Investments in product innovation using information technology : lessons from the financial services sector

Product innovation using information technology (IT) represents a very interesting object of study from an economic point of view. The existing company-information infrastructure offers numerous opportunities but also risks for product-innovation. Opportunities occur when existing or future systems offer possibilities for product-improvement. Risks occur in the field of technical, organisational and commercial issues. Handling thes.e opportunities and risks effectively, when deciding about investment proposals and allocating resources, requires more than standard financial exercises. Organisational, technical and economical issues are deeply intertwined, and this should be reflected in the decision making process regarding these investments. This paper deals with the question how decisionmakers can deal with investments in IT for product and service innovation. Topmanagement should be enabled to evaluate proposals effectively, which requires information, as well as methods for processing this information. Project initiators should be able to understand the context of the decision in order to write proposals. The complexity in this specitic tield is even larger, since information management and management of innovation should communicate with each other and be able to think and talk in terms of business interest (economics). Theory offers numerous instruments for decision makers. These instruments, however, themselves are insufticient for the complex decision situations which are faced in this field. Therefore a thorough understanding of all important aspects and their relationship is necessary. This paper aims to help researchers and practitioners to understand these decision processes by giving a conceptual descriptive structure for these decisions, giving several practical illustrations and building a decision framework upon this structure. After a short introduction, the theoretical background will be discussed and recent approaches from literature are presented. Thereafter, two cases in the financial services sector show why these approaches do not integrate context, process and content in decision making sufficiently. Finally, a framework is proposed which can be helpful for improving or redesigning the resource allocation process, particularly focllsed at rroduct innovation using IT