Product Innovation vs Process Innovation

Posted by Nelson de Witt on July 6, 2006 under Process Improvement | Comments

In business there are usually two type of innovations: Product innovation and process innovation.

Product innovations tend to be where all the excitement is. Everyone wants to be the “iPhone” of their category. They want a product that will allow them to charge a premium.

In contrast process improvement is like the ugly stepchild of innovation. Not as much attention is paid to them. Process innovation is more about efficiency and only seams to be important to manufacturing outfits.

Another difference is that process innovation costs a company money, while product innovation allows them to charge more. It also means that people will have to learn new ways of doing things and maybe even take on more responsiblity. It’s no wonder companies don’t focuses on process innovation as a way to separate its self from the competetion.

However, according to this Harvard Business Review article entitled “Investing in IT” proper IT investment can actually make a company more competitive. Markets that have heavy IT spending see higher concentrations of market share, more turbulence and increased speed to market.

The main reason for this is that business processes can be built into software, allowing innovative process improvements to be rapidly pushed out through a company. These improvements allow businesses to leap frog each other, while blowing past competitors who can not keep up with their rapid changes. Most companies don’t compete on products or services but on how they are delivered. “The firm with the best processes will win in most markets.”

Everyone may want create the next iPhone but we forget the importance of competing on our business process. After all Apple didn’t make the first mp3 player or smart phone. I’m willing to be that there internal processes are in part what allowed them to create these remarkable devices.