3 Key areas for operational innovation
“Adapt or die” is the universal guide to business survival
The COVID-19 pandemic made that even clearer, as organizations that quickly shifted operations to meet a pandemic-changed world not only survived but even thrived. The key for these businesses was leadership with the courage to make innovation a priority.
Innovation is a word that opens doors to change. The definition of “innovation” is short — a new method, idea or device or the introduction of something new. It can lead to as little or as much change as is needed.
Operational innovation’s end goal differs from operational excellence, which focuses on making existing processes more efficient. It means finding entirely new ways to improve all internal processes, from development to customer service to anything the organization offers.
Boost Midwest uses their Operations Audit and Workshop — Analyze, Innovate and Manage — when partnering with organizations ready for —and needing — change.
“We find that by using these three phases, we’re really able to make change both sustainable but also make it stick,” Boost Midwest President Marie Stacks said, “which is oftentimes part of the change process that is truly difficult.”
Why should an organization actively look to transform the way it operates? Should companies with a strong revenue look to innovate?
Operational innovation can expand and transform a local company into a national one — or potentially even a global.
Let's use Amazon as a prime example. Jeff Bezos started his company as an online bookstore and used operational innovation to grow Amazon to the mega-company it is today. Bezos seized the opportunities offered by the digital revolution starting in the mid 1990s, and kept right on going, changing the entire landscape of retail shopping.
Another example is Apple’s iTunes, which changed the music industry as a whole. But the same approach is used with smaller organizations.
Operational innovation can be tied to a specific product or service, to internal workflows or processes, or to an entire business model. It brings a potential for growth, which likely is why 79% of responses to a 2015 Boston Consulting Group survey ranked innovation as either the top or top-three priority at their company —up from 66% in 2005.
3 key areas of operational innovation: product innovation, process innovation and business models.
1. Product innovation.
This is the development of a new product, or improving an existing one by adding a new feature. Either way, the goal is to ease the lives of consumers by addressing a problem in an unexpected or unique way.
The reasons for product innovation include:
Advances in technology.
Changing needs of consumers.
Updates to design.
While this can be costly and involves risk — what if consumers don’t embrace the new or changed product? — organizations that resist innovation are likely to find themselves in a state of stagnation.
2. Process innovation.
This internal innovation relates to how an organization creates, delivers and supports a product or service. While process innovation doesn’t necessarily lead to an obvious increase in sales or demand, it often leads to lower production costs that can lead to a rise in profits.
Examples of process innovation may include:
Technology and equipment upgrades for greater efficiency.
Developing a more predictable and systematic supply chain.
Reducing duplication by modifying processes and workflows.
Process innovation is lower risk than product or service innovation but even though it focuses on internal operations, its benefits should not be overlooked.
3. Business model innovation.
Broader and more complex than process and product innovation, business model innovation concerns how a product or service is brought to market.
The obvious example is a brick-and-mortar retail store adding or switching to an online business model. However, in the technology sector, business model innovation usually addresses the system used to deliver the technology.
One challenge is that business model innovation theory is lacking compared to the other key operational innovations.
“Without a framework for identifying opportunities, it is hard to be systematic about the process, which explains why it is generally done on an ad hoc basis,” a Harvard Business Review article noted. “As a result, many companies miss out on inexpensive ways to improve their profitability and productivity.”
Boost Midwest’s Operations Audit and Workshop targets the where, why and how for business model innovation through analyzing data, reviewing processes and hearing directly from stakeholders.
3 Strategies for Business Model Innovation:
Blue ocean strategy. This approach encourages organizations to innovate by creating new markets, not compete in existing ones. It has potential in any sector, but is particularly relevant where supply exceeds demand in a particular market.
Open innovation. This allows you to align your innovation efforts with the wants, needs, and ideas of those that make up your company and your overall market. It uses input from many sources, both inside and outside of an organization. More ideas can be heard, so more information is available from different perspectives.
Lean innovation. In its simplest form, lean innovation creates a solution to a customer’s problem. Usually used with product innovation, this process employs design thinking to solve problems using customer feedback. It also addresses inefficiencies in the development cycle. Lean innovation values experimentation and continuous, incremental improvement, and is usually applied to product innovation.
Boost Midwest provides an unbiased review of processes, products and business models can point to how operational innovation can leverage your organization in its sector. To learn more, schedule your free consultation call today.
Ready to learn more about how Boost Midwest can help you optimize your project management and operations? Schedule your free consultation call with us today using our Quick Schedule Link here.