The word “innovation” is used widely and inconsistently in media and business literature. Looking to the Latin roots of the word, “in-nova-tion” literally means “in a new way.” Innovation can be defined as the successful conversion of new concepts and knowledge into new products, services, or processes that deliver new customer value in the marketplace.
Innovative products are those that replace or build on current offerings; they provide new features or other advantages that allow users to operate more efficiently and/or less expensively. Classic examples include the electric light bulb, the iPod, and GPS navigation systems. These products introduced radically new options for customers that quickly became widely demanded in markets around the globe while generating handsome profits for their producers.
In some cases, the product is a commodity or staple with a long product life cycle, for example, basic foods and pantry staples like milk and flour. Innovation is still important for competitiveness and long-term success, and the processes related to manufacturing and delivering the product are where changes can continue to offer greater value to customers and stakeholders.
Milk used to be delivered door to door, but that was in an era when someone was usually at home and could store it properly. In today’s social environments, there may be security barriers that prevent a delivery person from reaching the door, and there is likely to be no one at the residence to receive the perishable product. Providing alternative means of supply chain and milk delivery, such as making it available in quick-shop stores and grocers, allows customers to pick up the milk at their convenience. Other innovations for milk delivery were the processes for pasteurization (Louis Pasteur) and for dried milk. These process innovations benefited customers and retailers by prolonging the shelf life of the product.
Process innovation is finding better ways to do the job that you have to do. Compared with product innovation, there may not be an ingenious new idea that needs to be built, tested, funded, marketed, launched, and serviced. Process innovation may involve benchmarking another organization that performs a similar process, or an unrelated organization with a process that somehow parallels yours.
Business model innovation
While innovative new products and services—along with new manufacturing and delivery processes—are frequently used to improve organizational performance, sometimes the entire business model becomes outdated and ineffective, requiring a dramatic change, as in the increasing use of homecare rather than hospitalized care. The need for business model innovation is often driven by the increasing need for agility in business structure, and this is in turn driven by the increasing speed of change in the market.
Improvement versus innovation
Innovation by definition adds value, and it is probable that a successful innovative solution will be the one that improves the process and/or its output. But innovation and improvement are often referred to in tandem, as in “our innovation and improvement program” or “the continuous improvement and innovation team.”
Not all improvements are innovations, most innovations are improvements, and there are some innovations that are not improvements. The relationship looks like the figure below.
Excerpted from The Executive Guide to Innovation: Turning Good Ideas into Great Results, Jane Keathley, Peter Merrill, Tracy Owens, Ian Meggarrey, and Kevin Posey, ASQ Quality Press, 2013, pages 3-9.
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