Find out everything you need to know about innovation – The innovation process, types of innovation, and approaches to innovation.
Innovation is a comprehensive concept that can not be defined by using a singular factor. We mentioned concept, precisely because innovation can be seen as a process, mentality, culture, technology, human resources and many other notions that are at the basis of it.
We have tried to cover as many notions as possible in the article Everything You Need to Know About Innovation – The Innovation Process and Types of Innovation. There, we have presented various types and approaches to innovation, together with examples of innovation, from different perspectives such as: the object of innovation, the market’s evolution, how severe can innovation be, its effects and many others.
If in that article we have broadly presented the phenomenon, today we are going to talk about two types of innovation – product innovation and process innovation. These two categories are regularly present on the market, these days, being part of an approach to innovation that is based on its objective.
Product innovation is a type of innovation that is more noticeable for the consumer and it is related either to the enhancement of a company’s older products, either to the development of new products which are based on new technologies or which solve new needs of a consumer.
Product innovation occurs as a reaction to multiple factors – for example, a consumer’s needs are determined by social, cultural or economical factors, while at a business and organisational level, product innovation is performed when its purpose is the expansion to new market segments or the attainment of competitive advantage.
When product innovation is conducted through the development of a new product, it can either solve an older consumers’ problem in a new (innovative) way, or solve a new consumers’ problem, which occurred as a consequence of the evolution of the factors previously mentioned – social, cultural and economical.
E-Readers are part of both of these categories – innovative products that meet an older need in a new manner and a new need, which occurred as a result of the evolution of the social, cultural and economical factors.
The older need is that of reading. If we were to think about it, until the first E-Readers emerged on the market, reading was happening in the same way from the beginning – on paper or other physical surfaces. Well, with the evolution of technology the possibility of creating this type of digital solution to an older “problem” emerged.
We can also talk about a new need – the need for reading “on the go” which occurred with the increasing flow from the cities. A book can be read in the same manner indeed but the e-readers also offer, besides the comfort of reading, the comfort of having a huge number of materials stocked on a rather small device.
Apple is probably one of the companies which have the most well-known product innovations. Starting from the role that the company had in the evolution of the first personal computers in the 70s, to all the types of smartphones they released in the past 10 years, Apple is surely a leader on the market when talking about product innovation.
First of all, Apple is one of the pillars of product innovation that deals with the development of new products and new technologies. Both the first Macintosh, Macintosh 128k and iPhone, also called iPhone 2G are products that changed the game and revolutionised the industry.
What is more, Apple also excels when talking about product innovation that is developed by improving pre-existing products. This can be easily observed at the new characteristics and pieces that are added at each new iPhone.
Process innovation focuses on the innovation of facilities, skills and technologies used for the production and delivering of products and services. As opposed to product innovation, the effects are not as noticeable to the consumers.
Product innovation can result in a decrease in production cost and time and the improvement of certain processes or the elimination of certain barriers from the production process or consumption.
Most of the times, process innovation is performed either within the equipment used, either within the technologies used for developing the product or even within the methods used by the employees.
McDonald’s is a classical example of process innovation. Even though a few burgers and some fries do not seem to require a serious process.
The process itself is the one that helped Ray Kroc convince the McDonald brothers, Richard and Maurice, to sell their McDonald’s franchise at the end of the 40s. You can observe the food’s production process that made a difference between McDonald’s and the other fast-foods in the sequence below, from the movie The Founder.
Another example of process innovation achieved by McDonald’s is a call-centre in a town close to Los Angeles, which takes over the drive-through orders from multiple restaurants across the USA. This call-centre pick up the orders remotely and transmits them back to the same fast-food. This helped them win a few additional seconds for each order.
Process innovation does not need to be present only the production’s process case. It can be carried out in any type of process involved in a company, including processes that are related to the employees and human resources.
One such example of process innovation in HR comes from Google, which offers its employees 20% free time from their work to focus on personal projects. In 2004, its founders Larry Page and Sergey Brin transmitted their idea through a letter:
Multiple Google products have indeed occurred as a consequence of this 20% time off. Among these, we must mention Gmail, Google Maps, Google Talk and Adsense, the last one being responsible for almost 25% of Google’s annual income.
First of all, let’s talk about the differences. As we have previously mentioned in the beginning, the main difference between product innovation and process innovation is the fact that product innovation is truly noticeable to the consumers. For example, in the case of McDonald’s, we can say that the consumers receive the same burger, even though it has been prepared in one way or the other.
Speaking about the same example, we can say that process innovation facilitates product innovation. In an article, Ivey Business Journal gives an example of Samsung which says: “If we were to give up our production, we would lose.” This highlights the fact that those who have a competitive advantage through product innovation, would lose their advantage if they would ignore the production part. By keeping these departments “in-house” you will avoid the emergence of products that are similar to yours.
What you must keep in mind is the fact that these types of innovation can go hand in hand with each other or they can be extremely different. They are indeed two of the multiple types of innovation, but they are two of the most used ones as they work with tangible resources.
Want to become a master innovator? Read our other articles on innovation:
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