Technological Forecasting & Social Change xxx (xxxx) xxx

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Technological Forecasting & Social Change

journal homepage: www.elsevier.com/locate/techfore

The role of product development practices on new product performance:

Evidence from Nigeria’s financial services providers
Nkemdilim Iheanachor a, *, Immanuel Ovemeso Umukoro b, Olayinka David-West c
a
Strategy and International Business Group of Lagos Business School, Pan-Atlantic University, Lagos, Nigeria
b
Information Systems & Digital Business Transformation, Lagos Business School, Pan-Atlantic University, Lagos, Nigeria
c
Professor of Information Systems, Lagos Business School, Pan-Atlantic University, Lagos, Nigeria

A R T I C L E I N F O A B S T R A C T

Keywords: This study investigates the impact of product development practices on the performance of new financial
Product development products and services through the analysis of ten in-depth case studies. We argue that weak product development
Product performance practices negatively affect product performance. This study finds that in Nigeria, new financial product per­
Financial service providers
formance is suboptimal because of poor product development practices. This study further shows that when poor
Emerging markets
execution follows inadequate product development practices, the likelihood of product failure increases, as
evidenced by poor product performance and low adoption. The processes adopted in the development of
financial services affect the adoption, use, and overall penetration of the product in the target market. Therefore,
this study suggests that the management team of various financial service providers invest in developing sound
product development practices in the actualization of their goals of increasing the adoption and use of their
products.

1. Introduction
In emerging markets, financial services innovation (whether in
products or business models) is critical to a provider’s sustainability and
competitiveness (David-West et al., (2019)). Technological innovation
has disrupted the financial services sector by establishing novel ways of
creating and delivering value to customers (Hine and Greenaway, 2016;
Li, 2016; Madeira, 2016). This warrants additional investments in in­
formation technology (IT) assets, resources and capabilities. As IT in­
vestments increase, customer needs are also becoming more diverse.
Financial service providers (FSPs) must also strengthen their processes
to meet and surpass the needs of their customers who are the most
influential yet volatile stakeholders (De Oliveira and Rabechini, 2019;
Kim et al., 2018; Ouma et al., 2017; Pollari, 2016).
Understanding consumer pain points remains a critical driver in
creating and delivering a compelling customer value proposition that
meets their diverse financial service needs. David-West et al., 2019
report that customer value propositions (CVPs) such as affordability,
accessibility, ease of use, service reliability and security characterize
financial products and services. FSPs need these CVPs to acquire and
retain customers. To achieve and sustain these attributes in their prod­
ucts, FSPs must continually review their customer value propositions
and product fit amidst changing consumer behaviours. The continuous
review of product development practices is one such approach. This is
undoubtedly true, especially in an era where new non-bank financial
technology (Fintech) firms are challenging the incumbents and dis­
rupting the financial services space with new value propositions.
Financial product development requires the commitment of critical
resources and an understanding of customer needs, characteristics and
behaviours to gain the adoption, customer satisfaction (Brockmann,
2017; Laukkanen, 2016; Park and Koh, 2017), and continuous use of
financial services (David-West et al., 2019b). Well-developed financial
products yield benefits such as improved market shares, higher profits,
returns on equity, customer loyalty, and long-term survival (Albers
et al., 2018; Lalic et al., 2018; Mikkola, 2018). For new products to be
successful, organizations must ensure that product development pro­
cesses such as ideation, prototyping, testing and launching must be
carefully and systematically executed (Roy et al., 2017; Yoon and Rim,
2018; Claudy et al., 2016). Beyond the value proposition, pilot and
launch strategies that FSPs adopt can also affect product acceptance.
There is, therefore, a need to be innovative in the product development
process. Such processes require a competent team, efficient operational
processes, and a strategy for managing emerging product risks.
The spike in financial product failure in emerging economies is

* Corresponding author.
E-mail address: niheanachor@lbs.edu.ng (N. Iheanachor).

https://doi.org/10.1016/j.techfore.2020.120470
Received 19 June 2020; Received in revised form 4 November 2020; Accepted 11 November 2020
0040-1625/© 2020 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

Please cite this article as: Nkemdilim Iheanachor, Technological Forecasting & Social Change, https://doi.org/10.1016/j.techfore.2020.120470
N. Iheanachor et al.
caused by a lack of adherence to good product development practices
(Albers et al., 2018; Lalic et., 2018; Mikkola, 2018). For instance, low
financial inclusion rates in Nigeria can be attributed to poor product
adoption resulting from poor product-customer fit and other exclusion
enablers. Evidence of failed financial products abounds in Asia (Kim
et al., 2016) and Africa (Karabag, 2019; Šoltés et al., 2017; Gumel,
2017). These products often fail to address customers’ pain points.
Likewise, product failures have significant impacts on customers, em­
ployees, profitability, market share, brand equity, investors, and the
economy at large. Such failures can erode consumers’ trust in a brand
and could be capitalized upon by rival firms. This study investigates the
impact of product development practices on the performance of newly
launched products by financial service providers by relying on evidence
provided by ten case studies of purposively sampled FSPs.
The goal of product development practices is to meet consumer
needs while keeping a focus on profitability and business sustainability.
Products are one dimension of competition in the financial services
space. The practices that produce the products must receive adequate
attention. They are vital to improving the quality of services to promote
customer adoption, consumer satisfaction, customer retention, profit­
ability and long-term sustainability.
1.1. Rationale
The concept of product development has been widely discussed in
the literature, especially in innovation management research. However,
the analysis of the literature on product development practices shows
that most references and case studies are in the manufacturing (Akroush
and Awwad, 2018; Chang and Taylor, 2016; Vinayak and Kodali, 2014),
telecom (Namusonge et al., 2017), aviation (Naghi Ganji et al., 2017)
and transportation sectors. Studies on product development practices of
financial service providers remain sparse, especially those from an
emerging economy perspective. This phenomenon is essential given the
low level of adoption of financial services in Nigeria, resulting in a low
financial inclusion rate despite the broad spectrum of financial products
and services offered by Nigerian FSPs. Where financial products exist,
their adoption and utility are usually low. The adoption of financial
services (used interchangeably with financial products) is a significant
phenomenon as it plays a critical role in enabling Nigeria to attain its
financial inclusion goals of 80% by 2020. Despite the high number of
bank and non-bank FSPs in Nigeria, approximately 36.8% (36.6 million)
of the adult population remains financially excluded. Additionally,
14.6% (14.6 million) of adults are underserved. The underserved
segment resorts to the use of informal channels and services (EFInA,
2018), which could be costly and risky.
The challenge of financial inclusion in Nigeria and its consequent
negative impact on economic development continues to attract the
attention of scholars and governments at all levels. Several factors are
responsible for this low level of adoption. While a demand-side
approach may amplify the voice of financial services consumers, a
supply-side approach provides a broader perspective on the processes
through which FSPs conceptualize and develop products. This can offer
insight into how product development practices may contribute to low
financial service adoption and, by extension, low financial inclusion.
Financial exclusion can be due to lack of product-customer fit, often
resulting from flawed research and development efforts. This can be
because of insufficient business case analysis, ineffective market seg­
mentation, the absence of product prototype development, and insuffi­
cient testing and refinement, among other causes.
Specifically, the study examines the following:
1 The nature of product development practices (PDPs) among financial
services providers (FSPs) in Nigeria
2 The impact of product development processes on new product per­
formance in Nigeria
2
Technological Forecasting & Social Change xxx (xxxx) xxx
3 How the risk management strategies of financial services providers
affect the performance of the new products of financial service
providers
1.2. Research questions
The following research questions guided this study:
1 How do Nigerian FSPs undertake product development?
2 To what extent do best product development processes guide
Nigerian FSPs in their new product development efforts?
3 What is the role of product development processes in the perfor­
mance of new products developed by Nigerian FSPs?
We organize the rest of this paper as follows. The section after this
introduction provides a brief review of the related literature on product
development practices. It aims to explore the relevant literature and
outline extant theories within the context of product development
practices. The method section follows the literature review. The results
and discussion sections are next; followed by a conclusion, recommen­
dations, implications for practice and directions for further studies.
2. Literature review
2.1. Product development and product development practices
The term product development or new product development refers to
the transformation process of a market opportunity and a set of as­
sumptions regarding product technology into a product accessible to the
market (Chang and Taylor, 2016). It is a process that leads to intro­
ducing new products into a market as a response to a market opportunity
by logically combining a set of activities. Product development practices
(PDPs) are a defined set of tasks, steps and phases that describe the
standards by which a company repetitively converts embryonic ideas
into sellable products or services (Kahn, 2004). They are firm practices
that translate into the development and launch of new products as a
response to new market opportunities. PDPs are "success drivers of new
product development efforts" (Troy et al., 2008, p. 136) because when
properly implemented, they can positively impact an organization’s
market share, profitability and long-term survival. PDPs include prac­
tices that help business organizations arrive at quality and viable
products that meet market needs and can capture value for the organi­
zation while creating value for customers (see Fig. 1). The concept im­
pacts three broad aspects of organizational success: operational,
financial, and marketing performance.
Nguyen et al. (2018) note that practices such as the development of
product programmes, research and development (R&D) and innovation
can translate into the success of a new product. There are two categories
of PDPs – process speed and integrative practices.
■ Process Speed: This refers to the compression of activities (Kiss and
Barr, 2017) versus traditional sequential new product development
practices. Process speed could be agile development, early feedback
or late decision-making product development practices for acceler­
ating the speed of the product development process. Agile develop­
ment is characterized by rapid development iterations used to gain
feedback combined with overlapping processes where the next iter­
ation begins before the current iteration finishes (Haidar et al., 2017;
Mohan et al., 2010). Agile development contrasts with the traditional
waterfall development methodology that focuses on preparing a
complete and detailed design specification before the execution
phase begins (Guntamukkala et al., 2006; Roems, 2017). Early
feedback refers to regularly gathering feedback from multiple con­
stituents at the earliest stages of the product development process
(Lakemond et al., 2013; Thomas, 2014; Narasimhan et al., 2006).
Late decision making is a process in which product concepts,
N. Iheanachor et al.
Fig. 1. Product development framework (Source: Author’s representation).
capabilities and designs are not finalized until the last phases of the
development process (Buganza et al., 2010, 2009). Late
decision-making contrasts with the traditional stage-gate style pro­
cesses where product development is in a sequential structure of
decision gates (Kahn, 2004). At each decision gate, a facet of the
product is agreed upon and frozen before moving to the next gate.
■ Integrative Practices: These are processes used by the organization to
regenerate its knowledge base (Eisenhardt and Martin, 2000; Kogut
and Zander, 1992; Marsh and Stock, 2006). They include founda­
tional customers and supplier participation. Foundational customers
are customer representatives who participate in the new product
development process in a manner that helps shape the requirement
analysis (Carbonell et al., 2009; Gatignon and Xuereb, 1997) for new
product development. In-depth requirement analysis of market re­
alities is critical for the success of financial products. Validating
initial market assumptions requires engaging customers that can
provide a near real-life input to the requirement analysis and initial
product design stages. Supplier participation refers to the various roles
that suppliers play in the product development process. It ranges
from merely delivering parts based on a specification to substantial
involvement in the design process (Ragatz et al., 2002; Gatignon and
Xuereb, 1997; Cusumano and Takeishi, 1991). Suppliers are a critical
category of stakeholders in the product development process. The
interface with customers provides useful feedback on customer
buying and consumption behavior. Lau, 2011 also state that supplier
involvement and inter-functional integration can also eliminate
barriers that lead to new product failure.
2.2. Product performance and performance measures
Product performance refers to how well a product performs across
defined measurement indicators. The indicators could be how product
development promotes customer attraction (market share) and reten­
tion, revenues and net profit, brand equity, customer satisfaction and
feedback, among other indicators (Namusonge et al., 2017; Ganeshku­
mar and Nambirajan, 2013; Schilling and Hill, 2005). Product perfor­
mance reflects the financial and market performance of a firm’s new or
existing product (Najafi-Tavani et al. (2016)). Product performance
measures or outcomes are the actual performance of a product against
the expected level of performance. They are indicators that measure
changes that the firm needs to manage the transition towards defined
goals. In examining how firms benefit from new product development,
we can broadly categorize product performance into four distinct
dimensions:
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Technological Forecasting & Social Change xxx (xxxx) xxx
■ Profitability (financial) Performance: Financial performance is the
degree to which the product exceeds or falls short of the expected
profitability level (Cooper, 2019). The profitability dimension in­
cludes both the level of profit and profit objectives. On average, the
level of profit is scored relatively higher than the score for profit
against the objective. It, therefore, implies that firms expect a higher
level of profit from introducing new products.
■ Sales and Market Performance: Market performance is the extent to
which the product exceeds or falls short of achieving market ex­
pectations (Cooper, 2019). Sales performance illustrates the perfor­
mance of new products and comprises measures of performance
relative to sales objectives, and measures of total sales. Sales per­
formance is growth in sales against the aim.
■ Customer Satisfaction: This is the level of the purchaser’s affective
response. It is an assessment indicator of how well financial services
perform. High adoption is due to customer satisfaction with the
product. However, Umukoro and Tiamiyu (2017) warn that in the
context of e-services, the absence of better alternatives may increase
use without necessarily translating into customer satisfaction. One
way of ensuring customer satisfaction is for FSPs to define a product
value proposition in ways that address customer needs (David-West
et al., 2019b, 2017; Mbiti and Weil, 2013).
■ Enhanced Opportunities: These are the gains of product development
practices to the firm as an entity rather than solely accruing to the
product. This factor illustrates the long-term benefits that can be
derived from introducing a new product. Repositioning the firm,
creating a new market, and platforms for the introduction of addi­
tional new products or new product features increase the potential
for long-term prosperity.
2.3. Product development practices and product performance (success)
Schilling and Hill 1998 suggest that for a firm to be successful at new
product development, it must simultaneously meet two critical objec­
tives: maximizing profits through customer needs and minimizing the
time to market. While these objectives often pose conflicting demands
on a firm, there is a growing body of evidence that a firm may adopt
strategies to meet these objectives successfully. Successful companies
are known for articulating their strategic plan and leveraging their R&D
portfolio to achieve a fit between their new product development goals
and their current resources and competencies. Namusonge et al (2017)
posits that strategic product development practices have a positive and
significant influence on financial performance.
Many products fail too quickly because of weak market analysis,
poor design (weak products), regulatory risks, weak and unvalidated
N. Iheanachor et al.
market assumptions, and late arrival to market, among other reasons.
Ateke et al. (2015) note that firms can also measure the performance of a
new product in terms of the levels of customer adoption and satisfaction,
the profitability of the new product, and how long the product survives
competition from rival products. It is important to note that how well a
new product performs in terms of financial performance, customer
adoption, growth in market share, and customer satisfaction is a func­
tion of the product development practices that the firm adopts (Nguyen
et al., 2018).
Successful products need a strong product development team to
conduct practices that foster the success of developed products (Naghi
Ganji et al., 2017). Product managers must, therefore, understand the
business impacts of product development decisions and the need to have
the right product development practices in place (Nguyen et al., 2018).
Often, product development managers are quick to isolate the causes of
poor product performance and may tackle them individually. However,
a combination of these factors may exist. Cassia et al. (2012) argue that
new products and ideas fail because they lack structured product
development processes or practices. The absence of efficient product
development practices such as risk management, product development
strategy, research and development and other practices can lead to weak
products (Almeida and Miguel, 2007). This can lead to poor market and
requirement analysis resulting to products that do not align with
customer needs.
2.4. Product development practices include the following
■ Research and Development: Product innovation begins with an un­
derstanding of a need and how well to solve the need. Frankort
(2016) reports that knowledge acquisition through R&D is positively
associated with product performance both in terms of product
breadth and market performance. Many organizations, including
those in the financial service sector, are engaging in R&D to be more
deliberate in the products they introduce. Organizations such as
Google, Apple, and Microsoft take R&D further and include the
establishment of research, development and innovation labs to aid
their product development efforts. With greater involvement in
R&D, products perform better in terms of profitability, adoption, and
usage (Cuervo-Cazurra et al., 2018; Santoro et al., 2017; Homburg
et al., 2017; ). Considering this, we argue the following:
Proposition 1: Research and development practices enhance new
financial product performance.
■ Well-established or Structured Product Development Processes: Product
development involves a logical implementation of a set of activities
(Chang and Taylor, 2016; Kahn, 2004). Good product development
practices include well-thought-out processes that follow a product
development methodology. Although many methodologies exist,
certain features characterize them. For instance, product require­
ment analysis is a necessary process or practice that must be un­
dertaken to understand customer and market dynamics and validate
initial market assumptions. A well-structured product development
process also considers critical activities in the product development
life cycle. These activities include customer empathy and ideation,
the determination of a business case, design and prototyping, testing
and launch, and product performance assessment. Given these as­
sumptions, we argue the following:
Proposition 2: Structured product development processes contribute
to the success of new financial products.
■ Product Development Strategy: The product strategy is a plan that fo­
cuses on the product efforts directed towards achieving business
goals. It is a set of actions in a sequence explaining why this is the
right approach. Poor products can also result from a poor product
4
Technological Forecasting & Social Change xxx (xxxx) xxx
strategy, given that the strategy determines the products’ impact and
performance. Product development efforts become aimless without a
defined strategy, just as a strategy is useless without execution. The
product development strategy helps contextualize the problem that
the product will solve, for whom, when and where should a new
financial product be introduced. A well-articulated product strategy
helps a firm to assess how its product development capabilities
match the market opportunities. Such capabilities may include
leadership, functional and technical skills. Where existing capabil­
ities are inadequate for exploring market opportunities, the firm
must strategize on how to play, where to play, and when to play to
win (Ogechie, 2018). This can significantly increase the chances that
the proposed product will perform well when finally developed.
Consequently, we argue the following:
Proposition 3: The existence of a product development strategy en­
hances the success (performance) of new financial products.
■ Risk Management: New product development efforts often face risks
that, when not well managed, may lead to product failure; and
sometimes, product development efforts may not even materialize.
Risks differ across different organizations and product lines. While
the risk profiles for different financial products may not be identical,
it is essential to identify where on the spectrum a company wants to
be to plan risk mitigation measures. Consequently, we argue the
following:
Proposition 4: Risk management practices can enhance the perfor­
mance of new financial products.
2.5. Theoretical foundation and research framework
The dynamic capabilities (DCs) theory extends the well-established
resource-based view (RBV) theory. The dynamic capabilities theory
emphasizes the ability of a firm to integrate, develop and reinvigorate its
internal capacity to address challenges arising from rapidly changing
business environments (Teece et al., 1997, p. 516). From the above
definition, we can infer that DCs promote continuous change and the
configuration of the productive resources of a firm to adapt better to the
environment.
The literature provides empirical evidence that suggests that the
management of various competitive organizations invests in product
development practices as a strategic solution for long-term survival in
some dynamic environments (e.g., Pavlou and El Sawy, 2011; Schilke,
2014). Regular product development practices (PDPs) and product
introduction require a variety of activities that are the driving forces to
regenerate and renew the routines and competitors’ strategies of a firm,
ensuring environmental adaptation in various industries (Helfat and
Winter, 2011). The DC theory provides the underpinning for this case
study on the product development practices of financial services as it
helps to explain how financial service providers develop and integrate
assets, resources and capabilities for new product development as a
response to the needs of a changing business environment.
Fig. 2 shows four critical product development practices – product
development processes, risk management, research and development,
and product strategy – as factors that affect the performance of new
financial products.
3. Methodology
This paper is an exploratory study. It adopts a qualitative method
using multiple case studies of eight (8) financial services providers to
investigate the product development practices and the effects of these
practices on new product performance. Case studies provide very
engaging and rich explorations of a project as it develops in a real-world
setting (Berkowitz, 1997). The study uses a cross-case analysis given its
N. Iheanachor et al. Technological Forecasting & Social Change xxx (xxxx) xxx

Fig. 2. Research framework.

robustness for analysis and synthesis of data across multiple sources, 4. Results
unlike the individual or intra-case analysis approach that restricts the
analysis to a single case (Cruzes et al., 2015; Miles et al., 2013; Berko­ 4.1. Demographic characteristics of the interviewed FSPs
witz, 1997; Mahoney, 1997;). We collected data on product develop­
ment practices using semi-structured interviews. In Table 2, we present the main characteristics of these ten FSPs. For
Theories and concepts from the existing literature were identified the reason of confidentiality, financial services providers have been
(see Table 1) and used in the development of question items for the anonymized in the table.
interview guide. Pertinent questions were framed and validated for each Many of the FSPs interviewed mentioned that several financial ser­
of the constructs. We derived the questions from an item generation vices were developed within the last five years. As noted earlier, a
process while incorporating themes, noting patterns, seeing plausibility, plethora of financial products has always characterized the Nigerian
clustering, making metaphors, counting, contrasting/comparing and financial service market. However, many of these products underper­
partitioning variables (David-West et al., 2018; Miles et al., 2013). The form. The products shown in Table 2 can be broadly grouped into sav­
final instrument is a semi-structured interview developed from the ings, credits, insurance, pensions, utility and bill payment, corporate
validation of questions conducted through several iterations of expert banking, SME banking, and remittance products.
review. Convenient and purposive sampling of FSPs (cases) was con­
ducted to select the respondents who were within reach. The purpo­
siveness of the sampling approach ensures that the data were collected
from product development managers or senior team members (see
Table 1) at FSP headquarters, where product development and Table. 2
decision-making processes are located. Main features of selected FSPs for multiple case studies.
Table 1 highlights the sampling profiles used in the study. Embedded FSPs Institution Type Types of Digital Financial Services (DFSs)
research ethics protocols guided the practices used in seeking formal FSPs provided
participation consent and session recordings. An a priori list of codes FSP1 Microfinance Institution Loans, micro and nano loans, clean energy
(MFI) financing, asset financing, SME loans, and
guided the coding and analysis of interview transcripts. The hierarchical micro-savings
code structure from the a priori list of codes was replicated in an Nvivo FSP2 Bank-led Mobile Money Savings products and credit products
QDA environment (David-West et al., 2018). Operator (MMO)
FSP3 Deposit Money Bank E-payment bills, school solutions,
(DMB) collections, and trade
FSP4 PSSP Aggregator, Switch & E-wallet, bank-IT, corporate pay, web
Super-Agent connect, switch-it, pay outlet, ATM cardless
cash, and mobile top-ups
FSP5 Microfinance Bank (MFB) Loans, savings accounts, savings plan
accounts, regular savings accounts, festival
savings, social impact deposits, term deposit
Table. 1 savings accounts, voluntary savings
Profile of interviewees. accounts, individual savings, savings,
FSPs No. of Deparments/Functional Areas housing, and clean energy
Interviewees FSP6 Deposit Money Bank Letters of credit, unity pay, unity collect,
(DMB) and unity remits
FSP1 1 Operations FSP7 Micro Insurance Investment products (money market funds,
FSP2 1 Operations equity income funds, education trusts,
FSP3 1 Transaction & Electronic Banking employment investment schemes, and
FSP4 2 Management, Operations, and E-Products customized portfolios), insurance product
FSP5 1 Alternative Delivery Channel (life insurance, motor insurance and travel
FSP6 4 Retail & SME Banking, and Mass Market, and Agency insurance), goods in transit, fire and other
Banking peril, money insurance, group life
FSP7 1 Digital Banking insurance, savings and investment
FSP8 3 HR and Admin, Operations, and Enterprise Risk FSP8 Non-Bank led Mobile Corporate e-products, treasury products,
Management Money Operator (MMO) and trade products
FSP9 1 Marketing FSP9 Non-Bank led Mobile Corporate, retail, FetsTraq, and PTSP
FSP10 1 Strategy and Communication Money Operator (MMO) solutions
FSP10 Micro Pension Retirement savings accounts (RSAs)
*All respondents interviewed are of the managerial cadre.

5
N. Iheanachor et al.
4.2. Product development practices and level of implementation by FSPs
Table 3 summarises the different product development practices of
FSPs and the FSPs’ performance levels on each of those practices re­
ported. The dominant product development practices of FSPs include
R&D, product design and prototyping, risk management, product per­
formance measurement, strategy formulation and execution, and impact
measurement. As shown in Table 3, all FSPs reported engaging in all the
product development practices that were identified. In attempting to
assess how product development practices affect new product perfor­
mance, the study also assessed the level of implementation of these
product development practices. The results are presented in Table 3.
The results presented in Table 3 show that the level of execution of
product development practices varies across different FSPs. However,
similar patterns exist among FSPs with similar assets, resources, and
capabilities (ARCs). The results are discussed in the following section.
5. Discussion
5.1. Nature of product development practices among Nigerian FSPs
We assess the product development practices conducted by the
different financial service providers to understand the differences and
similarities and the attendant’s reasons for the level of PDPs conducted.
• Product Development Practices among Mobile Money Operators
(MMOs): Mobile money operators (FSPs 2, 4, 8, & 9) performed low
or moderate across the PDP measures. These institutions primarily
provide payment services through mobile devices. They rely mainly
on the quality of mobile network connectivity and the spread of their
agents across different locations of interest. MMOs typically offer
higher-priced services because of the high service charges they incur
from different partners who provide the service delivery channels.
Manpower costs are high, which limits the product development
capabilities of these providers. The assessed risk is average as pay­
ment services do not involve the extension of credit. MMOs have a
significant need for high-quality talent, which is expensive and
scarce. Market sizing and product viability assessments are non-
existent. Market and occupational segmentation are also not
visible, although product development and deployment are driven
by profitability assessments. Low levels of ideation and market
testing are observed.
Table. 3
Product Development Practices (PDPs) and FSPs Scorecard on each PDP.
6
Technological Forecasting & Social Change xxx (xxxx) xxx
• Product Development Practices among Pension and Insurance Providers:
Pension and insurance providers scored low in R&D, customer
empathy and ideation, business case determination, product design,
prototyping, testing and launch, and product impact assessment,
although both FSPs (7 and 10) scored moderately in their risk
assessment practices. These institutions primarily focus on providing
affordable retirement savings to working individuals to make them
financially secure and independent in their old age. Most product
offerings are homogenous, and the product design exists only within
the regulatory boundaries defined by PENCOM.
These regulatory safeguards are heavily skewed towards risk man­
agement with little incentives to potential savers compared with other
FSPs that offer them credit. They mostly engage in product adaptation
rather than developing new products to meet the needs of banked and
served consumers. Risk management here is very strong while
leveraging the risk management capabilities of the parent pension
companies. Market sizing and product viability assessments are very
scant. They do not have products that are gender specific, but they have
products that speak to the general needs of the consumers outside the
pension net. We also observed a low level of prototyping and product
testing among pension and insurance providers.
• Product Development Practices among Microfinance Banks/Institutions:
These institutions (FSPs 1 and 5) also exhibited similar product
development practices. While they score moderate across several
PDPs, more attention is given to business case analysis, product
design, and prototyping. These institutions are part of the FSP
segment in Nigeria that customizes services with ethical lending
practices in the form of small business loans to unemployed, low-
income individuals. These people would otherwise have limited or
no access to other financial products, especially in semi-urban and
rural areas. There are no procedures for how to track product per­
formance. The most popular products are near-identical. It takes
from two months to two years for them to launch new products. The
prototyping and actual product development process are also un­
clear. MFBs do not have products that are gender specific, and they
have fewer cost reduction initiatives in terms of interest rates. MFBs
identify the need for new products through agent networks, organic
movement, and interviews (FGDs) that provide them with an un­
derstanding of the dynamics of consumer behaviours and locations.
• Product Development Practices among Deposit Money (Commercial)
Banks: Although deposit money banks (FSPs 3 & 6) are not very
N. Iheanachor et al.
similar in product development practices, none of the DMBs scored
high in any of the product development practices. DMBs have well-
resourced product development teams that come from diverse
functional areas in the organization. Providers in this area conduct
more product adaptation and offer the same product to virtually all
consumers. Minimal customization occurs. These factors lead to low
product adoption; and where adoption exists, customer attrition is
high. Risk assessment is high, and this could reduce adoption. Market
sizing and product viability assessments are very scant. Market and
occupational segmentation are shallow as providers rely more on
customer feedback to gage market needs, some of which are un­
structured or inaccurate. For DMBs, product development is better
resourced. Product testing and roll-out can take an average of 2 to 3
months with regulatory approval not serving as a major impediment.
A low level of ideation is widespread and could be the reason for the
product homogeneity that is observed among DMBs.
5.2. Product development practices and product performance
Proposition 1: Research and Development Practices and Product
Performance
In the first proposition, we argue that R&D enhances new financial
service performance. All FSPs studied scored low or average on R&D
efforts. The findings of this study suggest that poor R&D practice is one
reason financial services fail in Nigeria. For instance, a respondent stated
the following:
"…our research and development are mainly on market research to
map out where the unbanked and under-banked customers are
located. That way, our products can be more targeted in our mar­
keting efforts."
This is not an R&D effort that defines the product development di­
rection, but rather it is research that helps the marketing of the product.
Beyond demographic profiling, R&D entails behavioural and psycho­
metric profiling of the target market segments to understand their eco­
nomic lives and the reasons for their behaviours. R&D efforts that
consider human-centred design approaches can unravel the various
consumer archetypes across various demographic profiles. It is in this
stage that the team empathizes with the customer to ideate and refine
the value proposition. A good R&D effort provides a clear picture of the
problem and potential solutions. A respondent notes thus:
"…I have been involved in some ideation where we have to engage
women in some market places to ask them what are the pain points,
what are the things that we need to know. We are trying to build a
product that will help them to save more and trying to attach some
new product to it but we found that what we were thinking about
was not what they even wanted and that led to the introduction of a
new product to them."
Grimpe et al. (2017) note that innovative product design, packaging,
pricing, and promotion that are rooted in R&D can significantly drive
the performance of new products. Processes driven by R&D can guide
the product development team during the design, prototyping, and
testing phases. We conclude that the low level of research and devel­
opment among FSPs is a driver of the poor performance of new financial
services (products) in the Nigerian market.
Another respondent states the following:
"The number of unbanked and under-banked adults in Nigeria is
about 50 percent of the adult population. We aim to reach those in
places that no one is interested in."
Products developed with this mindset will fail. While the market may
exist, not all of it is addressable. Serving a dynamic market such as
Nigeria requires quality R&D effort. D’Este et al. (2016) stress that there
is clear evidence that firms’ knowledge creation capacities, especially
7
Technological Forecasting & Social Change xxx (xxxx) xxx
internal R&D activities, are decisive for their product performance.
Proposition 2: Product Development Processes and Product
Performance
We argue for structured product development processes. They
include customer empathy, ideation, concept testing and refinement,
requirement analysis and market validation, prototyping, piloting,
product lunch and performance assessment. They contribute to the
success of new financial products. The data show that FSPs scored low
on each product development process except on indicators such as
business case determination, design and prototyping, and ideation
where a few FSPs scored high (see Table 3). Many FSPs deploy ho­
mogenous products to consumers without following a rigorous product
development process guided by an established product development
methodology. Some FSPs do not conduct customization that ensures that
the products meet the needs of the diverse mass market they aim to
serve. Homogenous products do not address diverse customer needs and
may lead to poor product performance. One of the senior executives
interviewed remarked the following:
"…we trust our product development team because they come with a
wealth of experience having worked in the manufacturing industry
for years. They understand how to carry out product development,
and we give them full support once they can show the profitability of
the product."
The products that meet the needs of this market may vary across
demographic groups and would require understanding customer needs,
defining product requirements and business cases, and scenario plan­
ning. Good product development practices require product teams to be
methodological (Kauffman et al., 2015; Orbach and Fruchter, 2011).
These methodological approaches can help in developing products in a
manner that considers different customer archetypes across different
demographic profiles. This helps to achieve well-defined use cases and
customer-centric products with guaranteed wide adoption and profit­
ability. Well-defined and executed product development processes can
also help reduce product failures (D’Este et al., 2016) as product
development teams can run more iterations of prototypes, allowing for
quality checks and determining the product’s desirability, viability and
feasibility. We conclude that the absence of or a poor implementation of
these processes can translate into product failure.
Proposition 3: Product Development Strategy and Product Develop­
ment Performance
Here, we argue that the availability of a product development
strategy enhances the success (performance) of new financial products,
given that strategy is required to serve a market efficiently and profit­
ably. Grimpe et al. (2017) posit that a well-developed strategy is critical
to successfully taking a product to the market as it considers market
forces, especially the threat of substitute products, barriers to entry and
other forces that may lower product performance. Product strategies are
unique to specific products. The route-to-market (RTM) also differs
across locations and demographics. The findings also show that all the
FSPs scored low on the product strategy indicator. What many FSPs treat
as a product strategy are marketing plans detailing how they will un­
dertake branding and advertising. A respondent notes as follows:
"…sometimes we have partnerships to deploy some products, so we have to
work with banks, like I said pension companies, sometimes we . . …there is
a small scale pilot which is with the internal customers, which is me and
my colleagues so we are the internal customers, and then expanded retail
team, who are the guys who manage the retail product on the field and
then we also sample a number of our key agent for a soft life deployment
before giving out the products to the customers in general…"
Product pricing is the responsibility of the finance department, just
as operations are an HR concern. There was no strategy document
showing how the product will translate into the realization of the overall
organization vision. The absence of this has resulted in poor product
N. Iheanachor et al.
performance measurement. Drawing from Danneels’s (2002) first- and
second-order competencies, we can explain that a product strategy helps
product managers and teams build marketing innovations that help in
aligning new product performance metrics to the overall organizational
goal. The absence of this can negatively affect product performance as
there are likely to be undefined indicators or approaches for measuring
product performance or for taking appropriate corrective measures.
Proposition 4: Risk Management Practices and Product Performance
Proposition four argues that risk management practices can enhance
the performance of new financial products. The study observes that the
risk management practices in product management are suboptimal
among Nigerian FSPs. Few FSPs (mainly MMOs), however, prioritized
risk. An MMO representative stated as follows:
"Like I said at the product conceptualization and development, all the
functionary units including risk are involved. So, all the risk exposure
deliberations are handled at that stage. We have what we call the
product papers…in that document every aspect of that product is
articulated and documented including the risk mitigants."
A key area where risk is dominant is the platform and not risks
relating to product development. FSPs are more concerned with man­
aging risks that are associated with the security of their platforms while
neglecting risks that may arise from non-approval by regulators. Such
risks, when poorly managed, may lead to products not making it to the
hands of the target user groups because of non-approval from regulatory
bodies.
6. Conclusion
New financial products in Nigeria struggle to perform well because of
poor product development practices. Although the financial service
sector has grown over the years with an improved regulatory environ­
ment, this study shows that product development practices seeking to
guarantee new product success are poorly implemented. The resultant
effects are poor product performance and low adoption. The processes
adopted in the development of financial services affect the adoption,
use, and overall penetration of the product in the marketplace. Financial
inclusion rates will therefore remain low if the adoption and use of
financial services remain low.
Evidence suggests that several financial services are inappropriately
designed and unsuited to the needs of the diverse segments of unbanked
and underbanked Nigerians. Additionally, there is an overestimation of
the market size owing to lack of adequate market research and R&D,
which can cause products to not meet financial projections. Products
also fail because of poor product designs stemming from inadequate
requirement analysis and a lack of well-designed and tested prototypes
before products are launched. This can also translate to wrongly posi­
tioned, priced, or advertised products that underperform in terms of
adoption and profitability. One reason highlighted by this study is that
the different FSPs have insufficient product development skills. Most
times, product development teams comprise software engineers and
those with a manufacturing background whereas financial products are
service-oriented. The absence of a skilled and well diversified team can
translate to high development costs, which may lead to unprofitable
products (Olson et al., 2001).
Addressing these concerns requires FSPs to reconfigure their product
development teams. The teams must possess the capabilities needed for
the development of quality financial services (products) that meet
validated market assumptions. With the right set of product develop­
ment capabilities, poor product performance can be closed using
industry-wide market research that incorporates human-centred design
(HCD) and design-thinking techniques. These can lead to the develop­
ment of financial services that are customer-centric and widely adopted,
trusted by consumers, and compliant with market regulations. Addi­
tionally, market knowledge breadth that flows from rigorous R&D can
8
Technological Forecasting & Social Change xxx (xxxx) xxx
help firms transform novel ideas into new products, thereby intensifying
product performance (Jin et al., 2019)
Good R&D practices such as the adoption of approaches such as
human-centred design can help product managers and the broader
product development teams to provide answers that validate initial
market assumptions. These could be assumptions on consumer needs,
buying behaviour, market share, rival firms, and other prevailing market
conditions. These methodologies can help answer questions such as the
following: 1) What non-existing value is being proposed by the new
product? 2) What use cases exist, and what is the addressable market? 3)
Is there an effective product development process? How competent is
the product development team? 4) What is the time frame between
ideation and launch? 5) How efficient is the operational process? 6) Is
the product prototype tested before or after launch? 7) Are there stra­
tegies for mitigating risks emerging from new financial product devel­
opment? 8) What are the feedback channels for customers’ opinions on
new products? 9) How does management respond to unfavourable
feedback on new financial products?
7. Managerial implications
The literature (Schilke, 2014; Pavlou and El Sawy, 2011) provides
empirical evidence that suggests that the more an organization invests in
product development practices, the higher the likelihood of product
success. Effective product development practices (PDPs) serve as forms
of competitive strategies, especially in an industry with multiple players
(Cheng and Yeng, 2019). DC theory argues for the development of ca­
pabilities that help a firm meet the demands of a dynamic environment
of business. In the Nigerian financial sector, management teams of FSPs
must build the capabilities required for product development to ensure
the high performance of their products. It should be noted that executive
commitment and support are key success factors for both product
development teams and ultimate product performance.
7.1. Study limitations and directions for further studies
A limitation of this study is the limited number of respondents, which
makes the generalization of the findings challenging. Moreover, the
busy nature of the category of respondents (being c-level executives)
meant that some were unavailable, and single interviews were some­
times conducted twice to enable the authors to gather rich data. This
reduced the number of respondents for some FSPs to one, making it
difficult to achieve diversity across functional roles in the product
development spectrum and, to a certain extent, leading to potential data
loss. Further studies should aim to reach a larger sample size and involve
several respondents in a single organization to achieve a higher level of
saturation. Future studies can further distil the issues into distinct FSP
types such as banks, insurance companies and pension providers in the
Nigerian market.
Author statement
All persons who meet authorship criteria are listed as authors, and all
authors certify that they have participated sufficiently in the work to
take public responsibility for the content, including participation in the
concept, design, analysis, writing, or revision of the manuscript.
Furthermore, each author certifies that this material or similar material
has not been and will not be submitted to or published in any other
publication before its appearance in the Technological Forecasting and
Social Change.
Supplementary materials
Supplementary material associated with this article can be found, in
the online version, at doi:10.1016/j.techfore.2020.120470.
N. Iheanachor et al. Technological Forecasting & Social Change xxx (xxxx) xxx

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study of the success factors for pioneering and following.
Dr Nkemdilim Iheanachor is a Faculty member in the Strategy and International Business
Group of Lagos Business School, Pan-Atlantic University, Ajah, Lagos, Nigeria. Nkemdilim
holds a PhD Degree in Management from Pan-Atlantic University.
Mr Immanuel Umukoro is a Research Fellow in Lagos Business School, Pan-Atlantic
University, Ajah, Lagos, Nigeria. Immanuel holds a Master of Science Degree in Infor­
mation Science from University of Ibadan
Professor Olayinka David-West is a Professor of Information Systems in Lagos Business
School, Pan-Atlantic University, Ajah, Lagos, Nigeria. Olayinka holds a Doctorate in
Business Administration Degree from Manchester Business School.