Process innovation

From CEOpedia | Management online

Process innovation is the implementation of a new or significantly improved production or delivery method. This category includes significant changes in technology, devices and / or software. Innovations within processes can be aimed at reducing unit costs of production or delivery, increasing quality, production or supplying new or significantly improved products. Production methods are techniques, devices and software used to manufacture products or services. An example of new production methods is the implementation of new devices that automate the production process as part of the production line or the implementation of computer support for the purposes of product development and development. Delivery methods relate to the company's logistics and include equipment, software and techniques used to acquire means of production, allocate resources within the company, or provide final products. An example of the new delivery method is the introduction of a goods flow control system based on bar codes or RFID (radio frequency identification of goods) technology.

Process innovations include new or significantly improved methods for creating and providing services. They may consist of significant changes in the equipment and software used in service companies or in changes in the procedures or techniques used to provide the services. Examples include the introduction of GPS-based location devices in transport services, the implementation of a new booking system in a travel agency, and the development of new project management techniques in a consulting company. Project innovations also include new or significantly improved techniques, devices and software in ancillary activities such as procurement, accounting, IT services and maintenance work. The implementation of new or significantly improved ICT technologies is an innovation within processes if its purpose is to increase the efficiency and / or quality of ancillary activities.

Process innovations do not include:

  • minor changes,
  • increase in production or service capacity obtained by adding production processes or logistics systems that are very similar to those currently used.

Examples of process innovations

Goods:

  • installation of new or improved production technology, such as automation equipment or real-time sensors that can better adapt processes to needs,
  • new equipment related to the production of new or improved products,
  • laser cutting tools,
  • automated packaging,
  • computerized equipment for production quality control,
  • improved testing of production monitoring equipment.

Delivery and Operations:

  • portable scanners / computers for registering goods,
  • the introduction of bar coding or radio frequency identification (RFID) chips to track materials flowing through the supply chain,
  • GPS tracking system in transport equipment,
  • software introduction to identify optimal delivery routes.
  • introduction of electronic billing systems,
  • introduction of an electronic tagging system,
  • new or significantly improved computer networks.

Distinction of innovation within products and processes

The distinction between products and processes is simple for products. In turn, for services, the situation may be less obvious, as the production, delivery and consumption of many services can take place at the same time. Here are some tips for making distinctions: If an innovation concerns new or significantly improved features of the service offered to customers, it is an innovation within the product. If an innovation relates to new or significantly improved methods, devices and / or skills used to provide a given service, it is an innovation within the process. If an innovation involves significant improvements in both the features of the service offered and the methods, devices and / or skills used to provide the service, it is an innovation in both the product and the process. In many cases, service innovation will only belong to one type. An example is a company that offers a new service or a new feature of the service without a significant change in the method of its provision. Similarly, it can happen that significant process improvements, such as those aimed at reducing delivery costs, do not change the characteristics of the service offered to customers.

Risk of innovation

The risk related to the innovative activity of enterprises is divided into:

  • company risk (financial) - related to the difficulty of obtaining funds for the project,
  • project risk - related to the technical conditions of the project implementation,
  • owners risk - related to the lack of diversification of the company's development directions.

Therefore, innovative risk should be considered from the point of view of: project risk, company risk and owners risk. These components present the basic features of innovation, which include, among others: high costs of project implementation, long time horizon and as yet unproven technology. Project risk is defined as the risk related to the technical conditions of the project implementation, while in terms of the risk of the owners it results from the lack of diversification of the company's development directions. Company risk is associated with broadly understood financial risk. Innovations are the basic source of creating a competitive advantage of an enterprise. Implementing innovation requires a lot of courage. Therefore, it is necessary to carry out analyzes aimed at ensuring that the implemented innovation is not the result of random activities.


Process innovation — recommended articles
Cost avoidance — Dependent demand — Organization of production — Production logistics subsystem — Types of supply — Business process mapping — MRP II — Management information system — Transformational outsourcing

References

Author: Sara Leśniak

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