MANAGEMEN

OF INNOVATION
Chapter 5: Operations and Process Innovation
Operations and
Process Innovation:
Chapter 5
Effective R&D requires close links with the operations.

Many new product ideas are based on existing products and may be developed from the operations
function. it is necessary to examine the role of operations and their management in innovation process.

These innovative ideas are likely to improve the manufacturing process or delivery of the product/service.

IN SOME INDUSTRIES, INNOVATION OCCURS ON PRODUCTION LINES RATHER THAN LABORATORIES.

OPERATIONS THE NATURE OF DESIGN AND PROCESS DESIGN

MANAGEMENT INNOVATION IN THE CONTEXT AND INNOVATION
OF OPERATIONS Relationship between Product and Process Innovation
Design Requirements Managing the Manufacturing: R&D Interface in Process Industries
Design and Volumes Stretch: How Innovation continues once investment is made
SUPPLY CHAIN
Craft-based Products
MANAGEMENT Design Simplification
Business Process Re-Engineering (BPR) Reverse Engineering
CHAPTER REVISION
Summary (What you learn?!)
LEAN INNOVATION PROCESS DESIGN Discussion Questions and Activities
OPERATIONS MANAGEMENT
Most organizations provide items that are
a combination of product and service elements,
for example, a restaurant provides a product
(the food) and a service (delivery to your table).

In an age of global mass production and

competition, it is often the service element

JUST FOR READING

of any purchase that gives the supplying
operation its crucial competitive advantage.

Innovation within the operations function

is crucial in achieving the organization’s
strategic objectives.

OPERATIONS MANAGEMENT IS ABOUT

THE CONTROL OF A CONVERSION PROCESS
FROM AN INPUT TO AN OUTPUT.
OPERATIONS MANAGEMENT
Regarding operations management:
three other very important dimensions
need to be added:

1. The customer who becomes

part of the process, as in self-service
supermarkets or in the education
process taking place in tutorials.

2. Information from customers' feedback,

market research, or government agencies
(standards, laws).

3. The physical and business environment

in which the organization operates.
THE NATURE OF DESIGN
AND INNOVATION IN THE
CONTEXT OF OPERATIONS
Something new and innovative to one company may be a tried and tested
product to another. Also, every innovative idea may not be suitable to patent
but, to those concerned, the novelty, the ingenuity, the problems associated
with its introduction, and the cost-benefit to the organization may be suitable. Design Design
(JUST FOR READING) Requirements and Volumes

Although designers frequently make inventions in many companies, Craft-based Design

designing and inventing are different in kind. Design is usually more Products Simplifications
concerned with the process of applying scientific principles and inventions.

For example: increasing the wall thickness of a product made from steel Reverse Engineering
may increase the product’s strength, reliability, and durability, but with
a consequential increase in product weight and cost.
THE NATURE OF DESIGN
AND INNOVATION IN THE
CONTEXT OF OPERATIONS
Design Requirements
The objective of design is to meet the needs and expectations of customers. Good design starts and ends with the customer.
Expectations differ from customer to customer, they may vary from day to day with the same customer. Customer expectations vary.

Specification's design for the product and service can be considered as three aspects:
● a concept: the expected benefits the customer is buying
● a package of component products that provide those benefits defined in the concepts (what the customer actually purchases)
● the process, which defines the relationship between the component product and services by which the design fulfills its concept

Some products or service elements are core to the operation and could not be removed without destroying. Other parts serve to enhance the core.
In a fast-food restaurant, the food and the speed of delivery are essential core elements whilst the ambiance and layout of the restaurant support the core.
(Example: Macdonald's and Burger King Case Study)

By changing the core, or adding or subtracting supporting services, organizations can provide different packages and design very different products and services.
In a fast-food restaurant, the customer may order the food at the counter (and possibly pay the bill) and stand for a moment or two until the choice is delivered in
disposable containers. The service is substantially different from that purchased in an exclusive restaurant. (JUST FOR READING)

The design brief depends on the market for which the product or service is created. For example, the aesthetics of a domestic water tap is not important when
mounted out of sight under the kitchen sink. If it were mounted in a visible application, the aesthetics of the tap would be very important. (JUST FOR READING)
 FAST
FOOD
Macdonald's RESTAURANT
Operating System
The success of McDonald’s is the design of its
operating system that ensures consistency and uniformity.

The original key innovation was to have a very simple menu

of just three foods and six drinks. This simplicity allowed
straightforward cooking and preparation procedures that
ensured consistent product quality and manage supply chain.
(JUST FOR READING)

If there is a counter to queue at, it will be away from the door.

Fast-food restaurant would not want to advertise a queue.

SIMPLE MENU, SIMPLE PROCEDURES, STANDARD FACILITIES, AND GOOD

OPERATIONS MANAGEMENT COMBINES TO GIVE A COST-EFFECTIVE OPERATION.
 FAST
FOOD
Burger King RESTAURANT
Operating System
A Burger King store manager said:
One of the things that we’re constantly looking at is;
how do we prepare for our rush periods and a pre-rush periods.

How can we get our condiments, utensils, napkins, and all of that
prepared, so that, when a lunch rush comes, we’re highly efficient?!
You’re not having to run to the back room to get supplies; they’re all
appropriated by the pick-up window right in your space. so those are
things that you've really got to be ready for.

SIMPLE MENU, SIMPLE PROCEDURES, STANDARD

FACILITIES, AND GOOD OPERATIONS MANAGEMENT
COMBINES TO GIVE A COST-EFFECTIVE OPERATION.
THE NATURE OF DESIGN
AND INNOVATION IN THE
CONTEXT OF OPERATIONS
Design Requirements
A design spectrum ranges from the concept designer, whose primary concern is ensuring technical excellence,
to the focus of the industrial designer on manufacturability and the ease of use of the product.

Example: the design team involved in the manufacture of a hi-fi set would include:
● electronics engineer concerned with the ability of electrical circuits to produce sound from the CD. (Product's Function)
● marketing team who is concerned about the look of the product. (the aesthetics, the ease of use, and the market price)
● industrial engineer who will be concerned with the sales volume required; how the product is to be made and assembled
i.e. the operations tasks involved in creating the product and considering the packaging requirements for items on display
for protection during transport.

In hi-fi, the knowledge required by a designer ranges from acoustics, electronics, mechanics, plastic processing technology,
and industrial engineering to ergonomics. it is so broad and complex that no one person can be professionally competent in
the whole range of disciplines required. In addition to their specific competence, the designer also needs an appreciation of
the problems of other elements of the design spectrum.

MANAGING SUCH A DIVERSE RANGE OF DISCIPLINES IS A COMPLEX MATTER.

THE NATURE OF DESIGN
AND INNOVATION IN THE
CONTEXT OF OPERATIONS
Design and Volumes
All the operations management functions involve making decisions, some are tactical and have short-term consequences whilst others
are more strategic with longer-term implications. One such major decision is the implications of the production volume required.

The highly skilled 18th-century craftsman making furniture at a rate of a few per year is a different type from the individual on 21st-century
assembly line at a production rate of 100 per day. The machinery, processing techniques used, materials, and design will also be very different.
Choosing the most appropriate and cost-effective method of manufacture is critical to the continued success of the organization.

Another key point is that assembly skills required to produce the product have become embedded in the process machinery and the workers
involved have become machine minders (see Illustration 5.3 on the production of blocks on HMS Victory). (JUST FOR READING)

If the volume required increases even more, by having robots on the assembly line the direct labor involved is further reduced.
If the product demand rises even further, it may be appropriate that the product is redesigned again and made out of a another material.
THE NATURE OF DESIGN
AND INNOVATION IN THE
CONTEXT OF OPERATIONS
Crafted-based Products
Some products are craft-based and made in small volumes.

Example: products from haute couture fashion houses. Unique gowns are handmade by very skilled personnel
and paraded at the show (new product launch). The designs are "copied" by other organizations and there is a rush
to get copies supplied to the high street retailers. These copies may look similar but are usually made from different
materials using different techniques and are less costly to make and purchase.

The operations management of the supplier to the high street has to respond very quickly to get the goods to the
market before the fashion changes. The flexibility and speed of response are critical to the organization's success.

Good marketing is also vital to avoid the end-of-season excess stocks that are ambitious and unrealized sales.
THE NATURE OF DESIGN
AND INNOVATION IN THE
CONTEXT OF OPERATIONS
Design Simplification
The purpose of design is to develop things that satisfy needs and meet expectations.
By making products easy to produce, the designer enables the operation to consistently deliver these features.

If the product is simple to make:

the required quality management procedures will be less complex, easy to understand, and likely to be more effective.

If a design is easy to make:

there will be fewer rejects during the manufacturing process and less chance that a substandard product reaches the customer.

The application of technology and technique of concurrent engineering (research, design, and development work in parallel rather than in sequence)
have made important contributions to management. Innovation within the manufacturing function involves searching for new ways of saving costs and
is a continual process. The closer designers work with operations and marketing personnel, the more likely the organization is to succeed.

It can take several years and cost millions of pounds to plan and build a major assembly facility, such as a car plant.
With huge investment, the design of the product must be correct at an early stage, as errors detected later can be expensive to rectify.
THE NATURE OF DESIGN
AND INNOVATION IN THE
CONTEXT OF OPERATIONS
Reverse Engineering
The process of duplicating an existing component or product, without the aid of drawings, documentation, or computer model is known as reverse engineering.

Reverse engineering is the process of analyzing a product to:

● identify the components and their interrelationships
● create representations of the product in another form
● create the physical representation of that product

it is very common in diverse fields. when a new design comes to market, competing manufacturers may buy one and disassemble it to learn how it was built and how it works.

In some situations, designers give shape to their ideas by using clay, plaster, wood, or foam rubber, but a CAD model is needed to enable the manufacturing of the part.
Reverse engineering provides a way of creating the physical model, which is the source of information for the CAD model. (JUST FOR READING)

Reverse engineering compresses product development times. In competitive market, manufacturers constantly seek new ways to shorten lead times to market a new product.
Rapid Product Development refers to recently developed technologies and techniques that assist manufacturers and designers in reducing product development time.

Reverse engineering is cost-effective only if the items to be reverse-engineered reflect a high investment or will be reproduced in large quantities.
Reverse engineering of a part may be attempted even if it is not cost-effective if the part is required and is mission-critical to a system.
PROCESS DESIGN
The process design is based on the technology being used within the process.

If an employee spends his working day assembling automotive car seats on

an assembly line, he quickly becomes an expert in this area of manufacturing and design.

Most people spend the bulk of their awake time involved with work and enjoy talking
about their job. In all organizations, it is the intellect of the employees that is the source
of innovation and it is the role of senior managers to create an atmosphere to encourage
appropriate intellectual activity. We go to art galleries or concerts to be entertained and
inspired, so it should be in our place of work. (JUST FOR READING)

Customers may be part of the process, as in carrying their luggage at airports or serving
themselves at the supermarket.

Clear signs and directions, easy-to-understand routes, understandable forms, and

approachable staff are all features of a well-designed service system. These are examples
of keeping things simple, if the customer doesn't have to communicate with an employee
to obtain the service, there is less chance for communication and quality problems.

Think of and compare the children’s party game of Chinese whispers with the processing
of paperwork or messages through several different departments in a large organization.

AT EVERY POINT OF INFORMATION TRANSFER THROUGH THE ORGANIZATION

THERE IS AN OPPORTUNITY FOR THE QUALITY OF INFORMATION TO BE DEGRADED.
 BE CREATIVE
ABOUT
Innovation in Action
DISTRIBUTION
Jonathan Ricci, CEO of Jones Soda:
Our consumers tell us the number one reason why
they don’t buy Jones Soda is that they can’t find it.

When Jones Soda tried to launch its range of drinks,

it found it difficult to get products into established retail outlets,
such as supermarkets and convenience stores, as these were
dominated by the big soft drink brands. (JUST FOR READING)

Rather than they give up, they looked at the other types
of stores to which their target customers always liked to go:
snowboarding shops, tattoo parlors, and music retailers,
and provided them with chillers and a supply of drinks.

In these retailers, there was no competition, and

the brand quickly built up enough sales and customer loyalty
that the main distributors then wanted to get in on the action.
PROCESS DESIGN AND INNOVATION
When it comes to delivering benefits to the firm it is process innovations that can generate enormous wealth for the firm.

Process innovation has received much less attention than Product innovation.
This may be because product innovations are visible, whereas process innovations are invisible.

It is not surprising that the following is quoted: "Product innovations are for show whereas Process innovations are for dough."
Yet, a major review of why firms engage in process innovation, found that product and process innovations are interdependent.

Process industries are characterized by:

● High production speed, short throughput time
● Rigid process control
● High capital investment
● Clear determination of capacity, one routing for all products, limited volume flexibility
● Low product complexity
● Low added value
● Strong impact of changeover times
● Small number of production steps
● Limited number of products

Food Packaging Industry: success has been achieved through a few packaging innovations. In the beverages sector, innovations such as
Tetrapak, PET bottles, and in-can systems have achieved numerous awards, market share improvements, and improved profitability for the firms.
In all of these cases, significant investment in production process technology was required and major manufacturing changes were introduced.
(JUST FOR READING)

The introduction of a cost-reducing process often is accompanied by changes in product design and materials,
whilst new products frequently require the development of new equipment. (JUST FOR READING)

IN PRACTICE, PRODUCT AND PROCESS INNOVATION ARE INTERWOVEN AND ANY DISTINCTION BETWEEN THEM IS ARBITRARY.
PROCESS DESIGN
AND INNOVATION
THE RELATIONSHIP BETWEEN
PRODUCT AND PROCESS INNOVATION

97% of innovations mix product and process innovation attributes.

Process innovation can be defined as new activities introduced into a firm to

achieve lower costs and/or produce higher-quality products. This may be why
it is often regarded as the Cinderella activity compared to the more glamorous
product innovation. Many activities and improvements may go unnoticed.
Changes in the production process that reduces costs by 10% would not
be noticed by end consumers but certainly would be noticed by the firm.

Recent models suggest that firms will favor product innovation where
there is a high level of product differentiation and competition is intense.
In contrast, process innovation will be undertaken where products are less
differentiated and there is less competition in the industry.

PROCESS INNOVATION OFTEN IS ASSOCIATED WITH THE ATTEMPTS OF FIRMS

TO ACHIEVE COST LEADERSHIP IN THEIR MARKET SEGMENT OR TO FOCUS ON COST
REDUCTIONS IN THE PRODUCTION OF EXISTING PRODUCTS.
PROCESS DESIGN AND INNOVATION
THE RELATIONSHIP BETWEEN PRODUCT AND PROCESS INNOVATION

JUST FOR READING

PROCESS DESIGN
AND INNOVATION
MANAGING THE MANUFACTURING:
R&D INTERFACE IN PROCESS INDUSTRIES

To be successful at innovation, firms need to be able to capture value from

their innovative functional products and then they must be able to manufacture
them in a competitive cost structure.

In process industries, this is even more important and is dependent on

the relationship between firms’ manufacturing and innovation activities.
PROCESS DESIGN
AND INNOVATION
STRETCH:
HOW INNOVATION CONTINUES ONCE INVESTMENT IS MADE

Process industries are characterized by large fixed items of capital equipment.

This causes a problem for firms in how to create change once plants are built.

To ensure stretch occurs, research argues that efficiency-driven production

managers need to accept risky interventions in production schedules to allow
continuing innovation.

Application development needs to be an institutionalized function in process

industry firms. It provides a way for firms to add value to customer products.
It focuses on bridging the gap between a product supplier’s knowledge of the
product’s performance scope and the customer’s knowledge of its production
process requirements. (JUST FOR READING)

KernPack is an expert in packaging machinery solutions and automation.

The firm has over 60 years of experience with precision systems. Kern can offer
improved products for its customers if it knows more about how its customers
use Kern machinery. (JUST FOR READING)

RESEARCH SHOWS THAT ESTABLISHING LONG-TERM CUSTOMER

RELATIONSHIPS IS THE BEST WAY TO ACHIEVE APPLICATION DEVELOPMENT.
Supply Chain Management
The term supply chain management describes the system of managing all the activities across company
boundaries to drive the whole chain network towards the shared objective of satisfying the customers.

MANAGEMENT
The inclusion of suppliers in design activities is essential. Much of the improvement in car design has

SUPPLY CHAIN
been at the initiative of their suppliers. For a company to achieve its own quality goals it must consider the
quality of the product from its suppliers. For example, large organizations may help their smaller suppliers
with training in quality circles.

DESIGN OF THE ORGANIZATION AND ITS SUPPLIERS

Successful supply chain management is highly dependent on good network coordination mechanisms,
business relationships, and information technology.

McDonald’s built a restaurant in Moscow. To achieve its required and expected level of quality and
service, the company establish an entire supply chain for growing, processing, and distributing the food
to its stores. McDonald’s made sure that all parties along the whole chain understood its expectations of
performance and closely monitored performance.
Supply Chain Management
Waste is a by-product of many processes and costs money.

Waste can take many forms: material, rejects, wasted movements, waiting time, and overproduction.

MANAGEMENT
"Any activity that does not add value."

SUPPLY CHAIN
Waste avoidance and process efficiency combine in the management principle termed "just in time"
(JIT) a definition of which is:

DESIGN OF THE ORGANIZATION AND ITS SUPPLIERS

JIT AIMS TO MEET DEMAND INSTANTANEOUSLY WITH PERFECT QUALITY AND NO WASTE.

Japan has limited natural resources. Consequently, the Japanese were champions of waste avoidance
in their processes and were amongst the first to introduce the JIT techniques and processes to their
large-scale manufacturing plants. (JUST FOR READING)

A RECENT DEVELOPMENT WITHIN SUPPLY CHAIN MANAGEMENT FOCUSES ON:

ABILITY OF SUPPLIERS TO RESPOND QUICKLY TO CHANGES IN DEMAND. "AGILE APPROACH"
 INTENSIVE CARE
USES FORMULA ONE
Formula1 Pit Stops to ICU TECHNIQUES
The skills developed during Formula 1 pit stops are now being used
to save lives at a top children’s hospital. This may seem like an unlikely
partnership but operational similarities exist.

London’s Great Ormond Street Hospital has changed the way that
young patients are treated after an operation. Like a pit stop, hospital
transfer requires quick coordination and teamwork, and this is at a time
when a patient is vulnerable after a long and difficult operation.

a child must be detached from one set of tubes and lines in the
operating theatre, then wheeled into ICU and connected to another set.
The receiving hospital has to absorb information from the surgical team
about the way the patient is responding and how his or her condition
can be kept stable.

Previously, the hospital handovers tended to be chaotic, so the Great

Ormond Street Hospital contacted McLaren and Ferrari. They realized
that their transfer was poorly organized, with people colliding and doing
things they didn't need to do. Numerous changes were made, including
providing more space for staff and an organized list of instructions.

The improvements have made the handover from the operating theatre
to ICU as smooth, organized, and quick as a professional pit stop.

Number of technical errors halved and information handover mistakes.

Business Process Re-engineering (BPR)
A contrast to the incremental ideas of process improvement is that
the radical breakthrough approach of business process re-engineering (BPR).

MANAGEMENT
They define business process re-engineering (BPR) as:

SUPPLY CHAIN
The fundamental rethinking and radical redesign of business processes to achieve dramatic
improvements in critical measures of performance such as cost, quality, service, and speed.

DESIGN OF THE ORGANIZATION AND ITS SUPPLIERS

The small modest improvement detracts effort from the real need to reinvent the business.
"Incrementalism is an enemy of innovation". The radical approach is the only way organizations
can be sufficiently innovative to survive in the twenty-first century.

Thus, we have the radical breakthrough approach versus the diametrically opposite incremental
methodologies. It may be possible, even necessary, to follow both at different times.

Large and significant improvements can be followed by incremental and less spectacular innovations
and improvements, but senior managers and company directors must be aware of the strengths and
weaknesses of both. (JUST FOR READING)
LEAN INNOVATION
Lean principles are derived from
the Japanese manufacturing industry.
Lean manufacturing or lean production is a systemic method for the elimination of waste within a manufacturing process.

Lean innovation embraces a philosophy of not letting perfection get in the way of progress.
A Pareto principle is that 20% of a product’s features will most likely deliver 80% of the benefits sought by customers.

Google has been practicing lean innovation without realizing it. Google has released so-called "beta" products to its
consumers. Example: Google Scholar was used by many research students, even though it was not yet complete and
probably contained some software errors.

Lean Innovation Definition:

Creating a new product or process, including the work required to bring an idea or concept into a final form
with emphasis on identifying and creating value and removing the waste of the new product development (NPD) process.

Lean innovation is very different from conventional approaches to product development in which teams expend enormous
effort trying to create a perfect product without sufficient in-market customer feedback. The resulting new products are
often too expensive, too complicated, too different from what customers want, and end up being too late to market.

Early reviews of firms that have adopted lean innovation techniques seem to show that it helps create a better learning
environment. It helps to focus on the most important product attributes and encourages rapid cycling of trial and error.
"Lean innovation is not a better innovation process; rather it can be a more efficient learning process."

"TO MAXIMIZE SUCCESS, LEAN INNOVATION MUST BE LINKED TO PRACTICES THAT EFFECTIVELY
CAPTURE THESE LESSONS AND MAKE THEM READILY AVAILABLE TO EVERYONE WITHIN THE ORGANIZATION."
Tom Agan (2014)
Welcome to
Innovation Managment

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