Process Innovation, and thus product and service innovation, form an integral part of process excellence leading to sustained profitable growth. This article provides a strategic and methodological approach to innovation.
Much has been written about innovation and the need to do so to ensure shareholder wealth is continuously created. But it seems few companies go beyond product and/or service innovation to innovate their processes as well. Product or service innovation should naturally lead to process innovation. The reverse is rarely considered. Process innovation can lead to huge gains in profit growth.
Product or service and process innovation combined with process improvement ensure long-term profit growth. A typical risk that companies run is to jump onto the innovation bandwagon prematurely without having their current processes running at maximum productivity.
The bulk of a company’s profit growth opportunities lie in its current processes awaiting improvement to unlock its full potential. Robust process improvement methodologies should be employed to increase efficiencies and effectiveness of these processes before considering volume increase or innovation strategies.
Profit growth typically falls into four categories determined by whether the offering (product or service) is existing or new and, secondly, whether the market serviced is existing or new.
Appropriate implementation of product, service and process innovation
Deciding whether process improvement or product or service and process innovation are required boils down to a strategic choice. While profit growth is the driver, determining whether the opportunity lies in an existing or new market and with existing or new products and services is a key step.
Existing offering and existing market – customer’s experience correlates with sales volume, up and cross-selling. To enhance the customer’s experience, the customer service process needs regular reviewing, continuously improved, and occasionally reinvented. Productivity improvement is a huge area of profit growth and often too quickly overlooked in an organization’s keenness to be seen to be innovative.
Existing offering and new market – market expansion go hand in hand with increased efficiency and volume throughput. Through improvement efforts, product and/or service and process (including channel) modifications are required that enable the organization to effectively deliver to the new market.
New offering and existing market – this requires a new product and/or service introduction while potentially expanding the product range and branding. This is the first of the growth areas requiring innovation, most often undertaken within the organization, often through capability and capacity expansion.
New offering and new market – this is the classical diversification approach that may require innovation and often includes mergers, acquisitions, or joint ventures.
Typical product, service and process innovation phases
For the first two profit growth areas above, improvement methodologies such as Lean Manufacturing, Six Sigma, TQM, 8D, TOC, BPS, etc. are employed.
When it comes to product or service and process innovation various methodologies can be employed, but all, in essence, follow similar phases that can be summarized as:
- Identify – This phase focuses on identifying the needs and wants of the market through appropriate research, gathering the voice of the customer and voice of the market. Analyzing and interpreting findings in combination with additional data and big data provides the raw input for product and service innovation.
- Design – During the design phase, ideas are generated, screened and initial concept formulated. The feasibility and business case for each evaluated and the top concept selected.
- Develop – During the develop phase prototype and an iterative process of create, tested, and modify is undertaken. Once approved the value creation process is scaled up and inputs defined and obtained.
- Deliver – Once the production or service process has been designed and tested, it its set in action culminating the the commercialize of products and services.
In order to sustainably deliver a new innovation whether a product or service, not only does the product and/or service innovation take place but often neglected is the processes to create and deliver those innovations long term. This implies that the creation and delivery processes themselves often need innovation, or at least innovative modification. House of Quality (HOQ or QFD) is a good tool to hang the different design stages together as the innovation moves through its development.
- Product and/or service Design
- Creation Process Design
- Delivery Process Design
Product, service and process innovation methods and tools
The NPI (new product introduction) approach is often employed by the marketing department and may, to a greater or lesser degree, including the other value creation departments in the process. Several roadmaps have been popularized in an effort to include all stakeholders in the innovation process. To name a few often lumped under the name of Design for Six Sigma (DFSS):
- DMADV: Define – Measure – Analyse – Design – Verify
- DMADOV: Define – Measure – Analyse – Design – Optimize – Verify
- DCCDI: Define – Customer Concept – Design – Implement
- IDOV: Identify – Design – Analyse – Optimize – Validate
- PIDOV: Plan – Identify – Design – Analyse – Optimize – Validate
- IDEaS: Initiate – Design – Execute and – Sustain
A selection of effective tools used in the innovation process include:
- Ethnography studies
- Market Perceived Quality Performance (MPQP)
- KJ Analysis
- Canonical Analysis
- Conjoint Analysis
- Kano Model
- Pugh Diagram
- House of Quality (HOQ) or Quality Function Deployment (QFD)
- Theory of solving inventive problems (TRIZ)
- Mote Carlo Simulation
- Statical tests
- Rapid prototyping
- Robust design
- Failure Modes Effects Analysis (FMEA)