The slow innovation progress of the zip fastener 1
3.2 Diagnostic question: Are the product and service innovation process objectives specified?
The performance of the innovation process can be assessed in much the same way as we would consider the products and services that result from it – namely in terms of quality, speed, dependability, flexibility, cost and sustainability.
These performance objectives have just as much relevance for innovation as they do for the ongoing delivery of offerings once they are introduced to the market.
What is the quality of the innovation process?
Design quality is not always easy to define precisely, especially if customers are relatively sat- isfied with existing service and product offerings. Many software companies talk about the
‘I don’t know what I want, but I’ll know when I see it’ syndrome, meaning that only when customers use the software are they in a position to articulate what they do or don’t require.
Nevertheless, it is possible to distinguish high- and low-quality designs (although this is easier to do in hindsight) by judging them in terms of their ability to meet market requirements. In doing this, the distinction between the specification quality and the conformance quality of designs is important. No business would want a design process that was indifferent to the creation of ‘errors’ in its designs, yet some are more tolerant than others. For example, in phar- maceutical development the potential for harm is particularly high because drugs directly affect our health. This is why the authorities insist on such a prolonged and thorough design process.
Far more frequent are the ‘product recalls’ that are relatively common in, say, the automotive industry. Many of these are design related and the result of ‘conformance’ failures in the design process. The ‘specification’ quality of design is different. It means the degree of functionality, or experience, or aesthetics, or whatever the product or service is primarily competing on.
Some businesses require product or service designs that are relatively basic (although free from errors), while others require designs that are clearly special in terms of the customer response they hope to elicit.
OPERATIONS PRINCIPLE Innovation processes can be judged in terms of their levels of quality, speed, dependability, flexibility, cost and sustainability.
Figure 3.6 The product or service design innovation activity as a process Transformed resources, e.g.
• Technical information
• Market information
• Time information
• Design ideas
Transforming resources, e.g.
• Test and design equipment
• Design and technical staff
• Lead user (customer) feedback
• Supplier advice
• Collaborators
The product/service design innovation
process
Designs produced to appropriate standards of…
Outputs Inputs
• Quality
• Speed
• Dependability
• Flexibility
• Cost
• Sustainability
What is the speed of the innovation process?
The speed of innovation matters more to some industries than others. For example, innovation in construction and aerospace happens at a much slower pace than in clothing or microelec- tronics. However, rapid innovation or ‘time-based competition’ has become the norm for an increasing number of industries. Sometimes this is the result of fast-changing consumer fash- ion. Sometimes a rapidly changing technology base forces it. Yet, no matter what the motiva- tion, fast design brings a number of advantages:
• Early market launch – increasing the speed of services or product development allows earlier marketing of new offerings that may command price premiums and generate revenues for longer.
• Starting design late – may have advantages, especially where either the nature of customer demand or the availability of technology is uncertain, so fast design allows design decisions to be made closer to the time when service and product offerings are introduced to the market.
• Frequent market stimulation – rapid innovations allow frequent new or updated offerings to be introduced.
What is the dependability of the innovation process?
Any benefits of fast design processes can be negated unless designs are delivered dependably.
Design schedule slippage can extend design times, but also adds to the uncertainty surround- ing the innovation process. Suppliers who do not deliver solutions on time, customers or mar- kets that change during the innovation process, and so on, all contribute to an uncertain and ambiguous design environment. Professional project management (see Chapter 15) can help to reduce uncertainty and prevent (or give early warning of) missed deadlines, process bottlenecks and resource shortages. However, external disturbances to the innovation process will remain.
These may be minimised through close liaison with suppliers and market or environmental monitoring. Yet, unexpected disruptions will always occur and the more innovative the design, the more likely they are to occur. This is why flexibility within the innovation process can help with dependable delivery of new service and product offerings.
What is the flexibility of the innovation process?
Flexibility in the innovation process is the ability to cope with external or internal change. The most common reason for external change is that markets, or specific customers, change their requirements. Although there may be no need for flexibility in relatively predictable markets, it is valuable in more fast-moving and volatile markets, where one’s own customers and markets change, or where the designs of competitors’ offerings dictate a matching or leapfrogging move. The increasing complexity and interconnectedness of service and product components in an offering may also require flexibility. A bank, for example, may bundle together a number of separate services for one particular segment of its market. Changing one aspect of this pack- age may require changes in other elements. One way of measuring innovation flexibility is to compare the cost of modifying a design in response to such changes against the consequences to profitability if no changes are made. The lower the cost of modifying an offering in response to a given change, the higher is the level of flexibility.
What is the cost of the innovation process?
The cost of innovation is usually analysed in a similar way to the ongoing cost of delivering offerings to customers. These cost factors are split up into three categories: the cost of buying
3.2 Diagnostic question: Are the product and service innovation process objectives specified ■ 91
overhead costs of running the process. In most in-house innovation processes, the last two costs outweigh the first. But all aspects of performance can affect costs. So, whether caused by quality errors, a slow innovation process, a lack of project dependability, or delays caused through inflexibility, the end result is that the design will be late. This is likely to mean more expenditure on the design and delayed (and probably reduced) revenue. The combination of these effects usually means that the financial break-even point for a new offering is delayed far more than the original delay in its launch (see Figure 3.7).
What is the sustainability of the innovation process?
The product and service innovation process is particularly important in ultimately impacting on the ethical, environmental and economic well-being of stakeholders. Some innovation activity focuses particularly on the ethical dimension of sustainability. Banks have moved to offer ethi- cal investments that seek to maximise social benefit as well as financial returns (avoiding busi- nesses involved in weaponry, gambling, alcohol and tobacco, for example). Other examples of ethically focused innovations include the development of ‘fair-trade’ products such as tea, coffee, chocolate, cotton and handicrafts; clothing manufacturers establishing ethical trading initiatives with suppliers; supermarkets ensuring animal welfare for meat and dairy, and pay- ing fair prices for vegetables; and online companies establishing customer complaint charters.
Innovation may also focus on changing materials in the design to reduce its environmental burden. Examples include the use of organic cotton or bamboo in clothing; wood or paper from managed forests used in garden furniture, stationery and flooring; and recycled materials and natural dyes in clothing, curtains and upholstery. Other innovations may focus on how prod- ucts and services are used. Computer designers may introduce power management systems. In Figure 3.7 Delay in time-to-market of new products and services not only reduces and delays revenues, it also increases the costs of development. The combination of both of these effects usually delays the financial break-even point far more than the delay in the time to market
Delay in time-to- market
Delay in financial break-even Cash
Time Sales revenue
Cash ow
Delayed sales revenue
Delayed cash ow
Development costs
Development costs of delayed project