HOW TO INNOVATE? PRODUCT INNOVATION VS PROCESS INNOVATION

Abstract

There are many studies on innovation. Some of the studies suggest that innovation is a process, while others suggest that process innovation is an alternative and supportive for product innovation. Some of these studies suggest that it is possible to succeed by focusing more on one approach than on the other, while some studies suggest that organizations should focus on a primary goal depending on their sector. This study is about the comparison of innovation determinants and types of innovation. The reason of the changes in paradigm, the competition goes to global and it makes innovation a necessity rather than competitive advantage. In this highly competitive environment, not to lose the market share, companies focus on the needs and expectations of the customers. Companies consider the customer affect while they are deciding how to innovate. By the use of new technologies, especially the use of internet, it is less costly and much easier to reach the customers directly and give the message via the web. IT enabled newtwork marketing provide customers opportunity to make comparisons among the competitors from all over the world. Product innovation and the resulting developments enable companies to differentiate themselves in the market. Product innovation, increased brand value, faster technology adoption rates, greater returns and more innovation opens door for an environment prepared for innovation. It also makes work fun, because partners are forced, revived, and appreciated when they are aware that their best idea will be real for everyone's benefit. Process innovation in an organization is the address of the reform, which has started from the customers' demand, to the end of the valuable product and service created by the organization, including the activity, decision, information and material flows. High expectations and demand are based on the ability in process innovation to ensure the full use of information technology and the emphasis on labor and organic composition in production technology. The main question is that how to innovate to have competitive advantage over the long run? Product innovation or process innovation? Many ideas discussed that scholers suggested about the types of innovation and their interrelations. Between 1950s and 1960s, the main problem was production. To get the success, the most important thing was how well the production is made. Therefor, the managers focused on operational activities and production. Strategic approach was the budget and procedures to run the operational activities. Increasing the efficiency in production was enough to compete. After 1960s, the growth in world trade began to exceed significantly the growth in Gross National Product, while foreign investments has been significant and growing rapidly. It was the beginning of fundamental change in the international competitive environment In the changing global economy, it is necessary to compete in many ways (quality, service, price...etc.) to meet the rapidly changing needs and expectations of customers. First of all, as Peter Drucker suggest, “every organization - not just businesses - needs one core competence: innovation. Growing competition force the organizations to innovate. It can be said that in the new economy, both types of innovation are significantly interrelated. And it doesn't matter how well to innovate in one of them, the necessity is, how well to innovate in both of them by using the opportunities of new technologies and the abilities of network marketing. Some developments direct the organization to innovate in one or more of these types of innovation. Innovation itself is a process and both product innovation and process innovation is interrelated. It can be said that the success also depends on how well you implement the technological developments in your innovation cycle by the usage of new technologies, well skilled labor, new managerial skills..etc. It is a necessity –rather than competitive advantage- to innovate in both marketing, technology, production and processes for a sustainable competitive advantage.