PRODUCT AND PROCESS INNOVATION

Today product obsolescence has become a major threat and opportunity for companies
Obsolescence can be either technological , cassettes discs etc., or style and fashion of automobiles
replacesd by new ones.
Planned obsolescence has become a major program for dynamic companies seeking to stay ahead of the
other companies in the run for market gain.

Benefits of new product development

Competitive advantage
An organization armed with good new product development process will be in a better position to bring
new products into the market ahead of competition.
Able to retain customers and its market share in the sector.
To appear significantly’best in the rest’.

Protection from obsolescence

To protect their product from obsolescence.

The threat of obsolescence is like a sword dangling (hanging) over head.
Under such conditions product innovation can salvage the solutions.

Operational Efficiencies

Technological products may simplify the manufacturing process and assembly operations.
Minimizes the need for the revision and changes after the product introduction.
Quality may be achieved at low cost.
Computer aided designs and manufacturing have positive impact on efficiency and productivity.

Customer Satisfaction

New products provide unique benefits and features to customers and satisfy their needs
New products meet customer expectations better than the existing ones hence sales increases, profits and
mkt share increases.
Loyalty to company products will be strong, brand image and equity value will be high.

Synergizing capabilities

Success require certain technical capabilities and market competencies

Internal incompetencies may lead to wrong judgement
A firm has to develop proficiency in technical engineering, product, marketing and R&D.
It should be able to achieve synergy in ther collaborative calculated effort.

Consequences of product failures may be sometimes disastrous

  Financial Loss
A product failure may give a rude shock to the financial position of the company.
A strong product failure may cause a company to become insolvent.
 Loss of image
Leads to customer disappointment with product capabilities
With succession of new product failure the disappointment mount up and
customers lose faith and interest in the company.
 Loss of Employee morale
A series of product success help in building pride among company personal and enhances
their morale.
On the contrary, failures erode the enthusiasm and faith in the organization.

Problems for a successful new product

 Shortage of resources
 Neglect of existing products
 Cannibalism

Categories of new products

1. New-to-the-world products
New to both the company developing it and to the market place where it is used.
Eg: zipper, photocopy machines, computer, digital camera, internet etc…
2. Line extensions
New to the marketplace but not to the company.
Eg: cogate tooth powder, tooth paste, mouth washes etc,..
3. Mee-too-products
New to company but not to the market place
Eg: detergent powder like Wheel, Rin, Ariel etc,….
4. Product Modification
Existing products that have been slightly modified.
Eg: LCD, LED

Innovation has become such a buzzword it can be hard to remember what it actually means. Depending
on who you talk to, the bar for “innovation” might seem incredibly high (“Let’s be the next Netflix!”), or
far too low (“Let’s hang up some hammocks in our office!”). There are several different ways a company
can innovate; in this article, they are broken down into three general categories: product, process, and
business model. By narrowing your focus on a specific type of innovation, you can be a more effective
and strategic innovator.

Product Innovation - Development of a totally new product or improved product or services.

Process Innovation - Finding a novel way of achieving an output which was traditionally done in
a different way. In the process innovation, the final product is not touched, but the method of
bringing out the product is improved.

Product Innovation

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 Fitbit 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 iPhone 11. 3) A new feature to an existing product, such as power windows to a
car.

Drivers of product innovation might be technological advancements, changes in customer requirements,

or outdated product design. Product innovation is generally visible to the customer and should result in a
greater demand for a product.

Process Innovation

Process innovation is probably the least sexy form of innovation. Process is the combination of facilities,
skills, and technologies used to produce, deliver, and support a product or provide a service. Within these
broad categories, there are countless ways process can improve.

Process innovation can include changes in the equipment and technology used in manufacturing
(including the software used in product design and development), improvement in the tools, techniques,
and software solutions used to help in supply chain and delivery system, changes in the tools used to sell
and maintain your good, as well as methods used for accounting and customer service.

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.

Examples:

1. 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.

2. Recently, Differential built a mobile sales dashboard for Grupo Bimbo. The baking
company has 65 manufacturing plants and 2.5 million sales centers located in 22
countries, across 3 continents. As a result, the executive team members travel a lot,
meeting with their direct reports around the world. Having a mobile sales dashboard
gives the team quick access to the sales information and other KPI’s for each country,
channel, and brand, cutting out guesswork in sales decisions, and reducing meeting time.

Business Model Innovation

Business model innovation does not necessarily imply changes in the product or even in the production
process, but in the way as it is brought to the market. Decision Innovation writes:

“Business model innovation is probably the most challenging of the innovation types as it will likely
present an organization with major requirements for change. Often, the very capabilities or processes that
have been optimized to make a company successful and profitable will become the targets for
transformation. In some cases, these changes can threaten elements of the company identity and come
into conflict with brand expectations or promises.

Whereas both product and process innovation can be incremental and moderate, business model
innovation is almost always radical, risky, and transformative.

When talking about business model innovation, without a doubt, names like AirBnB, Uber, or Spotify
will come up. These are perfect examples of fast-moving companies that were able to disrupt age-old
markets (hotel taxi, music) by tweaking or inverting their industry’s traditional business model.

Because of these powerhouses, many might assume only startups are capable of massive business model
innovation. Startups have a big advantage due to their ability to iterate and adapt their model as they are in
the process of creating an initial business model design; however, there are several large, well-established
organizations that have leaned into their advantages of a larger customer base and greater resources to
challenge their existing business model and “disrupt” themselves.

Examples:

1. IBM has managed changes in customer offers from mainframes to personal computers to
technology services.

2. Amazon found a new channel to the customer through technology by eliminating the
traditional retail distribution channel and developing direct relationships.

Instead of generic innovation goals, try to hone in your focus on a specific type of innovation. Once
you’ve done this, you can begin asking more helpful questions, such as “How might this digital product’s
ease of use improve?,” or ”Where in our hiring process are we spending the most time?” Answering these
questions through interviews and research will you point you in a clearer (though still sometimes risky)
direction for your business’ innovation efforts.
At Differential, we help organizations innovate products, processes, and business models by turning
back-of-the-napkin ideas into great digital products. Check out our process to learn more.

Product Vs Process Innovation

There are more than a dozen types of innovations. But not all are equally important at all times.
At various stages of industry evolution,  some are more important than others. By choosing the
right type of innovation to focus on you can be a more effective innovator.
Product vs Process Innovation

The most popular types of innovations are product and process innovations. Product innovation
refers to a change in the product. It can be in two different forms. First, an improvement in the
performance of a product. For example, an increase in digital camera resolution. Second, new
features in a product. For example, the new iPhone 7 has dual cameras which did not exist in the
previous iPhones. It is also a product innovation.

The second type of innovations that dominates innovation effort of firms is process innovation. It
involves improvement in the process of producing a product. It includes changes across all the
value chain activities. It includes improved inbound logistics, better media planning, or improved
manufacturing process. For example, using instant demand data to plan production run is a
process improvement. It can lead to lower inventory and lower stock outs.

While the product innovations are often visible to the customers, process changes are not
There are some significant differences between the two. While the product innovations are often
visible to the customers, process changes are not. Product innovations target product
improvement while process innovation targets cost improvements.

Technology Lifecycle and need for innovation

As technology evolves over its lifecycle, firms need to change their innovation focus. Early in
the technology lifecycle, companies face high market and technological uncertainty. Technology
and consumer needs are less understood. Firms experiment with product features, design, and
performance. At the same time, consumers are not clear on what they need, want and like. In
early stages, product innovation is the best way to reduce technological and market uncertainty.
As a result, product innovation dominates in the early stages.
But later on, as technological and market uncertainty reduces, firms focus on efficiency.  At that
time, process innovation becomes more important.

The role of dominant design in innovation choices

Is there a clear point when firms begin to change their innovation focus from product to process?
Fortunately, research provides a clear answer here. When a dominant design emerges, it marks
the point where this takes place. Before this point, firms experiment with the product. After this
event, companies focus more on the process.
When dominant design emerges, product innovation passes the baton to process innovation
Technological, Market and Financial uncertainty and Innovation

Firms face many types risks. Three key ones are the market, technological, and financial
uncertainty.  Companies attempt to reduce these risks.

Early on in new technology, all three uncertainties are high. What the technology can provide
and what the market wants are both unclear. As a result, whether there is money to be made is
also not very clear.

As the dominant design emerges, technological and market uncertainty reduces. But, financial
risk is still high because the cost structure is not yet optimized. Process innovation helps
optimize the cost structure and reduce economic uncertainty.

Industry Stability And innovation

The emergence of dominance design is one driver of industry stability. It leads to shakeout and
reduction in competition. Process innovation helps firms deepen their positions due to cost
structures. Uncertainty declines and incumbents become entrenched.

 the era of minor innovations is where most profits exist in an industry

Industry becomes stable, and innovations move from major to incremental ones. Most profits are
made in this era. The risks firms took in the early stages begin to pay out now. In this sense, the
era of minor innovations is where most profits exist in an industry.

While incremental innovations continue, the direction of change moves beyond product and
process innovation. Firms begin to focus on channel innovation, packaging innovation,
commercial innovation and financial innovation. This continues until the next discontinuity takes
place.

Product and process innovation

A product innovation is the introduction of a good or service that is new or has significantly
improved characteristics or intended uses; a process innovation refers to the implementation of a
new or significantly improved production or delivery method. Evidence from firm innovation
surveys suggests that the share of firms with a product or process innovation varies significantly
across countries and that firms often adopt mixed modes of innovation, meaning that they
combine product and process innovations.
What are product and process innovations?
A product innovation is the introduction of a good or service that is new or significantly
improved with respect to its characteristics or intended uses. These include significant
improvements in technical specifications, components and materials, incorporated software, user
friendliness or other functional characteristics. Product innovations include both new products
and new uses for existing products:

process innovation
Process innovation is the application or introduction of a new technology or method for doing
something that helps an organization remain competitive and meet customer demands. 

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.

Process innovation is different from incremental innovation in both scope and size. Whereas
incremental or continuous improvements generate limited value, innovation generates
improvements that increase value by upward of 50%, 100% or even more. Some describe
process innovation as creating radical or game-changing shifts. In addition to the introduction of
a radically new approach or technology, process innovation generally requires a longer planning
time and support from high-level management. It’s also riskier than incremental improvements
and requires a higher level of cultural and structural change. Process innovation also typically
impacts a broader portion of an organization than do incremental improvements.

Process innovation can generate value to either internal customers, including employees or the
actual organization itself, or it can create value to external customers, including business
partners, end users or actual consumers. Values stemming from process innovation include
reducing the time it takes to produce a product or perform a service; increasing the number of
products produced or services provided within a time frame; and reducing the costs per product
produced or service provided. Additionally, process innovation can generate significant gains in
product quality and service levels. Overall, an individual organization needs to see a significant
increase in some of its key performance indicators (KPIs) to be a true process innovation.
Eight stages of new product development

This composite new product development (NPD) framework for manufactured goods has eight
important components:

Idea generation is the continuous and systematic quest for new product opportunities, including
updating or changing an existing product. The goal is to generate ideas for new products or
services -- or, improvements to products or services -- that address a gap in the market.

Idea screening takes the less attractive, infeasible and unwanted product ideas out of the
running. Unsuitable ideas should be determined through objective consideration, including
through early testing and feedback with consumers.

Concept development and testing is vital. The internal, objective analysis of step two is
replaced by customer opinion in this stage. The idea, or product concept at this point, must be
tested on a true customer base. The testers' reactions can then be leveraged to adjust and further
develop the concept according to the feedback. One example of concept development is the
concept cars developed by car manufacturers. These prototypes are made of clay and shown at
auto shows for consumer feedback.

Market strategy/business analysis identifies the strategy of how to optimally market and sell
your product or service. It is comprised of four P's, which are product, price, promotion and
placement.

Product -- The service or good that's been designed to satisfy the demand of a target audience.

Price -- Pricing decisions affect everything; profit margins, supply and demand, and market
strategy.
Promotion -- The goals of promotion are to present the product to the target audience --
increasing demand by doing so -- and to illustrate the value of the product. Promotion includes
advertisements, public relations and marketing campaigns.

Placement -- The transaction may not occur on the web, but in today's digital economy, the
customer is generally engaged and converted on the Internet. Whether the product will be
provided in bricks-and-mortar or clicks-and-mortar shops, or available through an omnichannel
approach, the optimal channel, or channels, for placement must be determined if the targeted
potential customers are to become actual customers.

Feasibility analysis/study yields information that is critical to the product's success. It entails
organizing private groups that will test a beta version, or prototype, of the product, then evaluate
the experience in a test panel. This feedback communicates the target market's level of interest
and desired product features, as well as determines whether the product in development has the
potential to be profitable, attainable and viable for the company, while satisfying a real demand
from the target market.

Questions to be answered during feasibility analysis include:

Do you have the labor and materials required?

What is the price of production, delivery and promotion?
Do you have access to the right distribution channels?

Product technical design/Product development integrates the results of the feasibility analyses
and feedback from beta tests from stage five into the product. This stage consists of turning that
prototype or concept into a workable market offering; ironing out the technicalities of the
product; and alerting and organizing the departments involved with the product launch, such as
research and development, finance, marketing, production or operations.

Test marketing, or market testing, differs from concept or beta testing in that the prototype
product and whole proposed marketing plan, not individual segments, are evaluated. The goal of
this stage is to validate the entire concept -- from marketing angle and message to packaging to
advertising to distribution. Test marketing is often performed by offering your product to a
random sample of your target market. By testing the entire package before launch, the company
can critically review the reception of the product before a full go-to-market investment is made.

Market entry/commercialization is the stage in which the product is introduced to the target
market. All the data obtained throughout the previous seven stages of this approach are used to
produce, market and distribute the final product to and through the appropriate channels. The
product is now available to everyone and the "product lifecycle" begins. The life of the product is
shaped by the reception of the target market, the competition and subsequent enhancements to
the product offering.

Product development is an always-evolving and fluid process, and just as some steps will
change, depending on the nature of the project, so will the person who manages product
development. In some organizations, there is a dedicated team that researches and tests new
products. Some smaller organizations may outsource their new product development to a design
team. In midsize organizations, the product manager is often the person in charge of product
development, and he or she may be part of the marketing team, while tech shops selling
business-to-business (B2B) products and services that have very technical requirements may
have their product managers report to engineering. Regardless of what framework is used and
who is in charge of new product development, the new part is just one aspect of the entire
product lifecycle management (PLM).

Type of new product

Innovations range from radical new technologies to incremental product modifications.
4 levels of innovation can be identified.
Categories of new products
1. New-to-the-world products:
New both to the company development and market place using them

Innovation is of three types

1. Discontinuous innovation
2. Continuous innovation
3. Dynamically continuous innovation

1. Discontinuous Innovation
New to the world products are discontinues innovations while product replacement are
continuous innovations.
Firms need to understand that continuous innovations such a adding a brand variant to an
exiting product line lack significant risk but offers les significant returns.
Discontinuous innovations are extremely risky but if successful, returns could be huge.
Discontinuous innovations by their very nature are discontinuous to every customer
segment. Since they comprise new to the world products only.
These new products are fundamentally different from products that already exists that
they reshape markets and competitors.
Successful nee to the orld products aree pure technologicl innovations wwhich ervee a
very strong latent need.
They change customer habilts totally.
2. Continuous Innovations
It is the other extreme where an existing product undergoes marginal changes,
without altering customer habits.
Put simply the customer should find the new product different from the existing
options that he is aware of;
For the company, it is process of differentiation in its brand name, fragrance, colour
and packaging.
There should be a just noticeable difference (JND).
They change customer hbits marginally.
 Eg: cell phons have made the idea of mobile connectivity a reality and brought sea
changes in relationships among people.

3. Dynamically continuous Innovation

Falls between the discontinuous and continuous innovation.
The changes in customer habits caused by this type of innovations are moderate.

Eg: The progression from a manual to an electronic type writer and the advent of
cable and satellite television etc.,
IGATE software solutions offers business services provisioning (BSP) unlile other
vendors who undertake outsourced processes it undertakes an outsourced corporation.
A set of tasks forms a process.
A set of processes form a corporation

Igate does not look only at one process or two.

In BSP, Igate owns the technology as well as the process frame works.
Its billing is based on each transaction

Helped methods for this type of Innovation are Benchmarking and Building on old
ideas.

Benchmarking:
Benchmarking is the technique of identifying best practices of similar firms for
excelling.

Eg: Banks have maintained limited for interaction with their customers.
Customers could mostly transact with the bank during day hours but these have
always been establishments like restaurants, wwhich have dealt wwith customers
during night hours.
It is possible to follow this standards.

Old Ideas as a source:

Best innovators systematically use old ideas as the raw materials for one new idea
after another.
The old ideas are used in new places, new ways and in new combinations.
The essence is to take an idea that is commonplace in one area and move it to a
context where it is not common at all.

Eg: steam Engine was used in mines for seventy five years before it was used to
propel boats.

Technology strategy for product Innovation

 A company’s technology strategy may choose one of the two options available.
 New technology: it can invest in R&D and replace an older generation of technology
with a new one.
This is called break through approach. This is a linear-step-by-step strategy of
technology substitution

Eg: vacuum tube was replaced by semi conductors.

 Hybrid technology: it can work to combine existing technology into hybrid technologies.
Fusion of unrelated technologies will dramatically increase the degree of innovativeness
of products.
This is technology fusion approach.
It is non-linear, complement5ary and cooperative process.
It combines incremental technical improvement from several previously separate fields to
create revolutionary products.

Eg: Fibre optics communications systems are results of fusion of optics and electronics.

A company’s technology strategy should combine both break through is risky because it
focuses the R&D too narrowly and ignores the possibilities of improvements with
existing technologies.