Process innovation means the implementation of a new or significantly improved production or delivery method (including significant changes in techniques, equipment and/or software). Minor changes or improvements, an increase in production or service capabilities through the addition of manufacturing or logistical systems which are very similar to those already in use, ceasing to use a process, simple capital replacement or extension, changes resulting purely from changes in factor prices, customisation, regular seasonal and other cyclical changes, trading of new or significantly improved products are not considered innovations.
Process innovation happens when an organization solves an existing problem or performs an existing business process in a radically different way that generates something highly beneficial to those who perform the process, those who rely on the process or both. For example, the introduction of a completely new sequence to an existing production process that speeds production by 100%, thereby saving the organization money and time, could be considered a process innovation. Organizations today often bring in new information technology systems or find ways to use older in new ways at the forefront of their process innovation efforts.
While product innovation is often visible to your customers, a change in process is typically only seen and valued internally. Speaking generally, changes in process reduce costs of production more often than they drive an increase in revenue. Of the three types of innovation, process is typically the lowest-risk.
One of the most famous and groundbreaking examples of process innovation is Henry Ford’s invention of the world’s first moving assembly line. This process change not only simplified vehicle assembly but shortened the time necessary to produce a single vehicle from 12 hours to 90 minutes.
When people think of innovation, often, they’re thinking of product innovation. Product innovation can come in three different forms.
(1) The development of a new product, such as the Fit bit or Amazon’s Kindle.
(2) An improvement of the performance of the existing product, such as an increase in the digital camera resolution of the iPhone7.
(3) A new feature to an existing product, such as power windows to a car.