Innovation is transformation, it is the breaking of the status quo, it is change. Companies can innovate in a number of ways, including process innovation and product innovation. Innovation can also occur in the area of business models.
Often, companies do not try to innovate at all levels, but focus on certain types of innovation and make strategic choices to achieve results more effectively.
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What is process innovation?
Process innovation involves the introduction of new or significantly improved production or supply methods. This usually includes.
- Substantial changes in technology, hardware and/or software.
- Minor changes or improvements, such as the addition of production or distribution systems similar to those already in use, which may lead to an increase in production or service capacity, but may also result in a decision to discontinue the process.
These changes may be due solely to changes in supply caused by changes in factor prices, or they may be the result of new strategies, such as customisation. It should also be borne in mind that seasonal and other cyclical changes can also sometimes drive process innovation.
Process innovation – an effective way to improve
When we think of innovation, we tend to think of product innovation. This involves developing a new product, improving the performance of an existing product or introducing a new feature in a product already on the market.
Product innovation can be driven by technological advances, changes in customer needs or the design of obsolete products. In both cases, product innovation is usually visible to consumers and should lead to increased demand for the product.
In this sense, process innovation is quite different. It is the least attractive innovation because it is not visible to the consumer, but that does not mean that it is not a very effective means of increasing productivity.
A process is the combination of equipment, skills and technology used to produce, deliver and support a product or service. Even with this broad classification, there are countless areas for improvement.
Process innovation may include
- Changes in production equipment and technology (including software used to design and develop products).
- Improvements in the tools, technology and IT solutions used to support supply chain and delivery systems.
- Changes in the tools used to sell and maintain assets, and in the way we account for and service our customers.
As mentioned above, product innovations are usually visible to customers, while process changes are usually only seen and evaluated internally. These changes are more likely to reduce production costs than increase revenues.
Process innovation is less risky than product innovation and business model innovation.
Benefits of process innovation
The most important benefits of process innovation are as follows
Reduction of production time
The most important benefit of process innovation is that it leads to higher profits for the company in the medium and long term.
This is because it reduces production time by increasing the productivity of the human factor. This is because employees can do more work with fewer resources. Therefore, companies that innovate their processes know that the money they spend on them is not a cost, but aninvestment.
Increase the productivity of your employees
And when your staff learns and uses the newly introduced processes effectively, you can achieve high productivity and efficiency.
This will maximise your production time and motivate your employees. Because they are now able to do the job in less time and with better results.
Human errors occur in all processes and cause economic losses to companies. However, thanks to process innovation, human error has been significantly reduced.
This is because processes are more standardised, automated and follow established protocols. This reduces the company’s financial losses.
Improving decision-making processes
Especially in such a competitive market, any company needs to make decisions quickly and successfully. Process innovation makes decision-making faster and more efficient. Thanks to the new system, executives and managers have access to information generated in real time and can compare and relate key data that is crucial for decision making.
Improving customer satisfaction
Similarly, process innovation can increase customer satisfaction by better adapting to their needs. This is because companies prepare new offers that adapt to changes in market supply and demand.
It also allows the company to respond to changing consumer trends and to challenge new designs offered by competitors in the market.
Disadvantages of process innovation
The most important disadvantages of process innovation are
Mismanagement and waste
However, process innovation in business can be effective if it is implemented correctly. Otherwise, processes are not implemented correctly, resulting in a waste of money and other resources.
In any case, a company spends a lot of money, but if the processes are not implemented correctly, the money is quickly lost and is very difficult to recover.
Innovation can be limited
Of course, a company’s resources must be used to the maximum and in an optimal way. Therefore, implementing process innovation without careful analysis may actually limit adaptation to new competitive trends.
Lack of communication
Communication is, of course, essential for process innovation. Therefore, if an effective communication process has not been established, the innovation process may end in a major failure.
Examples of process innovation
One of the most famous and innovative examples of process innovation is Henry Ford’s invention of the world’s first moving assembly line. This process change not only facilitated the assembly of the cars, but also reduced the production time of a single car from 12 hours to 1.5 hours.
Today, the digital transformation of companies is the best support for process innovation projects. Thanks to technology, operational efficiency is increased and costs are reduced.
Process innovation: case studies
We all know McDonald’s, don’t we? Today, it can no longer be denied that it is one of the most successful food companies in the world. Its principles are clear: every product must taste good, be easy to prepare and not be too expensive. Speed of service is one of the keys to success. On average, McDonald’s serves its customers in just 90 seconds. The food production chain is so finely tuned that if a new idea comes along that is not suitable (a product that takes too long to produce), it is discarded because it affects the speed at which it is already successful.
Netflix is a company that is redefining cultural consumption today: in 2006, it announced a competition for programmers to devise a content recommendation algorithm that would improve existing algorithms by 10%. The contest was not held for three years, but finally the programmers came up with an idea to improve the existing algorithm by 10.08%. What was the prize: one million dollars. When you open the Netflix interface and see the films and TV programmes that you have recently watched or that are recommended to you according to your preferences, that is the seed of the success of this tool. It is amazing how much the user experience has improved.
Hot desking has revolutionised many offices. It is a very easy way to break the monotony of fixed desks and cubicles for each staff member. Hot-desking is the practice of working in different parts of the office each day without having a dedicated space; it started in the 1990s and has been introduced in many companies, where it is said to have increased communication, relationships and the exchange of ideas.
These are just a few examples of how innovations in company processes have led to great success. But innovation is not about following a template or a series of steps. What we can do is to create the best conditions for ideas to flourish within our organisations, so that promising ideas can be identified and supported.
In other words, process innovation is about helping companies improve their production and distribution methods. Because it allows companies to optimise the use of time, increase the productivity of their human resources, minimise errors, speed up decision-making and improve customer satisfaction. However, for process innovation to be effective, the whole process must be effectively managed, carefully analysed for missing constraints and communicated accordingly.