Product or service and process innovation forms an integral part of process excellence leading to sustained profitable growth. This articles 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 ensures 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 their 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 fall 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.
Deciding whether process improvement or product or service and process innovation is 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 exiting 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, customer service process need 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 goes hand in hand with increased efficiency and volume throughput. Through improvement efforts, product and/or service and process (including channel) modifications are required that enables the organization to effectively deliver to the new market.
New offering and existing market - this requires 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 merges, acquisitions or joint ventures.
For the first two profit growth areas above, improvement methodologies such as Lean Manufacturing, Six Sigma, TQM, 8D, TOC, BPS etc. are employed.
When in 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:
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 creates and delivers 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.
The NPI (new product introduction) approach is often employed by the marketing department and may, to a greater or lesser degree, include 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):
A selection of effective tools used in the innovation process include: