Delft University of Technology
FACULTY MECHANICAL, MARITIME AND MATERIALS ENGINEERING
Department Maritime and Transport Technology Mekelweg 2 2628 CD Delft the Netherlands Phone +31 (0)15-2782889 Fax +31 (0)15-2781397 www.mtt.tudelft.nl
This report consists of 29 pages. It may only be reproduced literally and as a whole. For commercial purposes only with written authorization of Delft University of Technology. Requests for consult are only taken into consideration under the condition that the applicant denies all legal rights on liabilities concerning the contents of
Specialization: Production Engineering and Logistics
Report number: 2013.TEL.7768
Title:
Process Innovation within
Manufacturing Firms
Author:
W. Boersma
Title (in Dutch) Proces Innovatie binnen een Productie Omgeving
Assignment: Literature
Confidential: No
Initiator (university): - Initiator (company): -
Supervisor: Dr.ir. H.P.M. Veeke
Summary
Process innovation within manufacturing firms is under exposed in literature and researches for decades in contrast to product innovation. Despite of promising technical product innovations it turns out that manufacturing firms not pursue and implement these innovations to improve process performance. The main question is what limits the implementation of technical innovation within manufacturing firms to innovate manufacturing processes?
Innovation is defined as implemented technologically new products and processes and significant technological improvements in products and processes. A process is a transformation of an input to a specific output. Innovation of a process is an improvement of this transformation and can be achieved by implementing product innovation. Radical implementation and rethinking of the manufacturing process is the same as business process reengineering. The framework for this method is the plan-do-check-act cycle. Literature show by empirical results improvement is dramatic when process
reengineering is combined with automation of processes.
Operations improvement is often confused with process innovation. This is related to the definitions of function and task. The task is concerned with what needs to happen or needs to be done in order that the contribution is realized such that the function is fulfilled. Innovation comes forth out of the
function of the system and improvement comes forth out of the performing of tasks. Innovation is initiated by the need of survival of the existing system within the environment. Innovation contributes to fulfilling the function whether operations improvement contributes to performing tasks.
Innovation, improvement and reengineering are all about change. Dissatisfaction, vision or concrete steps are needed to overcome the resistance to change. Most studies focus on reducing resistance to change. Other studies show that resistance can strengthen the change and serve as an asset and a resource. The awareness of this phenomenon is potentially contributing to successful implementation of technical innovation. Adequate readiness for change and sufficient resources are suggested by other research in order to successful change status quo. Time is a resource and change is unlikely if high workloads are present. A shortage of time limits therefore process innovation.
Manufacturing firms can be classified as innovation-adopting organizations and implementation of product innovation is generally a problem-solving process. One of the main issues concerning implementation is recognition or absence of problems that have to be solved. Literature about decision making acknowledge that the characteristics of the decision making process are increasingly process-based rather than project-based. The implementation of new technology is therefore not selecting the best solution to the technical problem, but finding the best solution for the disagreement of parties involved. This limits implementation of new technology.
In the field of psychology researchers found that increasing employees’ self-confidence and clarifying their role in the firm are key points for process innovation. Innovation depends also on the ability of
2013.TEL.7768 4 employees to learn, operate and work with new technology. Implementation of new technology is often associated with dismissals of employees and therefore slow down this process.
Abstract models of process innovation are not very useful because managers are often not capable to translate the valuable information to practical situations. Therefore process innovation is limited by the restricted knowledge of the responsible managers. From innovation models found in literature can be concluded that a source is needed as an initiator for process innovation. The absence of sources like technological enablers, lack of performance in processes and resource opportunities logically hinder process innovation.
An example of a product innovation is an autonomous material handling system. The cost of material handling is a significant portion of the total production cost and therefore worthwhile to optimize. In this perspective there is no reason to not implement a technical innovation that reduces the cost of material handling. Implementation of autonomous robots affects more than the material handling system and is therefore more complex than other new production equipment. It is a trend that technical innovations need more and more knowledge and understanding. This complexity is limiting process innovation.
This literature assignment contains certain selected perspectives on process innovation found in literature. Process innovation is limited in different ways. From what is found can be concluded that the human factor is the most limiting for process innovation.
List of abbreviations
AGV Automatic Guided Vehicles
BPR Business Process Reengineering
DSA Delft Systems Approach
IAO Innovation-Adopting Organization
ORC Organizational Readiness for Change
PDCA Plan Do Check Act
Contents
Summary...3 List of abbreviations ...5 Contents ...7 1. Introduction ...9 1.1. Structure...9 2. Objective ...11 3. Literature...11 4. Innovation ...12 4.1. Product innovation ...12 4.2. Process innovation ...134.3. Distinguishing both of innovations...14
4.4. Process reengineering ...14
4.5. Operations improvement ...15
5. Goal of innovation ...16
5.1. Function and task ...16
5.2. The goal of innovation ...16
6. Change ...17
6.1. Resistance to change ...17
6.2. Readiness for change ...18
6.3. Adoption of innovation ...18
6.4. Decision making ...19
6.5. A socio-cognitive model...20
7. Innovation models ...21
7.1. Industrial innovation model ...21
7.2. Distinction between models ...22
7.3. Usability of models...22
7.4. Source of innovation ...23
8. Implementing product innovations ...24
8.1. The material handling system ...24
8.2. Implementation of autonomous robots ...25
9. Conclusions and discussion...26
1. Introduction
Nowadays a lot of companies are investing in innovation in general, but sometimes innovation has a long way to go before practical implementation has been realised. The autonomous transportation system is a product innovation that is tested within a ‘real’ warehouse environment (Albrecht, 2012). The question arises how long it takes until this innovation is implemented. Past experience shows that even though this product is tested for a thousand times, production managers will still rather wait instead of purchasing it immediately.
In the port of Rotterdam automatic guided vehicles (AGVs) transport the containers from query crane to the stocking facility. This has proven to be a cost-efficient system. However, looking at other segments in industry AGVs are just about to be introduced. Some industries adapt product innovation in an early stage, others in a very late stage or even never.
These are just a few examples of how process innovation is limited in manufacturing firms despite of the technical possibilities nowadays. There is something that is limiting the introduction of new process methods, especially if it is about a technical system; a product innovation. Is the reason a shortcoming of the manager? Or is there lack of need of such a system? Or are the expected successes of innovations based on non-existing assumptions? In other words, how is process innovation limited within manufacturing facilities?
1.1.
Structure
A lot of questions come to mind when thinking about process innovation. A suitable structure is needed for finding an answer to the main question. The question can be approached in different ways. First there are models that describe innovation systematically. Using these models can lead to a well-defined cause for the problem of lack of innovation in manufacturing firms. But these model approaches bypass the answers that can be found in psychology, management, organizations and so on. The so-called human factor is much more present in these fields than in the proposed innovation models. Therefore also literature is studied that emphasizes different approaches from the socio-cognitive field, change of organizations and decision-making for example.
First some definitions have to be made clear. What is process innovation and is this the same as improvement or change? What is the relation between these terms? And what is the objective of innovation? These are some of the questions that will be answered in chapters four and five.
The main question to be answered is: ‘what is supporting process innovation within manufacturing firms?’ This question can also be formulated as: ‘what holds process innovation?’ In both cases the assumption is made that ‘something’ is influencing process innovation in a bad way, such that product innovations are not simply implemented and processes are not improved despite of promising
potential. In literature this is a known phenomenon, called ‘resistance to change’. In decision-making processes resistance also plays a big role. Chapter six is about change.
2013.TEL.7768 10 In chapter seven a closer look is taken at models and other systematic approaches to process
innovation. What is needed for process innovation and what is needed to implement technical
innovation within manufacturing processes? And which models describe process innovations and what do these models describe?
Chapter eight is focused on product innovation. This literature assignment starts with the observation that just product innovation is not enough to innovate a manufacturing process. The casus that lead to this study is the autonomous transportation system that is tested within the Fraunhofer Institut in Germany. A product innovation that potentially can have big impact on manufacturing processes. Fraunhofer is Europe’s largest application-oriented research organization.
2. Objective
The main objective of this literature assignment is to acquire knowledge about process innovation within the manufacturing sector concerning technical innovation and further understanding of what influences process innovation performance. The main question to be answered is what supports implementation of technical innovations in order to innovate the manufacturing process?
3. Literature
The focus in this literature assignment is on process innovation within manufacturing firms. Important literature reviewed is the research of Becheikh et al. (Becheikh, Landry, & Amara, 2006). The authors systematically reviewed literature from 1993 until 2003. The basic question of their literature review: what is innovation and what determines its development within firms? This question has similarities with the main question of this literature assignment.
Where this literature of Becheikh et al. focuses on innovation in general, this assignment focuses on process innovation. In the literature review of Becheikh et al. the researchers remark that a relatively insignificant proportion (1%) of the articles that they reviewed considered only process innovations. Articles considering product innovation or both product and process innovation form 37% and 43% of the total, respectively (Becheikh, Landry, & Amara, 2006). Therefore the conclusion is that the most interesting topic, process innovation, has been under-exposed for decades. This is another reason to research process innovation more specifically. On the other hand process innovation is linked to product innovation, so it is important to take this into account.
The Oslo Manual (OECD, 2005) is referred to for guidelines and definitions of process innovation. The manual is a necessary part of literature when innovation is studied or researched.
One of the basic, but important, questions is: what is innovation? The answer can be found in multiple approaches, because innovation is a broad term. In this literature study tried is to view at innovation from different perspectives, such as business reengineering, which is in fact an innovation method. Also some literature refers to ‘change’ or ‘improvement’, which are characteristics of innovation. So not just ‘process innovation’ was a key word when searching for literature. For a wide scope and more understanding also other key words are used, such as ‘operations improvement’.
More than ten papers were used to find the answer to the main question. Besides scientific papers also some books are used, such as ‘The Delft Systems Approach’ (Veeke, Ottjes, & Lodewijks, 2008). Also organizational behaviour is studied to get a better understanding of organizational change (Huczynski & Buchanan, 2007). And because of the link between change and decision-making, also ‘Management in Networks’ is studied (de Bruijn & ten Heuvelhof, 2008). Another book that
contributed to this literature study is about automation of production systems (Groover, 2008). For information on the topic of operations management another book is consulted (Slack, Chambers, & Johnston, 2007).
2013.TEL.7768 12
4. Innovation
Innovation is all about changing the present situation for the better; an update of the reality; or to say an improvement of the present situation. It is about how you make a system of learning, a system that innovates by itself, and evaluate what you do. In literature a lot is written about innovation in general. However just a small part is about process innovation. As stated earlier just 1% of the papers about innovation are about process innovation specific.
When writing a literature assignment about innovation, an important question needs answering: what in fact is innovation? Becheikh et al. start with the question ‘what is innovation and what determines its development within firms?’ as the question that has sparked the interest of researchers, managers and policy makers for decades (Becheikh, Landry, & Amara, 2006).
Innovation can be defined as ‘implemented technologically new products and processes and
significant technological improvements in products and processes’ (Becheikh, Landry, & Amara, 2006). To make this definition more specific the following conditions are added to this definition in the literature review of Becheikh et al.:
• Technological innovations have to be related to products and processes
• Innovation implies a technologically new product or process or at least a product or process having undergone a significant technological improvement.
• The innovations must have been implemented.
The Oslo Manual gives more or less the same definition of innovation:
An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations.
A common feature of an innovation is that it must have been implemented. Four types of innovation are distinguished: product innovation, process innovation, marketing innovation and organizational innovation. It is doubtful whether this classification is useful in all situations. A product innovation can be more or less a process innovation. And also organizational innovations can be similar to process innovations. The difference is sometimes hard to see.
Besides the strict definitions of innovation also synonyms can be found, such as ‘change’, ‘improvement’ or ‘renewing’. All of it says something about the characteristics of innovation.
4.1.
Product innovation
Because product and process innovations are interdependent and closely linked it is important not to neglect product innovation. Product innovation can initialize process innovation. New machinery (product innovation) can be used to improve the production process (process innovation). The casus in this literature assignment are the autonomous transportation robots for material handling; a typical product innovation that can be used to innovate the production process. The definition of ‘product innovation’ is stated below.
A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics (OECD, 2005).
4.2.
Process innovation
Now that ‘innovation’ is clearly defined, what is meant by ‘process innovation’? First the question ‘what is a process?’ will be answered. A process can be defined as “a series of transformations that occur during throughput which result in a change of the input elements in place, position, form, size, function, property or any other characteristic.” (Veeke, Ottjes, & Lodewijks, 2008). Another definition is given by Davenport as “a process is a specific ordering of work activities across time and place, with a beginning and an end, and clearly identified inputs and outputs: a structure of action.” (Davenport, 1993). This is also the definition used by Papinniemi. The author defines a ‘business process’ as “a structured set of activities designed to produce specific outputs for internal or external customers or markets.” (Papinniemi, 1999).
To conclude; a process is about transformation of an input to a specific output. It is a set or series of activities or transformations that change the elements that flow through the process.
Now the next question can be answered: ‘what is process innovation?’ In the Oslo Manual a definition is given. “A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software” (OECD, 2005). Papinniemi refers to another definition: “process innovation means performing a work activity in a radically new way.” (Davenport, 1993). He adds the following sentence of importance to it: “however innovation is not completed until its economic impact becomes apparent.” (Papinniemi, 1999). This is in line of thoughts with the Oslo Manual that the innovation has to be implemented before it is in fact an innovation.
To conclude, process innovation is an improvement of the process that transforms an input in a specific output. The implementation of the innovation is crucial and the change has to affect the transformation; not the output. However this is of course a preferred effect. The objective of process innovation is to improve the process, in order to improve the output. It is intended to make clear distinction between the ‘main objective’ and a ‘positive result’ here.
2013.TEL.7768 14
4.3.
Distinguishing both of innovations
About making a distinction between product and process innovation, the Oslo Manual gives the following statement: With respect to goods, the distinction between products and processes is clear. With respect to services, however, it may be less clear, as the production, delivery and consumption of many services can occur at the same time. Some distinguishing guidelines are:
• If the innovation involves new or significantly improved characteristics of the service offered to customers, it is a product innovation.
• If the innovation involves new or significantly improved methods, equipment and/or skills used to perform the service, it is a process innovation.
• If the innovation involves significant improvements in both the characteristics of the service offered and in the methods, equipment and/or skills used to perform the service, it is both a product and a process innovation (OECD, 2005).
It is therefore important to mention that this literature assignment is specifically about innovation in manufacturing firms and therefore about goods, rather than about services. The difficulty however is the fact that in literature more often ‘innovation’ is used instead of ‘product innovation’ and ‘product innovation’ instead of ‘process innovation’. This literature study strives to consistently use the correct definitions for innovation.
Maybe the best way to illustrate the distinction between process innovation and product innovation is to refer to the basics of a process scheme. An input is transformed in order to create an output; the product. Improvement of the process is all that is not the product itself: delivery time; throughput time; manufacturing costs and so forth. However some process improvements result in better products. Within a cheese factory a shorter throughput time results in a higher product quality and therefore a product innovation. This illustrates clearly that product innovation and process innovation are interdependent and closely linked.
4.4.
Process reengineering
In the research of Lyu about process reengineering can be found that process engineering is similar to radical process innovation (Lyu, 1996). In general the definition is ‘radically rethinking a
manufacturing process’. Innovation is often a series of incremental changes. In other words the distinction is that ‘innovation’ is a process and ‘process reengineering’ is more or less an event. On the other hand the difference is not that clear. An innovation can be also an event and reengineering can be done in an incremental way. In another study reengineering is defined to work as an object element of process innovation (Papinniemi, 1999). For innovating a process, process reengineering can also be applied. Therefore also process reengineering is studied in this literature assignment.
Using process reengineering means radically rethink a manufacturing process that has existed for many years to reduce costs and improve efficiency and effectiveness (Grover, Fiedler, & Teng, 1994). Figure 1 illustrates a framework for process reengineering. The sequence of steps can be identified as ‘plan’, ‘do’, ‘check’ and ‘act’ (PDCA cycle). Lyu postulates that a company may take advantage of the new technologies so that its manufacturing process and operations can outperform those of other
companies. The research combines the kaizen approach (continuous improvement) with automation for process reengineering and shows by empirical results the improvement is dramatic. From this study it can be concluded that automation of some manufacturing processes is not enough to justify the financial investment made, but that in fact the combination of process reengineering and automation results in dramatic improvements. So automation and Business Process Reengineering (BPR) have to be combined.
It is interesting that BPR itself is seen as an innovation in industrial engineering and management science. Rather than that its result is seen as innovation (Rotab Khan, 2000). The author states that BPR has proved to be useful to achieve dramatic improvement in operational efficiencies. This specific research is about the airline cargo handling process.
Traditional improvement programs have not been able to yield the necessary improvements for increasing system
performances. BPR needs a thorough understanding of the existing system’s behaviour. The same holds for the Delft Systems Approach (DSA): first an analysis of the process is needed to understand system’s behaviour. From that
suggested improvements can be deduced. Therefore the DSA can be seen as a method to achieve BPR. The DSA and BPR are therefore closely related.
Figure 1: Framework for process reengineering (Lyu, 1996)
4.5.
Operations improvement
What is often seen as a main task of production managers is ‘operations improvement’. But what does this mean? Is it similar to innovation? A limitation of innovation within manufacturing firms is maybe that managers are busy with improving the operations instead of innovate in this area.
In most cases, innovation leads to operations improvement. All operations, no matter how well managed, are capable of improvement, because nothing is that perfect (Slack, Chambers, & Johnston, 2007). What is the difference between operations improvement and process innovation? Davenport gives an overview of different approaches. One of them is ‘Business process improvement’ and another is ‘Business process innovation’. The objective is different, because improvement is described as “continuously improve one or all processes in terms of cost, time, and quality.” And innovation as “use change levers to radically improve key processes.” (Davenport, 1993). So improvement has more to do with step-by-step adjustments of processes to obtain better process performances. Innovation is about implementation of new processes (see definition), in order to obtain better process
performances. Therefore also the subject ‘operations improvement’ is taken into account in this literature assignment. Innovation is thus radical improvement; so more than just improving from this point of view. In the next chapter ‘improvement’ and ‘innovation’ are related to ‘tasks’ and ‘functions’ respectively.
2013.TEL.7768 16
5. Goal of innovation
Why should a manufacturing firm innovate? What is the purpose? What is the goal that a firm wants to achieve? And the final question: why should a manufacturing firm invest in technical innovations? In the novel ‘The Goal’ Goldratt writes about his experiences in his job as production manager of a manufacturing firm. The drift of the story is that the goal of the firm dictates almost everything that needs to be done (Goldratt & Cox, 1993). And also in the Delft Systems Approach (DSA) the goal to achieve is the starting point whereupon analysing the process follows. The similar named book starts with a paragraph about ‘the purpose of this book’, to underline the fact that starting with the goal in mind is necessary for a satisfying result (Veeke, Ottjes, & Lodewijks, 2008). And about the goal the book writes, “fulfilling the function in the environment is the goal of the system.” So, the goal is of importance. The next question is what exactly a ‘function’ is. To answer this question it is important to have a closer look at functions and tasks.
5.1.
Function and task
Within the DSA a distinction is made between ‘tasks’ and ‘functions’. These two are often confused. The distinction is however important to understand the innovation process in relation to operations improvement. The definitions that are used within the DSA are stated below.
“The function of an element is that which is brought about that element towards satisfying a need of the greater whole.” And “The tasks is concerned with what needs to happen or needs to be done in order that the contribution is realised such that the function is fulfilled.” (Veeke, Ottjes, & Lodewijks, 2008). For example a production manager has the function to ‘manage the production’. The tasks could be to ‘measure the output number’, ‘make a schedule’ and so on. Performing these tasks is needed to fulfil the function. Remember that just finishing a ‘to do’ list is not the same as fulfilling the function.
It is important to notice this difference, because if a manufacturing firm is just performing tasks; innovation is minimal. As said earlier innovation is something that comes forth out of the function of the system. Operations improvement is, from this point of view, performing tasks better; innovation about fulfilling the function of the system better.
5.2.
The goal of innovation
In the Delft Systems Approach the assumption is that innovation is initiated by the need of survival (Veeke, Ottjes, & Lodewijks, 2008). Also other reviewed research starts with noticing that adaptation to change (in environment) is the key to survival (Thomas & Hardy, 2011). Papinniemi introduces his research stating that the need for innovation is because of competition and that running industrial operations effectively is not enough in the long run (Papinniemi, 1999). Furthermore, Slack states that even the best operation will need to improve because the operation’s competitors will also be
improving (Slack, Chambers, & Johnston, 2007). So the main goal of innovation found in literature is to survive in ‘the world of competition’.
However most of the used researches are not about the question why to innovate, but about what it is and how this can be improved. It is found that a crucial question is missing: ‘why not innovate?’ As stated earlier; the goal (of innovation) is the exit point and is therefore crucial.
6. Change
The question ‘what is needed for innovation?’ can be made simple by stating the question ‘what is needed for change?’ In literature some researchers refer to the change formula of Richard Beckhard, which is used to clarify what is driving changes. Beckhard’s change formula is:
D x V x F > R Wherein:
D = Dissatisfaction with how things are; V = Vision of what is possible;
F = First, concrete steps that can be taken towards the vision; R = Resistance to change
The formula implicates that change is only possible when the product of these factors is greater than R. If one of them is low or even zero, the multiplication is not capable to overcome resistance and therefore no change can occur at all. It is like friction: a certain force is needed to keep something moving; directed opposite to the force of resistance. Another phenomenon is ‘stick-slip’: the force to move something that is not moving yet is higher than just the friction. A so-called ‘sticking’ force is working against the moving force. This illustrates that if there is no change present; even more dissatisfaction, vision and concrete steps are needed to overcome resistance.
The basic question of this literature assignment is: ‘what limits the process innovation within a manufacturing firm?’ From Beckhard’s formula it can be concluded that if there is no dissatisfaction (D=0), the outcome cannot be bigger than R. In other literature this is called the ‘readiness for change’. If there is none, than change is not likely to happen and therefore innovation is limited.
6.1.
Resistance to change
Resistance can be annoying and difficult. However, some research celebrates resistance, arguing that it plays an important role in successful organizational change (Ford, Ford, & D'Amelio, 2008). And also another study states that resistance can strengthen the change, serving as an asset and a resource (Knowles & Linn, 2004). It makes sense that when persuasion is studied, the related resistance is also studied. However this book elaborates about the psychological part of humans, it gives insight in how change is affected by resistance. The book is not about increasing motivation, vision or more
strategies how to reach the change, but about reducing resistance.
One of the questions in the introduction paragraph is whether lack of innovation is a shortcoming of the manager or not. Research about resistance to change focuses on these change agents
2013.TEL.7768 18 (managers). Reducing resistance seems one of the main tasks of change agents when a change (innovation) is to be implemented. By assuming that resistance is necessarily bad, change agents have missed its potential contributions of increasing the likelihood of successful implementation, helping build awareness and momentum for change, and eliminating unnecessary, impractical, or counterproductive elements in the design or conduct of the change process (Ford, Ford, & D'Amelio, 2008).
6.2.
Readiness for change
Being content with status quo, lack of vision or not knowing what steps are needed can limit change and can therefore limit innovation. The ‘program change model’ in figure 2 suggests that there must be adequate readiness for change (indicated by motivation) as well as sufficient resources. Without motivation or pressure for change chances are limited that available innovations will be adopted (Simpson, 2002). The author concludes that simple innovations can be adopted and implemented with few special resources or supports, but that more challenging innovations, on the other hand, need more comprehensive and positive support systems. This fact is another reason why manufacturing firms are not innovating on large scale in general.
Figure 2: Program change model for transferring research to practice (Simpson, 2002)
Other research describes the rationale and structure of the organizational readiness for change (ORC). It states that motivational forces for change are complex but include perceptions of current status (Lehman, Greener, & Simpson, 2002). Even if organizational change might be highly desirable, due to staff workloads, practice and resources it might be unlikely. Inherent, change ask for spending working hours (time) and this is not possible when high workloads are present and there is no time left. This is another important notice, that innovation takes time. A shortage of time therefore limits, despite the fact that innovations can result in timesaving.
6.3.
Adoption of innovation
The question is why manufacturing firms not immediately buy all the technical solutions for their businesses, despite that the solutions are cost saving? Part of the answer can be found in earlier chapters, but another issue here is the way in which firms are dealing with innovation in general. Studies about innovation in organizations examine in general the differences in the characteristics of innovative and non-innovative organizations. Damanpour et al. state that this has often produced
inconsistent results. The authors call for a second dimension, which is a distinction between organizations that mainly generate and those that mainly adopt innovation (Damanpour & Wischnevsky, 2006). Table 1 gives a representation of this classification.
Table 1: Organizational type and innovation (Damanpour & Wischnevsky, 2006)
Generation is a creative process and adoption is a problem-solving process. With these characteristics in mind it is clear that implementation of technical innovation is generally a problem-solving process. So if there is no problem recognized, why should new technology be used? This is one of the main issues concerning implementation of technical innovation.
Recognition of a problem can therefore be seen as the most important initiator for the adoption of new technology: as long costs are not a problem, no cost-saving innovation is needed. The following quote applies here: “If it ain’t broke, don’t fix it.” This appears to be the big obstacle for process innovation because innovation is not about fixing something, but to improve it.
6.4.
Decision making
The choice whether to implement new technology or not is a decision-making process. This process has changed in the last centuries from project-based to process-based. Firms are no longer
hierarchical, but more and more organized as a network (de Bruijn & ten Heuvelhof, 2008). This has consequences when decisions have to be taken.
Everyone in a network has ‘a voice’. A political debate dictates the process. It is not about finding the best solution to the technical problem. It is about finding the best solution for the disagreement of parties that are involved. In small companies the number of parties involved is much smaller than in big companies. Therefore the expectation is that within big firms less process innovation is possible because of the difficult decision-making process. However this cannot be found in the reviewed literature. An explanation is that on the other hand bigger firms are more dependent on processes and therefore process innovation is more important for them then for smaller firms. It is found that with firm size the expenditures on process innovation increase more rapidly. Literature shows that bigger firms spend more on process innovation than compared to product innovation (Fritsch & Meschede, 2001). However, the exact relation between firm size and the expenditure on research and
development (R&D) is unclear. Some studies show a proportionate relationship; others found that expenditure on R&D increases not proportional to size (Fritsch & Meschede, 2001).
The way in which firms make decisions to innovate is modelled in literature in two ways. In the two-stage model the firm decides first whether to innovate, then whether to perform product only, process
2013.TEL.7768 20 only or both. This model outperforms the one-stage, simultaneous model (Du, Love, & Roper, 2007). This means that for the sake of innovation it is better to use the two-stage model. It might be that manufacturing firms do not fit this model, but rather take decisions conform the one-stage model. This would be an explanation for the lack of process innovation within these firms. However this was not found in the reviewed literature.
Be it the one-stage or the two-stage model, in any case, a firm is in a decision-taking process when it comes to process innovation. Especially when it comes to whether or not buy a certain product innovation. In general the political process is delaying the implementation of new technologies. A manufacturing firm can be seen as an innovation-adopting organisation (IAO). It needs abilities to absorb change. Managerial challenges are to identify, select, and assimilate suitable innovations (Damanpour & Wischnevsky, 2006). Again it is clear that adopting innovation is about making a decision. This process is more and more process-based instead of project-based as stated earlier (de Bruijn & ten Heuvelhof, 2008). An answer to the main question ‘what limits process innovation within manufacturing firms?’ is that another approach is needed to implement new technology; an approach that is more human-based instead of technology-based. So not problem-solving project based, but political process based. A shift is needed in the way of thinking within manufacturing firms.
6.5.
A socio-cognitive model
In the field of psychology researchers have found that innovation self-efficacy is of great importance. It is the most powerful factor having both direct and indirect effects on innovation performance (Wang & Lin, 2012). Increasing employees’ self-confidence and clarifying their role in the firm are key points. This study postulates that innovation self-efficacy is positively related to innovation
performance. The same holds for innovation outcome expectations that are also positively related to innovation performance.
The researchers found that previous models related to innovation have investigated organizational action and project characteristics as the independent variables of interest without exploring the potential impact of individuals’ role stressors or social cognition. Managers should not only design technical strategies to improve performance, but also provide users in need with educational programs that help improve their innovation self-efficacy. The authors state in fact that each individual
employee in the firm influences the manufacturing process and is therefore important. Again this shows that process innovation is better to not be technology-based, but human-based.
Now it is known that self-efficacy of the individual is influencing the innovation process; what is from this perspective the reason for not rapidly implementing all suitable new technologies? First it is not wise to innovate more quickly than employees can handle, because employees have to work with the new technology. Second, new technology is often associated with dismissals of employees. Whether this is true or not in practice, technology often replaces humans in the manufacturing process.
To conclude, innovation self-efficacy, role conflict and role ambiguity influence innovation performance directly and indirectly. Therefore the role of psychology in implementing new technology within the manufacturing process is larger than considered in most of the studies carried out so far.
7. Innovation models
In a previous paragraph ‘the goal of innovation’ was considered. The innovation model of the DSA is based on the internal goal ‘to survive’. And surviving is only possible when new external goals can be found. Therefore a function is needed that scans the environment. Within the possibilities of the organization certain goals are formulated (Veeke, Ottjes, & Lodewijks, 2008).
Figure 3: Innovation model (Veeke, Ottjes, & Lodewijks, 2008)
From the innovation model in figure 3 it is clear that the environment is of great importance for a manufacturing firm. In practice this environment changes continuously. The absence of change therefore only exists in theory.
For the sake of this literature assignment a little mental experiment is considered. If, in theory, the environment has reached a steady state, the ‘explore environment and define objectives’ seems not to change either. However, who says that within a steady state environment the objectives can’t
change? For example: the objective of a painter could be ‘painting the house’, because the
environment asks for an ‘improving of the appearance of the property’ (Checkland, 1999). However the painter could also just ‘paint the roof’, and let this be his objective. In other words if the high level objectives are set, then it is still possible that within the lower level of the model other choices are made, and that therefore a process still innovates. So a changing environment is not needed for innovating the process. Concerning this model this is important to note.
7.1.
Industrial innovation model
Papinniemi proposes the ‘industrial innovation model’. This model is represented by figure 4. The aims of his study are; first to propose a basic model of process innovation to support assessment of process
2013.TEL.7768 22 innovation initiatives and projects, second to discuss opportunities and competence of this basic model (Papinniemi, 1999).
Figure 4: Industrial innovation model (Papinniemi, 1999)
The core idea of process innovation is transforming potential innovation initiatives to completed innovation. The essence is creation of value-adding in business and manufacturing processes (Papinniemi, 1999). The author also states: “The main purpose of the process innovation model presented at conceptual level in this study is to direct development activities towards necessary enterprise goals.”
Papinniemi states that a change is expected in the process performance. The economic nature of changes in manufacturing processes can be either value-adding or cost-reducing. Process innovation leads to a return on investment; hopefully. This study does not cover the usability and competence of the model and suggests that this is subject for further study. However the model says something about the innovation process. Such as the need of a source for innovation; see also paragraph 7.4. Another thing that is clear from this model is that improvement is the result of adding the current situation to the changes. As stated earlier, innovation reaches further than just improvement. However (it is clear that) the author does not make this distinction for simplicity.
7.2.
Distinction between models
Both the innovation models, from the DSA and from the work of Papinniemi, have a ‘policy’ initiator. However the second model lacks the ‘explore environment’ and forgets about where the policy is coming from. Also interesting to see is that the second model uses one-way arrows. It therefore seems a very straightforward process. Within the innovation model however arrows are also drawn backwards. Of course there are many other differences between these models; these are mentioned in the next paragraphs.
7.3.
Usability of models
To understand process innovation, models can be helpful. The main question of this literature
assignment is what in fact stimulates and supports process innovation within manufacturing firms. So, although the models give answers to questions like ‘how can process innovation be modelled?’ they do not give answers to the main question directly. However investigation of models is important, because
knowing more about process innovation is the key to the answer. When looking the models, a couple of things become clear. Environment, policy, performance measure and development are some of the key words that imply what is needed for process innovation. When looking at the innovation model of the DSA again, it is logical that when some of the phases are not executed or turning out to be a dead end, process innovation is not likely to take place. So the sub question can be answered: ‘what is needed for process innovation?’
The answer is contained in both models. Clearly a policy for the manufacturing process is needed; even for an analysis of the present situation and performance. In fact both models suggests that for process innovation a source is needed; a reason to reconsider the existing process. After
reengineering of the process a higher performance is obtained.
Papinniemi’s model is very basic. The commentary suggests that further study is needed to create a new refined model. Usability and competence of a refined model should be tested in manufacturing firms. Therefore the usability of this model in practice has not been proved. However, this model gives a clear and schematic representation of process innovation and is therefore a good starting point when process innovation is studied.
The innovation model of the DSA on the other hand is far more clarifying about the process that leads to process innovation and describes not exactly the way the innovation is implemented. The
implementation is represented as one arrow from the ‘develop and organize’ to the ‘execute’ box. Of course this is an on going process and therefore also a feedback arrow is drawn in opposite direction.
7.4.
Source of innovation
One of the things that is needed for process innovation is a source or initiator. Papinniemi suggests three source characteristics. The purpose of these is to serve as a pool of innovation candidates. The first is: technological enablers. They serve various opportunities for real process innovation; for example Just-in-time, Kanban, integration of processes and so forth. Second: lack of performance in processes and products. How is the process doing compared to competitors? Third: resource
opportunities; a human or financial resource that can be obtained by the firm. When none of these can be found, process innovation is not able to find its way from the drawing board to execution.
Within the DSA, sources are not mentioned directly in the innovation model. The model describes the environment as the initiator. It can be concluded that the models have a different level where to begin with innovation. Papinniemi’s model starts with a ‘business and manufacturing policy’. The innovation model of the DSA starts one level higher at ‘environment’. In both models however, change in policy can be a reason for changing the process and therefore innovation. From this point of view both models give a good representation of the real innovation process, but lack practical application. It is suggested that this may be a reason for businesses and managers to not innovate the processes, because they are simply not capable to translate these models to practical implementation. Are production managers the right persons to initiate process innovation or are (probably more capable) consultants needed to do this job? That is left as a question for further study.
2013.TEL.7768 24
8. Implementing product innovations
Back to the case of the autonomous transport robots mentioned in the introduction paragraph. The question why this new technology is not already adapted by most of the manufacturing firms can maybe be answered as follows:
“To design and implement new technologies and to build “the factory of the future” is, therefore, not simply the purchasing and installation of some turnkey solutions for the industry.” (Lyu, 1996)
The author states that a new technology alone is not enough to improve manufacturing performance, such as quality and productivity. As become clear in earlier paragraphs much more is needed for the implementation of new technology to innovate a process. This quote of Lyu underlines therefore earlier conclusions in this literature assignment.
A closer look is taken at the new technology that is in fact an innovative material handling system. These autonomous transport robots are not just implemented wherever possible. Of course companies are not always willing to investigate the possibilities of new products for their process. One can ask: why? And that is the main question of this literature assignment: ‘what limits implementation of technical innovations?’ In this chapter the question is directed at specific new technology. From this view, what are the limits of product innovation, so that not implementing is justified?
8.1.
The material handling system
Figure 5 shows that a production system is bigger than just the material handling and the
manufacturing system (Groover, 2008). So the material handling is just a part of the bigger whole. It is not part of the manufacturing system, but connected to it.
Figure 5: Material handling in the production system (Groover, 2008)
The cost of material handling is a significant portion of the total production cost, estimates range between 20-25% of total manufacturing labour cost. The proportion of total cost varies, depending on the type of production and degree of automation in the material handling function (Groover, 2008). Because of this fact it seems even more urgent to research all the possibilities to reduce this cost. The reason to innovate especially the material handling process is therefore even more obvious. Strange that despite this fact, innovation is limiting within manufacturing firms.
8.2.
Automation
Groover makes a distinction between automation and material handling technologies. Autonomous material handling robots are, however, a combination of automation and material handling. This makes it more complex, because it is affecting a much bigger part of the production system. It is expected that this is also a cause for the problem of not innovating this specific process within manufacturing firms.
8.3.
Implementation of autonomous robots
A lot of knowledge in different fields is needed to implement new technology. It is clear from figure 5 that multidisciplinary thinking is thus needed; in automation, in manufacturing systems and material handling. All these are connected in real production environments. The Fraunhofer Institut that is testing autonomous robots for practical implementation, is in fact trying to show production managers how new technology behaves within the constraints of reality.
Because of the complexity of this technology and the lack of experience to handle this new kind of technology, managers need to be convinced of the need for it within manufacturing processes. From the technology side, managers are just not convinced that this product innovation will lead to better process performances.
2013.TEL.7768 26
9. Conclusions and discussion
A literature assignment is in general a study from a specific point of view. The literature reviewed is clearly not all the literature about the chosen subject. And therefore the study is always directed in a way. However, tried is to achieve the main objective and that is to find an answer to the main question. To recapitulate, ‘what supports implementation of technical innovations to innovate the manufacturing process?’ And therefore also the opposite question is studied: ‘what limits the implementation of technical innovations?’
The main question is viewed and answered from different perspectives. With the use of two innovation models, the analytical method is applied that approaches the innovation process at an abstract level. Differences between these two models suggest inconsistence and therefore make application to practical situation even less attractive. Process innovation is limited because models like these are not used despite their value in process improvement programs. The models stand for an ideal picture of how innovation should be. Moreover, they are very abstract and not of much use to the responsible production managers. A consultant who is able to apply these thoughts in the production environment is preferred.
Another approach to process innovation is that of the socio-cognitive model. This model sees the people within the process as of the important factors. Self-efficacy of employees is one of the most important phenomena that influences process innovation in a positive way. In fact a lack of this will limit the innovation process.
Also from the perspective of the decision-making process more focus has to be on the political process based approach than on the project-based approach. People have to be more important. Is it not that the objective of a firm can be described as ‘to create income for her employees’? From this
perspective it is all about the employees and less about technology, despite the product innovations of these days.
The considered material handling system is an example of such a product innovation. Implementation however is a complex task, because managers have to cope with all the affected fields within the production system. They have to consider the ‘automation field’, but also the ‘field of material handling’. Also they have to be convinced, together with a team of other managers that this specific product innovation will lead to the best improvement of the process performance. From the view of innovators this is not so simple. A difference is made between ‘innovation generating’ and ‘innovation adopting’ companies. The first are creative minded; the other are more project-based in general. Therefore a discrepancy exists between what is suggested to and what manufacturing firms need. It seems logical that managers are not convinced quickly to spend budget on technical innovation to improve process performance.
Another issue is the distinction between improvement and innovation. Improvement has to do with tasks, the optimizing of execution; innovation has to do with functions. Therefore innovation is more
goal-oriented than operations improvement. If production managers are not aware of the difference between innovation and operations improvement; they would probably focus on tasks rather than functions. The innovation process however starts with the goal in mind. It is often seen that managers do not look at the goal or have the wrong goal in mind. As a consequence innovation is limited.
Change is the other issue that plays a role in innovation. To overcome the resistance in relation to change; dissatisfaction, vision and the needed steps are the three factors that drive changes. This approach illustrates that motivation is very important. Without motivation people are not willing to change the status quo and no innovation is obtained. Again it is clear that people are the key factor of innovation. Also, from the socio-cognitive model it can be concluded that increasing employees’ self-confidence and clarifying their role in the manufacturing process are key points to obtain process innovation.
Two innovation models from the DSA and Papinniemi respectively give a more systematically approach to innovation. From the models it can be deduced that a source is crucial to initiate the innovation process. A technological enabler such as an autonomous material handling system could be such a source. The models show that innovation is however not complete until implementation is realised together with a change observed in the process performance.
The models considered offer insight in an abstract way and it is therefore not easy to translate this to practical situations. Managers are despite of their knowledge and experience in most cases not capable of making the right decisions concerning purchasing technical innovation for the manufacturing process of their responsibility. Consultants are needed to advise them in these situations, all the more because implementing product innovations is not an easy task.
Implementation of autonomous robots requires knowledge and experience in more fields; the fields of automation, material handling systems and the total production system. Complexity of the production process is thus also a limiting factor for process innovation.
Decision-making procedures are more complex these days and a system also. Innovation limits are in fact often caused by shortcomings of managers. Also there is often a lack of need for a new system. Need comes forth out of dissatisfaction, but if the process performing well enough then by definition there is no need for a new system. The problem-solving minded manufacturing firms are often not convinced to implement a product innovation without a problem that is solved by it. So the mindset is also limiting process innovation performances.
Process innovation is limited in different ways. As can be found in literature different approaches to manufacturing processes can be used. In this literature assignment a couple approaches are
reviewed. The general conclusion is that the overall limitation of process innovation appears to be the human being; the production managers and the employees that work for the manufacturing firm.
References
Albrecht, T. (2012, March 1). Swarmin and transporting. Fraunhofer Research News , p. Topic 3.
Becheikh, N., Landry, R., & Amara, N. (2006). Lessons from innovation empirical studies in the manufacturing sector: A systematic review of the literature from 1993-2003. Technovation , 26, pp. 644-664.
Checkland, P. (1999). Soft Systems Mehtodology: a 30-year retrospective. Chichester, West Sussex, England: John Wiley and Sons Ltd.
Damanpour, F., & Wischnevsky, J. D. (2006). Research on innovation in organizations: Distinguishing innovation-generating from innovation-adopting organizations. Journal of Engineering and Technology Management , 23, 269-291.
Davenport, T. H. (1993). Process Innovation: Reengineering Work through Information Technology. Cambridge, MA: Harvard Business School Press.
de Bruijn, H., & ten Heuvelhof, E. (2008). Management in Networks. New York, United States of America: Routledge.
Du, J., Love, J. H., & Roper, S. (2007). The innovation decision: An economic analysis. Technovation , 27, 766-773.
Ford, J. D., Ford, L. W., & D'Amelio, A. (2008). Resistance to change: The rest of the story. Academy of Management Review , 33 (2), 362-377.
Fritsch, M., & Meschede, M. (2001). Product Innovation, Process Innovation, and Size. Review of Industrial Organization , 19, 335-350.
Goldratt, E. M., & Cox, J. (1993). The Goal (2nd Edition ed.). Hampshire, England: Gower Publishing Company. Groover, M. P. (2008). Automation, Production Systems, and Computer-Integrated Manufacturing. New Jersey: Pearson Education Inc.
Grover, V., Fiedler, K. D., & Teng, J. T. (1994). Exploring the Success of Information Technology Enabled Business Process Reengineering. Transactions on Engineering Management , 41 (3), 276-284.
Huczynski, A. A., & Buchanan, D. A. (2007). Organizational Behaviour (6th Edition ed.). Harlow, England: Pearson Education Limited.
Knowles, E. S., & Linn, J. A. (2004). Resistance and Persuasion. Mahwah, NJ, USA: Lawrence Erlbaum Associates. Lehman, W. E., Greener, J. M., & Simpson, D. D. (2002). Assessing organizational readiness for change. Journal of Substance Abuse Treatment (22), 197-209.
Lyu, J. (1996). Applying Kaizen and Automation to Process Reengineering. Journal of Manufacturing Systems , 15 (2), 125-132.
OECD. (2005). Guidelines for collecting and interpreting innovation data. Oslo Manual. (3rd Edition ed.). Paris: OECD.
Papinniemi, J. (1999). Creating a model of process innovation for reengineering of business and manufacturing. Production Economics 60-61 , 95-101.
Rotab Khan, M. R. (2000). Business process reengineering of an air cargo handling process. International Journal of Production Economics , 63, 99-108.
Simpson, D. D. (2002). A conceptual framework for transferring research to practice. Journal of Substance Abuse Treatment , 22, 171-182.
Slack, N., Chambers, S., & Johnston, R. (2007). Operations Management (5th Edition ed.). Harlow: Pearson Education Limited.
Thomas, R., & Hardy, C. (2011). Reframing resistance to organizational change. Scandinavian Journal of Management , 27, 322-331.
Veeke, H. P., Ottjes, J. A., & Lodewijks, G. (2008). The Delft Systems Approach. Delft: Springer.
Wang, R.-T., & Lin, C.-P. (2012). Understanding innovation performance and its antecedents: A socio-cognitive model. Journal of Engineering and Technology Management , 29, 210-225.
