2.3 Product, service and process?
A distinction is commonly made between product, service and process innovations.
Product innovation refers to new products, such as the invention of the mobile phone or the BAC/Sud-Aviation Concorde supersonic airliner.
Product improvements often enhance performance and reduce cost; an example would be a cheaper, lighter mobile phone with a higher resolution screen or the continuously updated Boeing 737.
Service innovations include ATM (Automated Teller Machine) banking and direct-to-the-customer insurance. Once upon a time, insurance was largely sold face-to-face, either at the insurer’s business premises or via agents at the purchaser’s home. Today it is considered normal for the entire process to be conducted either online or by phone. The approach has, arguably, been improved further with the introduction of price comparison and customer review sites.
Service improvements include the introduction of flat beds in first and business class by British Airways, Virgin and certain other airlines. Airline check-in services have also been improved with the option of online seat selection, check-in and print-it-yourself boarding passes.
Process innovation refers to new processes used to provide the product/service, either in a way others have yet to master, or in a way that enables better performance or lower cost. A classic example is the perfection of float glass pioneered by Sir Alastair Pilkington and his colleagues.
Process improvements are often aimed at reducing costs and/or improving performance. Volume production of motor-cars evolved towards a production-line approach, but several manufacturers experimented with cell structures where small teams were responsible for entire cars. Modern factories now make use of elements of both approaches.
Business models often entail a combination of product, service and process; the elements themselves may be innovative, or just their combination. Amazon has invested a great deal in designing a system for buying books and other consumer goods. Their business model is innovative, if for no other reason than that many of its components (low-cost computing, high-speed internet access) were not widely available in many countries at the turn of the millennium.
Activity 8 Examples of innovation
Try to find examples from your experience to illustrate each cell in the following matrix. (Don’t be surprised if it is sometimes difficult to decide which box to allocate each innovation to.)
The purpose of this activity is primarily to cement your appreciation of what is encompassed by ‘innovation’, even though it doesn’t really fit into neat categories – as different ways of thinking about it can help. The real-world conclusion remains; innovation is much easier to recognise and categorise in hindsight, and its design, implementation and refinement is often a remarkably messy business.