The Four Types of Innovation
According to innovation experts such as Ray Stata and James Higgins of Higgins and Associates, there are basically four types of innovation that organizations involved in Quality Management strategies need to be concerned about: product, process, marketing, and management. These four types are coupled with some forty-nine characteristics that an organization’s culture needs to possess to achieve strategic competitive advantage through innovation and creativity. Higgins uses four questionnaires that an organization can use to measure its performance in this area.
Product innovation results in new products or services, along with enhancements to existing ones. Toyota and Chrysler are good examples of product innovation. Process innovation results in improved processes within the organization’s supply chain, thereby focusing on improving the efficiency and effectiveness of logistics processes. Toyota and Cooper Tire are good examples of logistics process innovation. Marketing innovation is related to the marketing functions of promotion, price, distribution, and product-related packaging. For example, in advertising its new products, Chrysler uses innovative marketing themes such as those featuring its $1 billion Technology Center. Finally, management innovation improves the way the organization is managed. Bell labs uses total innovative management strategies, such as programs aimed at improving researcher’s productivity, to create new products.
Product innovation leads principally to competitive advantage through differentiation, while process innovation leads to a low-cost advantage. In the world-class organizations, product and process innovation are coordinated. A 15 year study by Varajaradan and Ramanujam, performed on successful companies, found commitment top product and process innovations to be one of the six common Critical Success Factors of these firms. Most of the successful firms in the U.S. and Japan, and to some degree in Europe, integrate process and product integration.
Marketing innovation helps achieve relative differentiation and relative low-cost objectives by improving strategies and tactics concerned with the marketing mix. In an age where the consumer is bombarded by advertisements, innovative marketing techniques are crucial to successful sales. In many cases, real differentiation and lower cost don’t matter if the customer perceptions are not in line. Marketing innovation helps align the desired perceptions by building strong relationships with customers so that the five key marketing mix variables are strengthened. These marketing mix variables are product, promotion, price, distribution, and target market. See the ASQ Profile on IKEA for more detail.
Management innovation can help achieve both differentiation and low-cost competitive advantage by improving the efficiency and effectiveness of logistical efforts to achieve corporate goals. U.S. and Canadian firms must improve their management practices to compete successfully in the global marketplace. As Deming and Tribus have often pointed out, the manager’s primary function is creative problem solving in the areas of the management cycle: planning, organizing, leading and controlling. As organizations continue to move toward greater self-management, individuals at all levels will have increased responsibility for creative problem solving.
Higgins offers the following examples of Management Innovation:
- Creative Problem Solving: expert systems, lateral thinking knowledge management, adaptive engineering
- Planning: strategic alliances, joint ventures, scenario forecasting, business plan software, speed strategies
- Organizing: reengineering, process redesign, creativity circles, restructuring, intrapreneurship, networked organizations
- Leading: transformational leadership, empowerment, whole systems change conferencing, management by wandering around
- Controlling: Comshares “Commander” Executive Information System, self-management, activity based costing, interactive balanced scorecard measurement systems
Strategic challenges will force management to change and innovate in the next decade, sometimes dramatically and sometimes incrementally. Although many of the changes have already begun, as shown in the profiles contained in this book, many more will be needed. Total Innovative Management can function as a change accelerator by developing new ways of managing change and stress, as well as improved information systems. Increasing the competition factor will demand improvements in competitor marketing intelligence systems, as well as new strategies for customer linkages.
The globalization of business will require innovative global strategies and structures, global cultures, and creative management styles. Changing technology will provide a new way of accelerating product life cycles and new product concepts to achieve new competitive advantages. A diverse workforce will require new leadership and management styles, new benefits, and new reward systems. The transition to a knowledge based society will require new, innovative management paradigms and knowledge management techniques. Finally, increasing complexity will demand more expert systems and computer simulations, which will give Innovative Management techniques a prominent place in the quality system of managing resources and processes.