By Francesc Rubinat Fontanellas
I was thinking about which would be the best topic to make an article for the blog and when the professor of the MIT Zaragoza International Logistics Program Dr. Alejandro Serrano came to explain us the idea of PROCESS INNOVATION, I thought: I have to write an article about it! It is fantastic!
First of all, I would like to sum up what I think he came to explain us in a few words: the innovation process is what gives to a company the competitive advantage that everyone is searching nowadays and what makes it to be unique and to be a company with a huge value. But, what is an innovation in processes?
We all know some companies that innovate with their products, Apple is the most well known and possibly the “top of mind” of almost everyone, but if we think about companies that can be leaders in process innovation will be very difficult for us to find them. The main reason is one of the biggest differences between the two types of innovation that I have mentioned in this article. It is that the process innovation is something intangible, something we cannot see and we cannot touch, things that we are able to do with product innovation. And the very first consequence of this is that other companies that compete with us can easily copy our new product but it will be very hard for them, or even impossible, to copy or to imitate the new way of manufacturing or transporting our product. Usually, it takes several years for the company to implement any change on some of its processes, so it is nothing that can be done in a few weeks. It is important to say that those changes in the way of doing things usually are followed by lots of bad reviews because you are changing something that maybe it seemed impossible to change and maybe it will look rare.
From my point of view, the best way to understand perfectly what is an innovation in a process and how can be implemented is the same as Alejandro Serrano did in class, by giving some examples. You will see that all the examples that I will explain are from big and successful companies that usually have lots of benefits at the end of the year. The first one is Toyota (the pioneer company on this topic), who starts manufacturing their cars depending on the demand, changing the production chain from push to pull system (it was between 1960 and 1970 in Japan). This type of production was called production Just in Time and it became a revolutionary change due to its success versus those huge American companies with a stronger economy and better resources like factories or new technology. They produce the cars when they receive the order, so they didn’t have stock (less cost) and the client could personalize his car with a lower additional cost (cars more competitive in price), the production chain becomes more flexible and any problem or non-planned difficulty can be solved faster and with less cost. At the end, what was important was that they could reduce the car prices, being able to be competitive on this sector.
The second case is a company called Barilla whose business is to produce pasta and sell it to different retailers. The innovation that they put on practice was the idea of not receiving any order from their clients, so that they provides all of them with a certain amount of pasta every certain period of time. They did it because their experience showed them that they were much better in calculating the demand of pasta for each period of time than each supermarket individually, and that is because they had access to a global information of the demand and others only to the demand they had in their own supermarket, what makes much easier to calculate more accurately the demand for each period and each supermarket. And this is the simple change that allow them being a better option for the retailers, cause they don’t have to think anymore about sending their orders every month or every year and they also don’t have to calculate the demand, apart from not having to throw the excess of stock or avoid the possibility of running out of pasta.
Finally, what about Ikea? One of the most famous companies in the world, the company that every student from economics or marketing or anything related to management has studied at least once in his life. What makes people go crazy for their products? One of the most important reasons was the innovation they did in the process of buying their products and in the process of taking them at home. They decided to sell all their products in a flat package (this makes possible that the client take them at home with their own vehicle) and they put the easy instructions inside it. Thanks to that, everyone can assemble all the parts of the furniture at home. The clearest consequences of these changes are that they won’t have any cost in transportation from the shop to the home of every customer and they won’t have any cost in paying the salary of someone who will go to the client home to help him in assembling the furniture. The result? Very low prices but with the same quality!
To sum up, these companies and others, like Inditex or United Colors of Benetton for example, have become a referent for all the companies on their sector because of all these innovations that someone one day thought, while observing some processes being done, and questioning some kind of process on their companies. And what is more, they had the courage to put them in practice and, despite all the critics they received, they persevered and they finally succeed and became huge companies admired for everyone.
You have to observe, be curious, be creative and be brave and then, you will have more possibilities to create a process innovation!