Operations management

1. Module 2:
Product and service innovation
By-
Dr. Anushree Singh
Associate Professor
SOM

2. What's innovation?
• Innovation refers to the process of “Turning an idea into a
solution that adds value from a customer’s perspective”.
• Innovation is the process of executing an idea that addresses a
specific challenge and achieves value for both the company and
the customer.

3. Definition of Innovation
• Innovation refers to a change that creates a new dimension of
performance. The process of making improvements by introducing
something new. – Peter Drucker (Hesselbein, 2002)
• An Innovation is a new or improved product or process (or a
combination thereof) that differs significantly from the unit’s previous
products or processes and that has been made available to potential
users (product) or brought into use by the unit (process). – The
Oslo Manual (OECD, 2019)

4. Objectives of Innovation
• Improve Overall Quality
• Identify new markets
• Product range extension
• Reducing labor cost
• Reducing environmental damages
• Replacement of product and services
• To gain economic benefits from new technology.
• To reduce new product development time period.
• To manage large, complex, and multiple projects

5. Fields of Innovation
1.Product Innovations
2.Technology Innovations
3.Service Innovations
4.Process Innovations
5.Business model innovation
6.Marketing innovation
7.Architectural innovation
8.Social innovation

6. Fields of Innovation
1.Product Innovations
• Product innovation is the development and launch of a new product or
service that directly affects the market it sells in.
• It can also develop improved versions of existing products in a market,
enhancing the functionality or desire for an item by taking consumer
feedback to make improvements or discovering additional features and
technology to add.
• Most often product innovation is achieving an improvement on existing
products, though creating a true invention also happens.

7. Fields of Innovation
1.Product Innovations - Example
• The automobile industry and its companies release new vehicle lineups
every year, often with fresh features, designs or technology.
• Historically, automobiles have gone from roll-up windows to power ones,
stationary seat placement to manual seat maneuvering to electronic push-
button movement and now have even more advanced elements, like self-
driving automation.
• Elements like seat belts, anti-lock breaks and airbags are also examples of
innovation that reduces risk and improves safety.

8. Fields of Innovation
2.Technology Innovations
• Technology innovation is defined as the creation and application of new or
improved technologies, tools, systems, and processes that bring about
significant advancements or breakthroughs in various fields.
• It involves harnessing knowledge, expertise, and resources to develop
innovative solutions that solve problems, improve efficiency, drive progress,
and deliver value.

9. Fields of Innovation
2.Technology Innovations –Example
Artificial Intelligence
• This is one of the technological innovation examples that has made a
potential impact on the business. Artificial intelligence could be defined
as the invention of machines with programming like that of a human. It
helps a business grow by presenting customer service by telephone and
a chatbot, product recommendations, and advertising.
• It is already creating an impact on the business through services like
automation of work, processing natural language, analytics.

10. Fields of Innovation
3.Service Innovations
• Service innovation refers to any positive changes in the services
sector that alter how services are provided or introduce new
services.
• The main aim of innovative services is to simplify existing
customer processes to enhance ease and speed.
• As a service manager or supervisor, you can integrate service
innovation into a business by improving or launching a service
concept in a new market.
• This may also involve delivering an existing product or service in a
more convenient, efficient and affordable way to customers or
integrating value-added services into an existing service.

11. Fields of Innovation
3.Service Innovations -Example
An example is a ride-sharing service that offers affordable
transportation, adding a delivery service option for customers to
send packages to different locations.

12. Fields of Innovation
4.Process Innovations
• A process innovation is the implementation of a new or
significantly improved production or delivery method. This
includes significant changes in techniques, equipment and/or
software.
• A company may consider using process innovation to improve its
product or service production and delivery to make them more
efficient and cost-effective.
• This innovation may relate to product manufacturing or include
improving secondary or supporting business processes.

13. Fields of Innovation
4.Process Innovations-Example
An example of process innovation in action is a coffee roaster selling
bulk packages of roasted coffee beans to various cafés. The roaster
can integrate product and sales management software that
automatically reorders a client's usual volume of coffee every
month. This innovation doesn't directly impact the coffee's quality
but affects how clients receive it by ensuring they never run out of
coffee.

14. Fields of Innovation
5.Business Model Innovations
• Business model is the way an organization creates, delivers and captures
value.
• Innovation in business models basically refers to adjusting the business
model in accordance with emerging trends.
• Generally, innovation in business models focuses on introducing fundamental
changes in the way a company delivers value for its customers.
• Businesses could work on developing new distribution channels or new
revenue streams as part of their plans for innovation in their business
model.

15. Fields of Innovation
5.Business Model Innovations -Example
An example of this is an online makeup retailer experiencing poor sales as it
faces increased competition from other online beauty retailers. The retailer
may revisit its business model and switch to offering monthly subscription
boxes of curated and themed makeup products. This business model allows the
business to better plan its product demand and helps it secure a more stable
income.

16. Fields of Innovation
6.Marketing Innovations
• Marketing innovation is the incorporation of new marketing
methods and techniques that differ from the previous ones and
involve significant changes in product promotion, design,
packaging, and placement. It helps improve a product or service
and reach a wider audience.
• It may help a business better connect and engage with new
customers by finding new uses for an existing product or
highlighting qualities customers might not be aware of.

17. Fields of Innovation
6.Marketing Innovations -Examples
• An example of this is a menswear boutique that specialises in
designing and creating bespoke tuxedos for male grooms. The
boutique may expand its market base by advertising its services to
women or non-binary individuals who may prefer to wear a suit to
their wedding.

18. Fields of Innovation
7.Architectural Innovations
• This innovation refers to how a business combines various system
components to create or add value.
• It can also involve revisiting these combinations to determine
areas that may benefit from improvement.
• This may include improving one of the core business systems,
including existing networking, accounting, manufacturing or
inventory systems.
• It does this without changing the fundamental components of the
system itself or altering or changing these components.

19. Fields of Innovation
7.Architectural Innovations - Example
• A common example of this is businesses that develop certain
technologies for industrial use and rework how these components
interact to create smaller versions of the product for a retail
market.

20. Fields of Innovation
8.Social Innovations
• Social innovation involves adopting or developing new practices or
tools a business can use to meet its responsibilities.
• Non-profit and commercial companies often rely on social
innovation and may use it to create improvements in a wide range
of societal areas.
• Communicating these innovations to customers can help them
view the business positively and help the company become more
sustainable.

21. Fields of Innovation
8.Social Innovations - Examples
• An example is a business that manufactures certain products,
switching to using less energy-intensive machinery to reduce its
reliance on fossil fuels and communicating this to customers in
print adverts.

22. Types of Innovation
Essentially, there are three types of innovation:
• Radical Innovation
• Incremental Innovation
• Disruptive Innovation
They may vary depending on the niche, market, brand essence,
services, and products offered.

23. Types of Innovation

24. Radical innovation
• As the name suggests, a radical innovation really changes the circumstances of a
brand, whether in terms of market or of business dynamics.
• It can occur due to a complete change in a company's positioning, work method,
processes, services, and products offered, or how it relates to customers.
• The best illustration of revolutionary advancement was the innovation of the plane.
This revolutionary new innovation opened up another type of movement and
created an industry and an entirely different market.
• An example of radical innovation would be Apple's iPhone. When it was released,
smartphones already existed, but Apple included features that changed the market
and made it more popular.

25. Incremental innovation
• Another type of innovation is incremental innovation. It adds new features to a
product, brand, or production methods without promoting a very drastic change.
• It's usually an evolution of an innovation already implemented by the brand that
complements and offers improvements, be it to employees, customers, or features
of a business.
• An example of incremental innovation is Gmail, which was created with the purpose
of sending emails quickly – but over time, different features were added to improve
the customer experience and make it more useful and competitive.

26. Disruptive innovation
• Technological and behavioral changes have favored the emergence of disruptive
innovation in recent decades.
• This type of innovation follows the market more than a specific brand, product, or
service. It can be leveraged by something a company has offered and, as a result,
made their name, but, in general, it's a scalable change that reaches many people
at the same time.
• Examples of disruptive innovation include Netflix, as the market used to rely on
companies like Blockbuster for movies and TV series. Netflix started offering DVD-
by-mail rental services but decided to innovate. It started offering video streaming
services through a monthly subscription and, in doing so, drove Blockbuster out of
the market. In addition to being innovative, this also gave Netflix a predictable
monthly revenue.