosage pharmaceutical
compositions containing morphinans. U.S. Patent 9,198,861.
Rank, J., Unger, B.N. and Gemünden, H.G., 2015. Preparedness for the future in project
portfolio management: The roles of proactiveness, riskiness and willingness to
cannibalize. International Journal of Project Management. 33(8). pp.1730-1743.
Sørensen, E. and Torfing, J. 2017. Metagoverning collaborative innovation in governance
networks. The American Review of Public Administration 47(7), pp.826-839.
Tabrizian, S. 2019. Technological innovation to achieve sustainable development—Renewable
energy technologies diffusion in developing countries. Sustainable Development.
Wirtz, B. and Daiser, P., 2017. Business model innovation: An integrative conceptual
framework. Journal of Business Models, 5(1).
Zinaida, C., 2017. Engaging Consumers into Legal Video Streaming Services in Russia.
Zott, C. and Amit, R., 2017. Business model innovation: How to create value in a digital
world. GfK Marketing Intelligence Review. 9(1). pp.18-23.
Online
Portfolio management. 2018. [online]. Available
through:<http://www.innovationmanagement.se/2013/09/16/managing-innovation-
portfolios-strategic-portfolio-management/>.
Diffusion of Innovation Theory. 2018. [ONLINE]. Available through:
<http://arianelg.com/portfolios/monzo/> .
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