Process innovation is the application or introduction of a new technology or method for doing something that helps an organization remain competitive and meet customer demands.
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Process innovation happens when an organization solves an existing problem or performs an existing business process in a radically different way that generates something highly beneficial to those who perform the process, those who rely on the process or both. For example, the introduction of a completely new sequence to an existing production process that speeds production by 100%, thereby saving the organization money and time, could be considered a process innovation. Organizations today often bring in new information technology systems or find ways to use older in new ways at the forefront of their process innovation efforts.
Process innovation is different from incremental innovation in both scope and size. Whereas incremental or continuous improvements generate limited value, innovation generates improvements that increase value by upward of 50%, 100% or even more. Some describe process innovation as creating radical or game-changing shifts. In addition to the introduction of a radically new approach or technology, process innovation generally requires a longer planning time and support from high-level management. It’s also riskier than incremental improvements and requires a higher level of cultural and structural change. Process innovation also typically impacts a broader portion of an organization than do incremental improvements.
Process innovation can generate value to either internal customers, including employees or the actual organization itself, or it can create value to external customers, including business partners, end users or actual consumers. Values stemming from process innovation include reducing the time it takes to produce a product or perform a service; increasing the number of products produced or services provided within a time frame; and reducing the costs per product produced or service provided. Additionally, process innovation can generate significant gains in product quality and service levels. Overall, an individual organization needs to see a significant increase in some of its key performance indicators (KPIs) to be a true process innovation.