UNDERSTANDING INNOVATIONProcess inn

UNDERSTANDING INNOVATION
Process innovation is about making beneficial changes to the processes
that produce products or services, as for example,
Building new systems that assemble a TV set faster and cheaper
Redesigning the assembly line so that TVs can be manufactured more
reliably
Outsourcing the production of the plastic covers on TVs so costs can
be reduced and quality improved
Service innovation is about making beneficial changes to services that
customers use. Examples include
Changing the way dealers sell new TVs in order to cut costs
Changing the way customers get rid of their old TVs by introducing
a take-back policy
Offering credit finance options to allow customers to purchase TVs
Each of the innovations just listed adds value; if customers recognize
this, they will return to purchase or use similar products or services
in the future. A key characteristic of a product, process, or service is the
degree of tangibility of the product and the degree of interaction with
the end customer or consumer. For example, product innovation
involves innovating tangible products. This is an activity in which most
consumers have little involvement. The first time a customer experiences
the product is when it is brought into the market and the customer
purchases it. On the other hand, services typically involve
intangible products such as banking and serving fast food. Unlike with
products, the customer has a high degree of contact and interaction
with services.
Other differences between products and services include the following:
Inventory: Products can be stored; services cannot.
Response time: Products have a longer lead time; services have a
shorter lead time.
Resources: Products tend to be capital-intensive (e.g., machines),
whereas services tend to be labor-intensive.
Figure 1.1 illustrates these differences along the two main dimensions:
the degree of tangibility and the degree of customer contact. We will now
look at each of these innovation types in greater detail.
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