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Understanding process innovation

In this video, Dr Christos Tsinopoulos discusses applying open innovation to a process and how this may also improve service delivery.
So far, we have been discussing about open innovation, mainly focusing on products and then a little bit on services. Now, this makes sense, not least because talking about open innovation and talking about products is widely understood by the wider public and users, people that feel and touch things. And then they can feed back information to the organisation, the organisation that makes this. It’s also easier to communicate and illustrate examples of open innovation. And more importantly, it’s relatively easier to communicate complex concepts associated with open innovation when you refer to a product. However, much of open innovation does not only happen in the case of products, but it happens in processes as well.
In fact, there are publications out there that suggest that more open innovation happens in processes than it does in products.
So the thing about process innovation is that it is usually seen as an intermediary activity. And what I mean by that it is often conducted as a means of developing a product or a service. So if you go to a shop and buy something, for instance, you are buying the final product. But that product has been manufactured by a process which you do not necessarily see or you do not necessarily engage with. Similarly, when you buy a service, yes, you buy an experience. You buy a process that you’re through, as we discussed earlier. But again, you’re not so interested in the process. You are interested in the experience and the feeling that you have at the end of it.
So customers may not see it. It’s a part of the process. It’s a part of the overall organisational business activity that the customers may not see, but they still have a view on it on its outcome. So for instance, in the service context, a badly-designed process might result in long queues. And I guess it would be fair to say that for most of us, queuing or waiting is not a good experience. In a manufacturing context, in a physical product context, a badly-designed process might the result to a bad reliability of the product or potentially a product that doesn’t exactly do what it’s supposed to be doing. So here at Durham, we have looked at this aspect.
And if you recall, one of the things, one of the ways we defined engaging with open innovation is by looking at three different dimensions. So we looked at the corporation with external parties for which we have discussed quite a bit about, we have looked at the use of external information such as market data and the acquisition of R&D. Now, each organisation is likely to have its own routines or its own unique processes, its own unique way of doing things. Corporations, we have argued, help understand each other and how processes are being applied.
So if you have a unique process that you apply, then close cooperation with the customers and suppliers can educate, can inform people how they are actually using this kind of process. And it also allows the application-specific capabilities. So if I have a certain capability as a supplier, by understanding how you are using the process, then I can tell you what it is that you can improve and how.
User information, which is a second dimension we have been discussing, could lead to suggestions for improvement. So for instance, if you have information about market trends, for instance, you can use this kind of information to improve the processes, increasing the capacity of a plant, for instance. But they can also improve information about the use of the product, which can then feed back to the design of the process, making, for instance, the process more reliable, if that’s what the market wants. The acquisition of R&D, which is the third dimensions we discussed about, can also lead to increase the number of ideas.
This is not product ideas that I’m referring to, but ideas about improving the process of what you do– for instance, buying a new process technology, something that can make things go faster, for instance. And the final thing that it does is it actually increases an organisation’s absorptive capacity. So the use of R&D, for instance, acquiring R&D from external organisation, not only helps directly by making things better, more efficient, but it also improves an organisation’s ability to learn from other organisations and to develop new products and services later on. So it has a continuous loop of learning and improvement that effectively leads to better performance.

The need for innovation

Competition in global contexts has increased the pressure for new and efficient processes. As a result, there has been increased attention on the ability of organisations to build new processes.

Despite the popular focus on product innovation, research suggests there are good reasons to believe that much of the impact of open innovation happens behind the scenes and is not always directly evident in the final offering to the customers.

Technology in supermarkets

For instance, the technology used to manage the supermarket experience, eg the automated self-service tills, is often developed by suppliers, and the need for it often comes from customers.

The motivation of organisations

Our research has found that different levels of engagement with external parties, such as customers, suppliers and universities can increase the ability of an organisation not only to introduce new products but new processes as well.

Such levels of engagement are also affected by the motivation of organisations to be seen as complying with legislation – where legislative change may impact process change.

Open innovation activities

That is when an organisation engages with open innovation activities and is motivated to be seen as legitimate, then their ability to introduce new processes increases. This may sound confusing, but its meaning is relatively straightforward.

One of the key motivations for organisations to introduce new processes is to do things more efficiently. Yet, this is not the only one.

Financial organisations

Financial organisations often introduce new processes to comply with legislation. Similarly, multinationals adopt codes of ethics to ensure that their processes comply with accepted ethical standards. These are often referred to as institutional forces and explain how some organisations behave when profit maximisation or cost reduction is not the only motivation for action.

When such institutional forces are combined with efforts to cooperate with external parties then the ability to introduce new processes increases.

There are several takeaway points from this research:

1) The impact of engaging with open innovation on the introduction of new processes

Process and operations managers often find themselves under pressure to make their processes more efficient. Looking externally for ideas, technology and research and development (R&D) can clearly help find solutions to this ongoing problem.

2) The timing of cooperation with innovation partners

You will often find yourself in situations where a new management system is being implemented or a new supplier is being sought. Doing the two at the same time or at least close together will increase the ability to introduce a new process.

3) The link between open innovation and service delivery

As a customer’s experience when going through service is determined by the design of the process, this research indicates that engaging with open innovation can improve overall service delivery as well.

Further information

There are publications out there that suggest open innovation occurs more in processes than products.

Here’s a good example, which you may like to take a look at:

Tsinopoulos, C., Sousa, C. M. P. and Yan, J. (2018) ‘Process Innovation: Open Innovation and the Moderating Role of the Motivation to Achieve Legitimacy’, Journal of Product Innovation Management, Vol.35(1), pp 27-48.

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Harnessing Open Innovation in Business

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