Innovations vary widely, in scale, nature, degree of novelty and so on – and so do innovating organizations. But at this level of abstraction it is possible to see the same basic process operating in each case, For example, developing a new consumer product will involve picking up signals about potential needs and new technological possibilities, developing a strategic concept, coming up with options and then working those up into new products which can be launched into the marketplace.
In similar fashion deciding to install a new piece of process technology also follows this pattern. Signals about needs – in this case internal ones, such as problems with the current equipment – and new technological means are processed and provide an input to developing a strategic concept. This then requires identifying an existing option, or inventing a new one which must then be developed to such a point that it can be implemented i.e. launched by users within the enterprises – effectively a group of internal customers. The same principles of needing to understand their needs and to prepare the marketplace for effective launch will apply as in the case of product innovation.
Service may appear different because they are often less tangible – but the same underlying model applies. The process whereby an insurance or financial services company launches a new product will follow path of signal processing, strategic concept product and market development and launch. What is developed may be less tangible than a new television set, but the underlying structure to the process is the same. We should also recognize that increasingly what we call manufacturing includes a sizable service component with core products being offered together with supporting services — a website a customer information or help line, updates etc. indeed for many complex product systems such as aircraft engines – the overall package is likely to have a life in excess of 30 or 40 years and the service and support component may represent a significant part of the purchase. At the limit such manufacturers are recognizing that their users actually want to buy some service attribute which is embodied in the products – so aero engine manufacturers are offering power by the hour rather than simply selling engines.
Similarly the huge growth in outsourcing of key business processes – IT cal center management, human resources administration etc – although indicative of a structural shift in the economy has at its heart the same innovation drivers. Even if companies are being hollowed out the challenges facing the outsourcer and its client remain those of process innovation. The underlying business model of outsourcing is based on being able to do something more efficiently than the client and thereby creating a business margin – but achieving is depends critically on the ability to re-engineer and then continuously improve on core business processes. And over time the attractiveness of one outsourcer over another increasingly moves from simply being able to execute outsourced standard operations more efficiently and towards being able to offer – or to co-evolve with a client – new products an services.
The distinction between commercial and not for profit organizations may also blur when considering innovation. Whilst private sector firms may compete for the attentions of their markets through offering new things or new ways of delivering them, public sector and no profit organizations use innovation to help them compete against the challenges of delivering healthcare, education law an order etc. They are similarly preoccupied with process innovation (the challenge of using often scarce resources more effectively or becoming faster and more flexible in their response to a diverse environment )and with product innovation – using combinations of new and existing knowledge to deliver new or improved product concepts – such as decentralized healthcare, community policing or micro–credit banking.
Source: Managing Innovation