In 1965, Intel co-founder Gordon Moore observed that computing power roughly doubles every couple years. This prediction, now dubbed “Moore’s Law”, held true driving exponential progress in silicon chips for decades.
But contrary to popular belief, human processes don’t intrinsically benefit from such advances. Merely adopting new technology alone fails to improve most business processes.
Lasting transformation requires process innovation – completely reimagining workflows to unlock technology’s full potential.
In this comprehensive 3200 word guide, we’ll cover everything executives and innovators need to know including:
Chapter 1. What is process innovation and what makes it a competitive imperative
Chapter 2. How process innovation differs from incremental improvements
Chapter 3. The technologies paving the way for innovation
Chapter 4. A framework of best practices to redesign processes
Chapter 5. Overcoming common barriers to systematic innovation
Let’s get started!
Chapter 1: What is Process Innovation and Why It Matters
Process innovation means radically changing an existing business process to improve quality, cost and speed by harnessing new techniques or technologies.
Unlike incremental enhancements, it completely restructures workflows rather than optimizes within constraints.
"Process innovation goes beyond process improvement or streamlining. It‘s about inventing an entirely novel way of doing things."
For example, McDonald’s 1940s Speedee Service System revolutionized commercial food prep. Rather than cooking individually, the brothers created an assembly line production model preparing multiple burgers in parallel.
This allowed rapidly fulfilling orders during peak times. The process innovation formed the backbone of McDonald’s expansion into the globe spanning giant it is today.
On the other hand, process improvements refer to gradual, sustaining changes aligned to current business architecture. While valuable, they yield linear gains.
Process innovation delivers exponential advantages including:
1. Dramatically improved productivity
Redesigned flows and new technology assimilate tasks more efficiently. Staff get more done in less time and effort.
2. Enhanced customer experience
Eliminating friction delights users and strengthens brand perception.
3. New monetization paths
Innovations unlock capabilities allowing entirely new revenue streams.
4. Future proofing
Agile processes facilitate adapting to market changes better than rigid ones. First mover advantage pays off.
5. Optimized costs
Streamlining and automation drive significant savings from reduced errors, wastage and labor.
An Arthur D Little study of 300 firms confirms process innovators grow profits 2X faster over 5 years compared to other companies.
With such tremendous upside, no wonder 78% of executives rate process innovation as a top priority for their organization according to McKinsey [1].
This potential largely stems from emerging technologies drastically expanding innovation possibilities.
Chapter 2: How Process Innovation Differs from Incremental Improvements
Process innovation and incremental improvement both aim to enhance process capability over time. But the degree and methods used differ significantly:
| Dimension | Process Innovation | Process Improvement |
|---|---|---|
| Change Scope | Radical, Transformative | Incremental, Gradual |
| Typical Enablers | Advanced Technologies like AI, ML etc. | Conventional Optimization, Lean Six Sigma |
| Methodology | Creative techniques "Out of the box thinking" | Analytical techniques – As-Is Analysis, Benchmarks |
| Uncertainty | Higher risks from unproven methods | Lower risk from structured methods |
| Capacity Building | Requires new competencies in areas like data science, design thinking etc. | Leverages existing domain and analytical expertise |
| Leadership Style | Visionary, Experimentation Promoting, Risk Tolerating | Methodical, Results Oriented, Risk Averse |
| Potential Results | 10X or higher performance gains | 10-20% gradual gains |
The differing models appeal to different leadership mindsets and organizational cultures. Visionary innovators like Elon Musk embrace bold risks and experiments. Meanwhile operational leaders like former Intel CEO Paul Otellini focus on structured improvements and execution.
But the most successful organizations combine both approaches.
For instance, global bank BBVA innovated retail banking by acquiring fintech providers across software, data analytics, apps and even quantum computing [2]. The deals fuel both incremental upgrades and transformational initiatives reimagining consumer finance.
Structuring innovation initiatives separately from operational groups helps here. This balances daily business needs with experimenting on revolutionary ideas.
Next, let‘s dive deeper into the technological catalysts driving breakthrough innovations.
Chapter 3: Exponential Technologies Enabling Innovation
Process innovation relies on harnessing new technologies to profoundly improve user experience, economics or performance.
The last decade‘s explosion of data, analytics and connectivity birthed several exponentially advancing tools including:
1. Artificial Intelligence and Machine Learning
AI broadly refers to algorithms performing tasks previously requiring human cognition. Machine learning, a subset of AI, automatically improves at tasks by studying data patterns.
Sophisticated self-learning algorithms can optimize supply chains, predict equipment faults, customize recommendations and automate customer service.
For example, agricultural leader Cargill uses AI to forecast soybean prices to the penny. This strengthens their market position and logistics planning to feed global populations [3].
2. Robotic Process Automation
RPA software bots automate repetitive, rules-based human workflows like data entry at far higher speed and accuracy. Global RPA spend grows over 20% annually and reached nearly $2 billion in 2021 [4].
McKesson, a Fortune 5 healthcare firm, automated legacy workflows across accounting, HR, supply chain and clinical trials leveraging Blue Prism‘s RPA. This allowed reallocating over 50,000 manual hours annually for higher value work [5].
3. Internet of Things + Edge Computing
Internet of Things (IoT) refers to an ecosystem of interconnected physical objects like machines, vehicles and goods; embedded with sensors transmitting key data like location, temperature, images etc.
Edge computing hardware processes this IoT data locally to enable real-time insights and instant response rather than sending it across networks to the cloud.
For example, oil rigs detect impending equipment failures using sensors and edge systems. Rapid alerts minimize dangerous downtime that costs over $1 million daily in losses [6].
4. Blockchain
A blockchain is an immutable distributed database allowing secure data sharing across a business network without centralized control. Consensus algorithms ensure all copies remain identical.
Global shipping giant Maersk uses blockchain to efficiently manage the supply chain across hundreds of partner firms including customs, ports and logistics without tedious paperwork [7].
5. Quantum Computing
Quantum computers can theoretically solve complex optimization problems with millions of variables that cripple classical machines. They exploit exotic quantum physics properties like superposition and entanglement for speed ups.
While awaiting full scale quantum hardware, hybrid quantum-classical algorithms already run on systems like D-Wave, IBM Q and IonQ specializing in traffic routing, aerodynamics, drug discovery and more [8].
These exponentially advancing capabilities vastly expand process innovation possibilities. But WHERE and HOW should you get started exactly?
Chapter 4: A Framework of Best Practices to Redesign Processes
Hopefully the technological promise convinces you on process innovation importance. But lacking a clear roadmap risks wasting effort and money.
Here we provide a structured framework integrating leading academic and industry best practices:
I. Discover Inefficiencies
First, identify the most critical processes needing innovation via:
- Process mining algorithms automatically detecting bottlenecks from system logs
- Internal data analysis – costs, defects, cycle times
- Customer complaint analysis
Early McKinsey research found just six core processes cause ~60% of customer dissatisfaction and 80% of costs in most organizations [9]. Phyically map these high impact flows end-to-end.
II. Envision the Future
Next, allow unrestricted creative thinking on redesigning flows freed from current constraints.
- Conduct brainstorm workshops tapping staff across functions
- Benchmark competitors and exchange perspectives
- Prioritize ideas using weighted scoring models factoring benefits, costs and risks
III. Co-Create andPrototype
Engage staff at the process coalface to refine the design working with them. Quickly test simplified Proof of Concept versions first.
Techniques like design thinking and lean startup emphasize rapid prototypes for user feedback over detailed specifications. This allows incorporating real experience.
IV. Scale Up and Institutionalize
The biggest challenge lies in sustainably implementing the new process across the organization. Use change management best practices including:
- Executive sponsorship
- Training programs upskilling staff
- Partial rollouts to prove validity
- Embedded data analytics continually monitoring new process KPIs
- Automating compliance to design using workflow engines
Also align related functions like finance, HR and IT to assist adoption.
Now let‘s tackle the biggest barriers threatening process innovation success.
Chapter 5: Overcoming Key Barriers
Despite great potential, 75% of transformation programs fail according to Bain & Company research [10]. Why? The top challenges include:
1. Innovation Theater
Flashy prototypes make headlines but lack meaningful business integration behind the scenes. Set measurable operational and financial goals upfront.
2. Innovation Silos
Isolated teams lose enterprise alignment, duplicating existing capabilities. Maintain transparency on efforts to senior leaders.
3. Innovation Myopia
Current vendor partner opportunities distract fromaddressing real pain points. Let data direct efforts, not vendor capabilities.
4. Risk Aversion
Breakthrough innovation necessitates some failure. Celebrate smart risks rather than punish experimentation.
5. Innovation Whiplash
Constant re-prioritization due to activist investors or leadership changes disrupts progress. Filter out noise emphasizing long term goals.
6. Innovation Inequity
If benefits accrue mainly to executives and investors over employees and customers, resistance emerges. Design ethical win-win innovations.
7. Post Innovation Atrophy
Failing to continually enhance the new process causes entropy. Schedule iterative review cycles.
While daunting, concerted leadership commitment aligned to a structured gameplan helps organizations overcome these traps.
Now over to you!
In Conclusion
Implementing process innovation remains challenging but hugely rewarding for firms bold enough to transform. Remember:
- Find your highest impact processes and comprehensively map their true as-is state
- Brainstorm creative ideas for reimagining flows unconstrained by today‘s limits
- Engage staff and users early to incorporate experience
- Leverage exponential technologies like AI and IoT for unprecedented capabilities
- Scale through savvy change management and sustained incremental improvement
So are you ready to ignite innovation across your enterprise? The future waits for no one!