Product Innovation and Process Innovation

Product Innovation and Process Innovation

• Utterback and Abernathy (1975) categorized technological innovation into Product Innovation and Process Innovation as distinct innovation patterns.
• Product innovation focuses on "What to make", while process innovation focuses on "How to make".
• The technological innovation process evolves over time as industries develop.

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• Fluid Phase
• When a new product is introduced, various competing designs emerge until a standardized dominant design becomes established.
• Once a dominant design gains traction, innovation shifts toward incremental improvements based on the standardized product.

• Transitional Phase
• As the dominant design spreads and demand increases,
• The focus shifts from product improvements to enhancing production efficiency and solving process-related challenges, leading to a surge in process innovation.

• Specific Phase
• Process innovation becomes more stabilized and refined.
• The type of innovation varies depending on the product category.

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Differences in Innovation by Product Type

1️⃣ Assembled Products

Assembled products involve the combination of multiple components through an integrated production process. These industries focus primarily on product innovation, as competition is driven by improvements in design, functionality, and performance. Examples include mainframe computers, aircraft, and automobiles.

In these industries, component manufacturers maintain distinct product characteristics, allowing for continuous differentiation. While process innovation plays a role, the primary emphasis is on enhancing product features to meet market demands and improve competitiveness.

2️⃣ Non-Assembled Products

Non-assembled products, in contrast, rely on raw material transformation processes, where the final product remains largely unchanged. The key focus in these industries is process innovation, aimed at improving efficiency, reducing costs, and optimizing production techniques. Examples include glass manufacturing, steel production, textiles, and petroleum processing.

Since these products do not undergo significant design changes, companies concentrate on refining manufacturing processes rather than developing entirely new product variations. Process advancements, such as adopting new refining methods or automation technologies, drive competitiveness in these industries.

Overall, assembled product industries prioritize product innovation to enhance functionality and differentiation, whereas non-assembled product industries emphasize process innovation to improve production efficiency and cost-effectiveness.