Effect of product innovation on performance of commercial banks in Kenya
For most firms, successful new product innovations are engines of growth. Product innovation is the result of bringing to life a new way to solve customer’s problem. To remain relevant, financial institutions have gone through continuous re-modification, re-invention and re-introduction of product propositions to meet customers changing needs. The objective of the study was to determine the effect of product innovation on performance of commercial banks in Kenya. The study adopted a cross-sectional survey design approach. The population of the study comprised of (43) forty-three commercial banks licensed by the Central Bank of Kenya as at 31st July 2014. All the commercial banks were included in the study with the respondents being the general managers. The study used both primary and secondary data. Primary data was collected with the aid of a self-administered semi-structured questionnaire. Secondary data was collected by use of desk search techniques from published reports and other relevant documents. Descriptive statistics such as mean, standard deviation and frequency distribution were used to analyse the data. Data presentation was done by the use of percentages and frequency tables. The results indicated communication of product innovation to staff was to a great extent with majority agreeing that product innovation affected organization performance. It was found out that to command a higher market share; a commercial bank needed innovative ideas. Majority of the respondents strongly agreed that organisation strategy and goals impacts innovation and to sustain performance, banks need to be innovative. From the study findings, it can be concluded that product innovation impacts on customer satisfaction and that the reputation in the market makes the bank stand out. A competitive bank is one that undertakes rapid innovations and to command a higher market share, commercial banks need innovative ideas. The study depict that aspects relating to product innovation and competitiveness include: location and wide network, branch networks, range of products, cost (charges), reputation, product range, customer service, bank reputation, innovation and customer service, processes and systems, and discipline. From the findings the study recommends that the services offered by commercial banks should be enhanced by their level of innovations. Commercial banks’ range of products should be of first class innovation. The banks should aim at enabling customer’s access their bank accounts online. As concerns the level of satisfaction, it is determined by a banks range of products, and therefore the bank should maintain a wide range of products. Therefore, commercial banks should aim at product innovation to enhance customer satisfaction. The organisation strategy and goals should always be tailored to promoting innovation. People should be considered and encouraged to innovate so that the organisation may remain competitive and be a market leader. There is need to replicate the study using many other sectors and find out the effect of innovation on organization performance. There is also a need to conduct a similar study which will attempt to find out the effect of effective processes on product innovation and the distinction between user resistance to change and change management which arises as a result of product innovation and technology evolution. This research study included only a relatively small number of financial institutions, but there are many more others operating in Kenya. Future research studies should therefore be undertaken to incorporate a larger number of firms in the study.