Tag: process innovation

How to recognise 3 kinds of innovation in your organisation

When I am asked to help a team with their innovation strategy, I always ask about their past innovation activities. Often I am told that they are not yet innovating, or that they innovate infrequently, or that they are planning to innovate more in the future. However, if you ask the team to think about recent attempts to change, improve and restructure their activities, they quickly come up with a long list of innovations that they never recognised as such. These improvements might have achieved a specific purpose, but perhaps they could have been leveraged to have a more profound effect on the organisational culture. Almost every opportunity to adapt something in an organisation is also an opportunity to strenghten the learning culture, build trust, deepen the use of knowledge, encourage experimentation and to be more innovative.

To help teams recognise how they might have innovated in the past, I explain three different kinds of innovation. It is by looking back that we can also look forward.

The most easily identifiable form of innovation is innovation aimed at developing new or improved products and services. In technical products this product development process may require deep knowledge of how to harness natural phenomena or use certain technology, while in other sectors like the food sector developing a new product may require a good understanding of consumer tastes and different ingredients. Not all new products require a complicated design and development process.

Process innovation is slightly more difficult and involves making improvements to existing products and services or designing completely new products and services, often in an incremental or ongoing way. Process innovation could be aimed at improving efficiency and reducing waste or costs, or it could be the introduction of new equipment and technologies into an existing process. While many smaller companies lack this process improvement ability in-house, even high-tech manufacturers depend on specialists external to the organisation. In places where these experts or specialists are not available, process improvement costs are much higher and improvements are more difficult to implement. In many industries, product innovation is made possible by new process innovations, so manufacturers who integrate new equipment into their production facilities may be able to offer new products and services simply by upgrading their systems. An interesting phenomenon is that enterprises that are good at continuous process improvement are often able to introduce many more product innovations, as they typically have internal systems for product development, product distribution and knowledge accumulation.

The third kind of innovation is focused on business model innovation and organisational design. This kind of innovation is all about internal organisation, functional specification, combining different kinds of internal expertise, knowledge and technology domains and being able to adapt the management of a company division based on differences in specific contexts. We include innovation in marketing strategies, innovation in supply chain integration, and innovate approaches to co-opting or working with customers as well as improved management models under this heading. Enterprises that are able to manage innovatively tend to be better at process innovation, resulting in more options and the ability to improve products or services.

Many improvements that my clients want to undertake span all three of these types of innovation. Yet, the way how you go about innovating are slightly more difficult and may require different team and expertise configurations.

How difficult it is to change an organization around a simple insight

In the last few months I have been going back to my change and organizational development roots. I have been on a journey to reconnect my more recent insights on systemic change and innovation systems with my earlier experience in process consulting, supporting organizations to change. I have rediscovered many old ideas that are still extremely valid and useful. I even have to wonder how I forgot some things that once were so important to me. Also, some things that did not seem all that important 10 years ago now seems far more important, but I digress.

Let me share an example of how a more recent insight about innovation became more powerful when I looked at it from an organizational development perspective. In my training work on innovation systems, I often lay a foundation with some simple concepts. One such building block is the idea that there are three kinds of innovation: product, process and business model. Product innovation is the easiest (you need to mainly be creative, know something about either a key technology or a key market), with process and business model innovation often being more difficult because you might need more abstract thinking capability, technical and others skills from beyond your organizations as well as a creative imagination. Easy enough, all the participants nod their heads in agreement and indicate that I can move on. Yet, back at the office this was not so simple.

I noticed that a few of my favorite technology and R & D centres here in South Africa were struggling with this very simple idea. They were mainly focused on product innovation, arguing that their behavior is shaped by the incentives created by public grants that supported them to develop products for wanna-be entrepreneurs (I wrote about the importance of technological capability here). It was convenient to blame the public grants for this incentive, and everybody knew that the results less than ideal (many of these wanna-be entrepreneurs did not stand a chance in the market as they lack technological capability and or business experience). Thus the Status Quo was maintained with everybody talking about changing but not really making the shift.  Until the easy funding became less easy. It was at this point that some management teams realized just how entrenched the culture of product innovation was, and how dependent these organizations have become on public grants.

So I had the task of coaching a team to think through this change process, to reduce their dependence on public funding by helping their team to shift to process innovation from a mainly product innovation focus. This meant that instead of designing, prototyping and manufacturing a particular product for a wanna-be entrepreneur, they shift their attention to helping existing companies or entrepreneurs with a track record improve, enhance or expand their process technologies so that they can themselves develop, prototype and manufacture new products.

Interestingly enough, the technological capabilities for product innovation and process innovation for this particular engineering group have a lot in common. It is mainly the internal processes, arrangements of teams, self assessment criteria (are we making progress?) and the identity of the organization that had to change to make this shift. This in itself meant some business model innovation was required. They also had to become better in forming partnerships with other technology providers. In complexity thinking language, the physical technologies and entrepreneurial technologies will remain largely the same, but many additional or different social technologies would be needed. For instance, some additional skillsets are needed that are more expensive and not typical to technology centre at universities. Lastly, this process focus shift would require far more work on the premises of the client, and also working with many other unknown technologies and sectoral requirements, which meant that concepts such as self-management, temporary work teams and many parallel projects also had to be tried out. It started sounding more and more like a completely new organization and a major disruption that this client could not afford. Starting over was simply not an option. And the individuals in the current team was a real asset.  If this team could not make this shift then very few would be able to make it.

It was agreed that we needed an adaptive process, a series of small experiments that allowed them to try some process innovation applications. The horizons of innovation provided a useful framework (Tim Kastelle inspired me about this model, recently Ralph-Christian took it further). We captured their current technological and market capabilities and agreed that this focus had to be maintained while we find ways to explore the adjacent technological and market spaces without breaking the bank. Tim Kastelle always say 70% of the focus should be on the current block (horizon 1). We did this by first looking which process innovations would be interesting to some of their existing markets (we found a few). The we looked at where their current technological capability could be used in new markets, but in a process innovation way. This could be done by investigating some economic sectors a little deeper.  Thus most of the energy of management remains on the current technological base and markets, with an additional focus on process innovations in an adjacent markets and technologies. We were all surprised that these ideas required very little additional funding (at first), with more specialized equipment and skills required if any of these ideas took hold.

The moral of the story is this. It sounds simple to say “shift attention from product innovation to process innovation”. People might actually agree this is important. But to make this shift requires many internal changes. A process of exploration and mental simulation using a simple framework was all it took to identify some areas where the current management team with its current resources could try several new ideas, without much change to the business plan or operations of the organization. I am very pleased with this outcome.

Thanks to the team for trusting me to facilitate this process. You know who you are!