Innovation Management And New Product Development PDF

Innovation Management and New Product Development 6th edition Chapter 5 Operations and process innovation Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Introduction Effective research and developm...

Innovation Management and New Product Development 6th edition Chapter 5 Operations and process innovation Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Introduction Effective research and development (R&D) requires close links with the part of the organisation that produces the product (or service) – that is, operations. Many new product ideas are based on existing products and may be developed from within the production or service operations function and it is necessary, therefore, to examine the role of operations and its management when studying innovation. These innovative ideas are likely to be ideas for improvement in the process of manufacture or delivery of the product or service. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Operations management Most organisations provide items that are a combination of product and service elements – e.g., a restaurant provides a product (the food) and a service (delivery to your table). The term operations management was coined to bring together the skills and techniques developed in the manufacturing and service sectors in order to help encourage the transfer of the best practices. In an age of global mass production and competition, it is often the service element of any purchase that gives the supplying operation its crucial competitive advantage. Innovation within the operations function is, therefore, crucial in achieving the organisation’s strategic objectives. Operations management is about the control of a conversion process from an input to an output (Table 5.1). Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Table 5.1 Operations inputs and outputs Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Fig. 5.1. The operations manager’s role Source: Adapted from Slack, N. et al. (2004) Operations Management, 4th edn, © Pearson Education Limited. Figure 5.1 illustrates the operation function and includes the elements of design, planning and control and improvement. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved  To this process, need to be added 3 other very important dimensions: 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 (complaints or compliments), market research or government agencies (standards, laws, EU directives, etc.); and 3. the physical and business environment in which the organisation operates. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Figure 5.2 Design simplification Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Figure 5.3 The design of processes Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Process design and innovation process innovation has received much less attention than product innovation in the literature on innovation management. This may be because product innovations are visible, whereas process innovations frequently are invisible. In practice, product and process innovation are interwoven and any distinction between them is arbitrary. Process innovations are an important source for increased productivity and they can help a firm gain competitive advantage. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Process design and innovation Process industries are characterised 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. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved  Process innovations are an important source for increased productivity and they can help a firm gain competitive advantage. E.g. In the food industry, process innovations often are associated with the introduction of new plant, equipment or machinery. 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. In practice, product and process innovation are interwoven and any distinction between them is arbitrary. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Figure 5.4 Typology of industries Source: Taylor, S.G., Seward, S.M. and Bolander, S.F. (1981) Why the process industries are different, Production and Inventory Management Journal, vol. 22, no. 4, 9–24. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved The relationship between product and process innovation Process innovation can be defined as new activities introduced into a firm’s production or service operations to achieve lower costs and/or produce higher quality product (Reichstein and Salter, 2006). It is true that many of its activities and improvements may go unnoticed. Changes in the production process of a cereal box that reduces costs by 10 per cent would not be noticed by end consumers; but certainly it would be noticed by the firm. Some recent models suggest that firms will favour 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. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Stretch: how innovation continues once investment is made Process industries are characterised by large fixed items of capital equipment. Change is thus expensive. Essentially ‘stretch’ here means evolutionary problem solving. Intensity of use leads to familiar learning effects. Enhanced maintenance of the plant can lead to improvements. Other changes can come from system-wide effects of improvements in feedstock and downstream processing. Application development enables product development by changing production process requirements. stretch is the mechanism by which established plants incorporate improvements in process and product technology, and make higher output and new products as a result. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Triggers for Innovation in the management of the operations process The task of all managers is to improve their operation – otherwise they are supervisors and do not justify their job title. New, innovative ways of working within the operations process to gain competitive advantage is, therefore, part of every operations manager’s duties. How to trigger off an investigation resulting in an improvement? One approach is first to identify techniques or triggers to help this improvement process. Triggers:  Gap analysis  Quality circles and process improvement teams  Total quality management (TQM)  Quality function deployment (QFD)  The ISO 9000 approach  The EFQM excellence model Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Gap analysis: A technique used extensively to aid understanding of the differences (or gaps) between the customer and producer view or experience of a product or service. E.g. Consider a service product – a university lecture, where the same lecture is experienced by the teacher and the student. However, viewing the lecture from the student’s (customer’s) viewpoint is different from that of the producer (the lecturer or university) (Fig. 5.5) Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved  The student’s expectations are based upon the university’s and the lecturer’s image, experience and word of mouth exchanges. These combine and may lead to the student having a specification of what he/she expects from the lecture. The university, through its management, has a concept of what should be in the lecture (the syllabus). The lecturer takes this concept and produces his slides, handouts (hopefully simple and easy to understand) and delivers the lecture. These differences or gaps are shown in the figure and each is a source of dissatisfaction with the lecture from the student’s or university’s perspective. These identified gaps help to show those corrective actions required in the design of the lecture or its delivery process (Table 5.3). Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Figure 5.5 Innovation gap analysis Source: Adapted from Slack, N. et al. (2004) Operations Management, 4th edn, © Pearson Education Limited. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Table 5.3 Gap analysis Source: Adapted from Slack, N. et al. (2007) Operations Management, 5th edn, © Pearson Education Limited. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Quality circles and process improvement teams A quality circle is a small group of voluntary workers who meet regularly to discuss problems (not necessarily restricted to quality matters) and determine possible solutions. Members of quality circles are given training in quality control and evaluation techniques. An idea coming from a member of the quality circle is far more likely to be adopted than an idea imposed from above. The recognition by senior managers that the employees are worth listening to helps to improve the total quality ethos of the company with beneficial effects on the company and its customers. The process improvement team’ was used to reflect the need to look at the whole business process being considered. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Total quality management (TQM) An effective system for integrating the quality development, quality maintenance and quality improvement efforts of the various groups in an organisation so to enable production and service at the most economical levels which allows for full customer. (Feigenbaum, 1986: 96) The TQM philosophy stresses the following points: meeting the needs and expectations of customers; covering all the parts of the organisation; everyone in the organisation is included; investigating all costs related to quality (internal and external); getting things right by designing in quality; developing systems and procedures that support quality improvements; and developing a continuous process of improvement. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Quality function deployment (QFD) Making design decisions concurrently rather than sequentially requires superior coordination amongst the parties involved – marketing, engineering, operations and, most importantly, the customer. QFD is a structured approach to this problem that relates the voice of the customer to every stage of the design and the delivering process. In particular, QFD: promotes better understanding of customer demands; promotes better understanding of design interactions; involves operations in the process at the earliest possible moment; removes the traditional barriers between the departments; focuses the design effort. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved The ISO 9000 approach Many countries developed their own quality systems and standards and in 1994 these were combined to become the International Standards Organization ISO 9000 – a set of standards governing documentation of a quality programme. A qualified external examiner checks that the company complies with all the requirements specified and certifies the company. Once certified, companies are listed in a directory and this information is made available to potential customers. As many large organisations insist on all suppliers having the ISO quality standards, much time and effort was spent in new, innovative ways of controlling and developing processes to maintain the agreed and certified standards. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved  ISO 9000 (2000) was developed to include four additional principles:  quality management should be customerfocused;  quality performance should be measured;  quality management should be improvementdriven;  top management must demonstrate their commitment to maintaining and continually improving management systems. Despite these revisions, the ISO approach is not seen as beneficial by all parties. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved The EFQM excellence model In 1988, 14 leading Western European companies formed the European Foundation for Quality Management and gave an award for the most successful application of TQM in Europe. In 1999, this idea and model was refined and developed into the EFQM Excellence Model. the EFQM Excellence Model reflected the increased understanding and emphasis on customer (and market) focus and is results-oriented. The underlying idea is that results (people, customer, society and key performance) are achieved through a number of enablers (Figure 5.6) in managing and controlling the input/output transformation processes involved. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Figure 5.6 The EFQM excellence model Source: Adapted from Slack, N. et al. (2004) Operations Management, 4th edn, © Pearson Education Limited. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved  Performance measurement is by self-assessment, which EFQM defines as ‘a comprehensive, systematic, and regular review of an organisation’s activities and results referenced against a model of business excellence’. It may be easier to understand and apply this approach than is the case with some of the more philosophical concepts within TMQ. Furthermore, the EFQM excellence model also embeds innovation and learning in the performance of the organization. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Design of the organisation and its suppliers: supply chain management The term supply chain management describes the system of managing all the activities across company boundaries in order to drive the whole chain network towards the shared objective of satisfying the customers. In many situations, these suppliers are global and supply chain management has become a key strategic issue for many organisations. With the involvement of suppliers in the new product development process, it has also been found that more cost-effective designs have been created. Successful supply chain management is, therefore, very dependent on good network coordination mechanisms, business relationships and information technology. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Table 5.7 Supply chain management Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved 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 is creating a new product or process, including the work required to bring an idea or concept into a final form, with emphasis on identifyingand creating the value and removing the waste of the new product development (NPD) process. Greg Cohen ( 2011) describes lean innovation as five steps and principles: Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved Fig. 5.8. Lean innovation Source: G. Cohen (2011) Lean Product Management, © 2011 The 280 Group, reproduced with permission. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved 1. Identify customer value: define value from the perspective of the customer. 2. Map the value stream: identify all steps in the value creation process and remove those steps that do not create value. Value stream analysis focuses on the flow of material and information through the system with a focus on throughput and wait times. 3. Create flow: assemble value-creating steps in a tight sequence to enable value to flow quickly through the system. 4. Establish pull: as value starts to flow, value is pulled through the system, ideally by the customer and at the rate of customer demand (‘build to order’ is a pull system). 5. Seek perfection: repeat the previous four steps until all waste has been removed in the system. Perfection is a state that the professionals continue to approach, but never actually achieve. Copyright © 2018, 2013, 2008 Pearson Education, Inc. All Rights Reserved