Process Innovation Trumps Product Innovation?
Kevin Parker of Manufacturing Business Technology explored innovation as not only a process (vs. a product) but also as something we tend to constantly be engaged in simply because of the constant upgrading of technology. Talking about products on the last gasps of their lifecycles he cited studies that said:
…further cost-reducing process innovations have relatively small effects on demand…Does that mean then, that product innovation, as opposed to process innovation, is always the key to success? Not necessarily, as the always helpful Wikipedia points out in its entry on “innovation”: process innovation can lead directly to increased shareholder value. Product innovation, on the other hand, risks costly R&D efforts that, if they fail, can erode shareholder value.
Kevin was trying to make a point that process innovation, spurred by technology, is endemic and possibly less risky than product innovation. Maybe so, but I believe that it is process innovation that can bring fantastic value that in some cases overshadows product innovation. And you don’t necessarily need technology to do it.
One of the roles of the best Project Management Offices (PMOs) is to do research on process innovation and bring the “best of the best” from inside and outside a company’s industry and country to the executive governance board for consideration. This is how the top companies drive innovation of their processes.
How do you fell about process innovation being valuable? Is it not valuable to your company because they do not conduct research for process innovations?
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POSTED IN: Best of the Best Practices, PMOs and Portfolio Management
5 opinions for Process Innovation Trumps Product Innovation?
Dibyendu De
Apr 14, 2008 at 10:49 am
Excellent blog. You are right that process innovation is less risky and can bring in more profits than concentrating on product innovation. A process always involves activities and costs are tied to activites. Lesser the activities lesser is the cost and more are the profits. However, the focus should be on how to reduce boredom and stress of human activities. It automatically brings down costs.
Bob Turek
Apr 14, 2008 at 11:00 pm
Dibyendu- thank you for commenting- I hope you continue to read and comment with your insights. Your point about reducing boredom that leads to more output/througput (the way I like to look at it) and therefore less cost is excellent. Take a look at the related posts- they have a lot to do with how to set up ways to find innovative business processes outside your organization, industry, and even country.
Ryan
Apr 19, 2008 at 10:52 am
Great post, keep up the good work.
Quick point there seems to be a problem with your site, just below the search box I get an error message. Might just be me though.
Sanjay Roy
Apr 22, 2008 at 5:39 am
Hi Bob,
I fully agree to your notion that process innovation definitely brings more value to shareholder then product innovation, though, both have enormous influence in creating value in the enterprise. But i have one concern is that process innovation must not kill creativity instead it should encourage more creative ideas and bring continuous value improvement. It has been observed that too much process intensive enterpise has actually killed creative innovation and eventually became less competitive.
While the above concern is not really paramount in my mind, i feel your argument that process efficiency and innovation bring down cost is definitely and important factor and we at the thrashold of new generation enterprise must look forward to, to innovate and excelled.
In our organization, which is a global leader in EDA product and is considered the best partner of Semi-conductor industry are well aware of this notion and is working towards improving out bottomline by continuously working on bringing more process efficiency and innovation…
Thanks for the article again…
Sanjay Roy
IT Engagement Manager
Cadence Design Systems (India)
Bob Turek
Apr 22, 2008 at 11:14 am
Sanjay- thanks for commenting. Please do more. I really like the link to continuous improvement. As you probably know, continuous improvement is heavily dependent on the culture of the organization, i.e., the ability to recognize that process performers are the experts who can discover innovations plus the ability to monitor/solicit those innovations by supervisors and managers. This should encourage creativity as long as it contributes to continuous improvement. The PMO can look outside the organization with research on how things are done in other companies to contribute to this creativity and present ideas to an executive governance board. So, what you have is bottom up and top down pressure to continuously improve. Have you seen your best customers doing this type of thing? i.e., both or either bottom up or top down innovation efforts?
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