Process innovation is a technical, production, and managerial improvement that reduces the cost of production of an existing product. Process innovations find application in new technology, new methodology, a new organization of labor. These innovations are less risky than product ones, and in many cases are less capital-intensive.
Product innovation and process innovation
Product innovation and process innovation are closely linked and can intertwine. Thus, the new equipment and tools developed by the company, which are used for production in the company and do not go beyond its boundaries, are process innovations. Reference: “What is Product Innovation“, https://mpmu.org/what-is-product-innovation/
If these equipment and tools are sold abroad, they become product innovations. If the company develops advanced software for internal use – this is a process innovation.
If this is done by a specialized company to sell software to an external user, it is product innovation. When an enterprise that manufactures computers develops improved software for them and provides that software to the users of those computers, the enterprise performs service innovations.
The classification of innovations
The classification of innovation by the depth of the changes proposed by the Czech economist F. Valenta and the Slovak economist I. Perlaki allows us to trace in more detail the transition from low-level innovation to higher-level innovation.
Types of innovations
- Zero-order innovations – restorative – the restoration of the original properties of the system, preservation, and renewal of its existing functions.
- First-order innovations – quantitative – change in the quantitative properties of the system.
- Second-order innovations – organizational – regrouping of the components of the system to improve its functioning.
- Third-order innovations – adaptive – adaptation of the constituent elements of the system following the new requirements.
- Fourth-order innovations – variants – improving several parameters without changing the approach (for example, supplying the existing electric locomotive with a more powerful engine).
- Fifth order innovations – group – new generation; all or most of the properties of the system are changed on a traditional basis (for example, switching from A-series to AI-series electric motors).
- Sixth order innovations – species – improvement of quality parameters based on a partial renewal of principles (for example, creation of a javelinless loom).
- Seventh-order innovations – generic – a fundamentally new solution (for example, switching to semiconductors and transistors, replacing conventional rail transport with “air cushion” transport).
Innovation from consumers or businesses
Depending on the source of ideas, the emergence of innovation can be caused either by specific users, by discovery, or by the company’s own needs.
Depending on the factor that has influenced the course of the innovation process, the risk of innovation from the market is different.
If the company has created a novelty designed to fill a free market niche, the risk is significantly lower than the risk of implementing an innovation based on a scientific discovery for which no one has yet found practical application.
Internal organizational innovation
When an internal organizational innovation is introduced, it is created and used within the enterprise itself or in its subdivision, and the innovation does not take the form of goods (it is not the subject of purchase and sale).
In the implementation of inter-organizational innovation, the functions of the idea generator and the manufacturer are separated from those of the user.
Increasing the application of innovation to the level of one or several sectors of the economy significantly increases its importance.
The strategy of the enterprise
The company’s strategy, which determines the development and competitive position in the market, significantly affects the innovative behavior of the organization.
Depending on the market situation and the chosen strategy, the company can implement reactive or strategic innovations.
Reactive innovation – an innovation that ensures the survival of the enterprise, ie. innovation in response to the actions of a competitor. Reactive innovations help maintain the organization’s market position but do not create additional competitive advantages.
The implementation of reactive innovation is typical of organizations that use defense strategies.
For example: To ensure the accelerated development of the market of mobile connections in the companies working in this field, regularly offer new services (new tariffs, new conditions for providing connections), which allow expanding the circle of customers.
Strategic innovation is an innovation, from the implementation of which the organization receives additional competitive advantages in the future. Reference: What is Innovation Management, https://www.muzonet.com/what-is-innovation-management/
Enterprises implementing strategic innovations use an active (offensive) strategy.
Strategic innovations are usually focused on creating new needs rather than meeting existing market needs. The innovator organization is ahead of its competitors in the implementation of strategic innovation, which allows it to temporarily monopolize the market.
The aggressive innovator can use this advantage to strengthen its competitive position. For example, Energia Rocket and Space Corporation is a leading global company in the development of space technology and services.
Many developments of RKK “Energy” have no foreign analogs. Depending on the strategy used, the innovations carried out in the organization can be oriented to the existing solvent market demand or to form new market needs.
All kinds of innovations are closely intertwined. Thus, product innovations can affect the change of production processes, technologies, organizational conditions.
Through process innovations, the necessary technical prerequisites for product innovation can be created at the same time.
At the same time when the product innovation is aimed at achieving labor results, the process innovation is oriented towards increasing the efficiency of the production process, social innovations are related to changes in the socio-technical system.
Social innovation can also be a tool for product innovation. The totality of all innovations is aimed at increasing the socio-economic efficiency of production, and the current stability and future success of the organization largely depend on the results of innovation.
The innovation process is a complex, creative, multifaceted, iterative process, between the stages of which there are straight and feedback.
It can be viewed from different positions and with varying degrees of detail. In its most aggregated form, it includes the following three stages: new idea – realization – use of the new result.
The linear model of the innovation process Historically, the first to emerge in the innovation process following the concept of the innovation chain, which gained great popularity in the 1950s.
It reflects the mechanism of the consistent transfer of tasks and knowledge from each stage to the next (research – development – production – marketing and sales).
This model is built on the logic of the process of division of labor and its merit is its simplicity, but it does not reflect the complex relationships between the various links in the chain, the feedback mechanism, and external conditions.
The linear model has two main varieties, depending on the choice of starting point – the market or technology. In the 1950s, he relied on the idea of ”technology push” and his starting point was basic and applied research. At the same time, the external environment is undergoing profound changes related to increasing competitive pressure, increasing uncertainty, diversification of production.
The motive for a short-term and quick return on investment in R&D and the interest in secondary innovations come to the fore.
This requires the linear innovation model of technological impetus to be replaced by the linear innovation model of market pull. In it, as a starting point of the innovation process, the market needs are considered, which set the directions of the research, and then the sequence of stages is the same.
The linear model has serious shortcomings: it presents the innovation process as a one-time act, not as a permanent activity; does not affect the variety of straight and reverse links; the opinion of potential users is not taken into account at all stages of the process; the diversity of sources of innovation is not reflected; does not affect the possibility of parallel implementation of some of the stages, etc. Many nonlinear models were developed in the 1980s and 1990s.