Monzo Bank Ltd Case Study: Innovation Theories Impact and Analysis

This case study analyzes Monzo Bank's operations, focusing on the application of innovation theories, specifically diffusion theory and Schumpeter's innovation theory. The study examines how Monzo, a mobile-only bank, has utilized these theories to develop its products and services, including its mobile app, prepaid debit card, and crowdfunding strategies. It details the historical development of Monzo, highlighting its innovative approaches to customer service and financial management. The analysis includes strengths and weaknesses of the innovation theories, and recommendations for future development. The study also critiques the theories' limitations and assesses their impact on Monzo's growth and market position. The case study explores the role of entrepreneurs and risk-taking in Monzo's success and provides insights into the bank's expansion strategies and potential future developments.

MONZO CASE STUDY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1.) Description of two innovation theories..................................................................................1
2. Explaining the role of innovation theory in historical and future development of products
and services of entity...................................................................................................................5
RECOMMENDATION...................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Monzo Bank Ltd is the mobile only bank which operates its business in UK. Generally,
bank operates through mobile app and a prepaid debit card with prepaid debit card with the
licence of banking. In this report, detail explanation will be provided on one or more theories of
innovation by which proper strategies will get analysed in order to improve the services offered
by organisation. Further, in this report strength and weakness of innovation theory will also get
discussed by which proper recommendation will be provided for the better development of
services. Moreover, historical development of entity's services will also be discussed in this
report. In this report diffusion theory of innovation will be going to be explained. This is one of
the oldest social science theory which describe innovation life cycle for a product. This is the
theory which explain to organisation that how, why and at what level new ideas and technologies
in business operations will get spread. however, Monzo Bank Ltd is a digital online based bank
which originally operates through a mobile app. This is the bank which mainly founded in 2015
and which set the record for "quickest crowd-funding campaign in history." It is because its
customers raised approximately £1m which is also in 96 seconds through Crowdcube ivestment
platform.
MAIN BODY
1.) Description of two innovation theories
Diffusion theory of innovation:
This is the theory which explain to organisation that how, why and at what level new
ideas and technologies in business operations will get spread. This theory is been published by
the Everett Rogers by stating that diffusion is considered as process by which innovation and
creativity will get communicated in a time period among participants in a social system. Under
this theory more emphasis is provided on communication which explains that people as a part of
social system will easily adopt new ideas, behaviour and products (Hartmann, 2019). There are
four main elements which influence in spreading new ideas which include innovation itself,
communication channels, social system and time. However, it is also true that innovation is the
type of process which completely depend upon human capital. If entities wants to sustain over a
longer period then they must have to widely adopt the process of innovation.
How diffusion theory help Monzo to get where is now
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It is true that Monzo's users constitute innovators. Bank mainly offering strategies in
order to identify its uniqueness and strengths. Through this innovation theory it helps entity in
developing innovative, communal, efficient, transparent operations so that customers get
attracted. This is the main reason because of which entity able to attract more customers which
lead company success. there are mainly two ways because of which Monzo bank able to acheive
its success which include:
Crowdfunding: This is the technique which mainly adopted by entity in order to raise money
through charities, people and businesses. Monzo Bank Ltd. have mainly adopted this technology
which is through investment in time and trust. It is found that through last two rounds of crowd-
funding, 7395 invested their money in the business operations of such bank. In this company
allowed customer over the age of 18 with the opportunity in order to invest up to £2000 where
shares are also get offered at £7.7145 per share.
Digital module: It is true that traditionally banks are looking for options to develop digital
banking apps in order to completely separate digital bank. But Monzo is the newest licensed
digital bank of UK which has taken an initiative where new product development and customer
experience get enhanced.
This theory emphasizes that promoting innovative activities it is important that entity
must have to understand the nature and characteristic of target population. There are five
strategies which propounded by the author which are as follows-
Innovators:
These are the types of people who wants to be first try innovation. They are generally
entrepreneurs who are interested in generating new ideas and generally they are very willing to
take and risk.
Early adopters:
In this generally category of people came who represent opinions of the leaders. Their
work is to grasp changing opportunities by which business achieve its success (Malerba and
McKelvey, 2018). They are generally aware of the things which needs to change and becomes
comfortable with changed operations.
Early Majority:
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These are the group of people which generally needs evidence before applying new
changing business opportunities. They typically want to analyse that whether innovation will
work or not.
Late majority:
These are the group of people which considered as sceptical regarding adoption of
change. They will only adopt the change after it has been tried by majority of peoples.
Laggards:
Generally these are the type of people which are bound by the tradition and they are very
conservative. They did not easily adopt changing practises of organisation and are the hardest
group for bringing on the board.
Criticism of the theory-
In this theory it is analysed that the set of adopter's categories are omitted and because of
that author did not even realise that some adopter's have the direct influence on innovative
activities and are also able to quickly adopt innovation. Adopter's which specify in this theory are
okay but there are some chances that the delay in innovation will may get arise because if this
adopter's of the economy.
Strength and weakness of this theory are as follows-
Strength:
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Illustration 1: Stages of innovation theory
(source: Diffusion of Innovation Theory, 2018)

 It generally has relative advantage which means that the degree at which innovation seen
is far better than the ideas, programs and products which replaced by the entity.
 It also helps in developing compatibility of products where proper analysis will get
developed on consistency of innovation within the values, experiences and need of the
potential adopters.
 This is the theory which generally consistent with more findings because of effect of
survey and experiments which has been conducted before implementing such theory
(Kleinknecht, 2016). This is because the theory has been considered as most practical
study of innovation.
Weakness:
 Evidences of this theory including the categories of adopters did not establish upon the
health of public by which target population will not get analysed by the entity.
 One of the major weakness of this theory is that this is linear and also source dominated
which underestimate the power of media because of which unawareness gets created with
the development of new innovations. It does not consider the support of social system by which difficulty arise in adoption of
new technologies and operations.
Schumpeter's Innovation Theory:
This is the theory which is given by Schumpeter's with his own explanation of business
and trade cycle. The theory has been developed on the basis of innovation timing in capitalist
system. He provided an explanation on business cycle in accordance with the items of innovation
which takes place in system of economy of capitalist (Nioun, 2019). According to author
innovation means the introduction of new products, services or methods.
This is the theory which indicate that innovation is the type of activity in which changes
takes place in the existing method of production. This theory generally provide more emphasis
on free enterprise or economy of capitalist with the great reward by successful innovator. In
accordance with this theory of innovation the activities are generally based on two broad
categories:
 Greater move of innovations
 Smaller moves of innovations
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Author stated that upswing and downswing of business cycle in terms of innovative activities of
organisation. It is also stated in this theory of innovation that as soon as entity develop
innovation, more chances of causing disequilibrium in existing system of economy will get
obtain. Another assumption of this theory is developed on the prediction that capital of the entity
will soon be replaced by the alternative system of economy which can be a part of the system
and which cannot get eliminated in the process of business operations.
Criticism of the theory:
There are generally two grounds upon which the theory has been criticised and it is also
state that there are some unrealistic assumptions propounded in this theory of assumption.
Firstly, author stated that there is a full employment situation in the economy which is a totally
wrong assumption (Bain and Kleinknecht, 2016). Secondly, it is stated that innovation in
business generally finance through bank credit which creates an inflationary situation.
Strength and weakness of the theory:
Strength:
 It generally focuses on the carrying new combination of entrepreneurship by which new
methods of producing goods and services will get generated.
 This theory generally empowers the role of entrepreneur so that risk taking factor will get
generated in order to develop new and creative innovative activities of business
operation. Role of entrepreneur has provided a major importance in order to develop
effective capital resources.
Weakness
 It is very difficult to perform the objective which specified in this theory of the business
cycle (Aghion, Akcigit and Howitt, 2015). The argument which are mentioned in this
theory are only based upon the sociological factor rather than economic factors.
 This theory also leaves out the factor which obtain fluctuations in economic activities. It
needs to be specify because innovation is the only factor which cause fluctuation in the
economy.
2. Explaining the role of innovation theory in historical and future development of products and
services of entity
Background of the company
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Monzo Bank Ltd. Is the smart phone based banking company which generally provided
its services in UK and offered current accounts, prepaid and debit cards with other financial
services. It generally operates through mobile banking app only.
Historical development process
Monzo bank Ltd is the organisation which mainly deals in giving banking services to the
customer of UK but it operates only through mobile app. It is true that entity has developed a
unique marketing technique which has been considered as substantial word of the mouth. It is
also a fact that modernisation in banking sector is large and also there are new and fast
technology adoption in this sector of the banking. Thus, Monzo is the entity which has focused
on developing innovative customised traditional bank services in the set up of mobile app only.
They did not have any branches and the users will only get connected to company through their
mobile phones only.
Entity has brought new technology's evaluation where money get transferred with only
few couples of click and receipts get added in transaction log with the use of mobile camera.
They also provide facility if customer's card get lost which can be frozen and unfrozen which is
with the one single tap of click (Schumpeter, 2017). Entity only have one agenda that is customer
problem and the ways by which their problem will get solved. Entity is providing all the facility
which a consumer wants with the banking sector and it is measured that there is a huge
innovative expansion taken place of the Monzo Ltd.
Services which provided by entity are unique for instance, ordinary banks did not give
customer a breakdown regarding whether consumer is spending money but the entity is
providing all type of information by which consumer will able to analyse its spending. It is
analysed with the historical development process that entity has applied measures which stated in
the Schumpeter's Innovation (Yi, Berry and Chen, 2018). This is the theory which generally
focus on the role of entrepreneur regarding their willingness to take risks for developing better
future of the organisation. The theory generally focuses on carrying new features of innovation
in order to offer effective products and services to consumers.
One or more way to develop future production:
However, it is true that the entity has effective and some unique feature of providing
services to customer, but in order to achieve the growth in future production too entity must have
to capture strategies which specified in the theory of Schumpeter's business cycle. One of the key
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component of the entity is to complete transparency in their business function. It also has a blog
in which they communicate everything regarding their mission and objectives which they want
to achieve. However, with the fast and effective digital development in the process of entity, it
has been found that entity is lacking in troubling of intangibility where customers compliant that
in order to complete task user mainly depend on app and ask its bank to perform such
transaction. It is also been found that sometimes Monzo card will get declined when customers
try to pay their purchases bills in stores, online and at automated machines (Biemans, 2018).
Card which generated by company also did not have acceptable in all the systems of merchants.
Many of the customers have provided their compliant that app shows that their payment was
successful even thought it was not and amount got deducted from the account holder of
company.
Therefore, in order to solve these types of issues, entity must have to follow theory which
propounded in Schumpeter's business cycle. This theory mainly give emphasis on changing
strategies in products and services which are already in existence. It is because this theory mainly
consider the role of entrepreneur greater so that they will able to take risk and will help in
developing availability of the resources. In order to solve issues which relates to network issue
because of which cards get declining, entrepreneur of the entity must have to facilitate effective
allocation and deployment of economic resources by which capital gets increases in the scale of
economy.
This is the theory which is based on circular flow and implies condition in which
economic activity produced at constant rate (Santacreu, 2015). With this entrepreneur of the
Monzo Ltd will able to develop maximum use of resources by which there will be no possibility
of obtaining resources as wastage. Here the innovation may be consist of introduction of new
methods in which online transaction will easily get carried out with the new combination of the
factors.
However, these are some issues which has been identified with the experience of customers.
Now there are some suggestions which entity must have to develop in order to improve future
development process.
Cloud computing:
This is the type of software which mainly offered benefits to all the sector of
organisations. This is the innovative technology through which entity will able to store secrete
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data over the internet. This is the software which has become a type of one solution for the type
of problems which related to any kind of information. However, it is true that Manzo Ltd has
effective software through which proper care will be taken in order to record personal
information of the customers. This is the way through which entity will more able to secure the
industry. It is very important that confidential, secure and internal information data of the
company will not get leaked. Thus, with the use of encrypted cloud service, Monzo Ltd will able
to store sensitive information by which risk will get managed.
This will also allow Monzo bank the type of ability in order to respond quickly to
customers and with their technological needs. Through this compounding entity will also able to
solve its issue which relates to payments. This ability will help them in gaining competitive
advantage over the other traditional bank of the market. However, Monzo Ltd function its
operations through mobile based app which increases the chances of facing hackers of market
with which personal banking information of customer may get leaked (Christensen, Raynor and
McDonald, 2015). In order to face with the hackers in of market, cloud compounding software
will help in increasing efficiency where entity will easily able integrate new technologies and
application in future by which chances of hacking app will get reduced.
Other issue which has been faced by Monzo Ltd customer is regarding the payment
where it has been analysed that when customer are paying online bill their payment from account
will get debited but it will not credit in system of merchandise. In order to solve this issue for
future development cloud compounding will help in serving the clients faster. It is because this is
the type of software which makes new and bundled services easier to launch. It also eliminates
delay in giving effective services.
Business Canvas model
For the present:
Key partners
Master card
apple pay
part of the FSCS
crowd cube
investment
platform
Key activities
software
engineering
product design
data analysis
customer support
product
Value
proposition
For provide
customer with an
alternative
banking of past
customer
relationship
Instantaneity
efficiency
transparency
customer
segments
Travelers
digital natives
8

Developers management
legal
cost structure
IT infrastructure
Product roadmap
customer support
commission
customer
retention
key resources
Digital only bank
platform
data accuracy
improved through
crowd sourced
suggestion
community
channels
smartphones
chat
email
revenue streams
Overseas cash withdrawals for free
For the future
Key partners
Master card
apple pay
part of the FSCS
crowd cube
investment
platform
Developers
Key activities
software
engineering
product design
data analysis
customer support
product
management
legal
executive
project
management
Value
proposition
For provide
customer with an
alternative
banking of past
To create the
world's very first
smartphones
based bank.
customer
relationship
Instantaneity
efficiency
transparency
digital based bank
notification in
real time.
24/7 customer
support
customer
segments
Travelers
digital natives
digital nomads
digital natives
cost structure
IT infrastructure
Product roadmap
key resources
Digital only bank
platform
channels
smartphones
9

customer support
commission
customer
retention
legal
UK banking
license
customer
retention
marketing and
promotion
data accuracy
improved through
crowd sourced
suggestion
community
chat
email
mobile apps for
iOS and android
operating system
apple pay wallet
etc.
revenue streams
Overseas cash withdrawals for free
a free monthly withdrawals which is upto 200
RECOMMENDATION
In order to improve the service more efficiently here are some recommendation to entity
which they might helps them for generating good amount profitability in business market.
Use of disruptive theory:
This is the theory of innovation which helps in developing powerful way of developing
thinking about the type of innovation which driven business growth. In this era of competition,
entities must have to provide services that are new and improved. However, it is also a fact that
sometimes organisation ends up by producing services which are too sophisticated. Therefore,
with the principles of this theory, Monzo Ltd will able to create new market and value network
by using three elements. This theory helps organisation to generate the ideas with the developing
world in order to apply the same concept in developed world. It also helps in taking risk and in
encouraging entrepreneurship in order to introduce new market concept. This is the process by
which entity will able to provide services which initially takes roots at market and then increases
competition with its effectiveness.
Arguments:
In the views of Mueller (2019) it is argued in a support of theory by stating that it
incumbents to enter in market and to develop strategies which helps in sustaining innovation. It
also helps in fulfilling the needs to customers and to respond with the disruptive threats.
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