Int. J.

Production Economics 60—61 (1999) 95—101

Creating a model of process innovation for reengineering

of business and manufacturing
Jorma Papinniemi*
Department of Industrial Engineering and Management, Lappeenranta University of Technology,
P.O. Box 20, FIN-53851, Lappeenranta, Finland

Abstract
The purpose of this paper is to develop a basic model of process innovation to support reengineering of business and
manufacturing. The proposed model introduces basic relations between source, object and performance characteristics of
process innovation at conceptual level. The model aims at improving “assessment of process innovation initiatives”. It
points out the effectiveness chain from an original initiative through process changes to potential increase in “perfor-
mance of processes” and “competitiveness of the whole enterprise”. Discussion of the proposed model suggests the basic
relations of effectiveness to be operationalised as assessment tools for a decision support system of process innova-
tion  1999 Elsevier Science B.V. All rights reserved.

Keywords: Process innovation; Reengineering; Performance management

1. Introduction 1.1. On industrial innovation terminology

There are many challenges that industrial enter-
prises face to maintain their competitiveness. Run-
ning industrial operations effectively is not enough
in the long run. Capabilities of innovation and
utilising innovativeness in new ways are required in
future competition. First we discuss shortly some
key concepts of the topic stressing the point of view
of manufacturing enterprises.
* Tel.: #358 5 6212616; fax: #358 5 6212667; e-mail: jorma.
papinniemi@lut.fi.
¼hat is a process? A process is a specific ordering
of work activities across time and place, with a be-
ginning and an end, and clearly identified inputs
and outputs: a structure of action [1]. In this study
we consider typical industrial processes of manu-
facturing, engineering and materials management
combined with customer related processes of prod-
uct and sales management. Linking these processes
to chains we specify business process as follows.
Business process is a structured set of activities
designed to produce specific outputs for internal
or external customers or markets. It implies
a strong emphasis on how work is done within

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96 J. Papinniemi/Int. J. Production Economics 60—61 (1999) 95—101
an organisation, in contrast to product focus’s em-
phasis on what. Further more business processes
have cross organisational boundaries and they are
generally independent of formal organisational
structure [2]. Activity is a combination of people,
technology, raw materials, methods and environ-
ment that produces a given product or service. By
pointing out process view of business and manufac-
turing this study emphasises the need for under-
standing and tracing chain effects on processes and
on the whole enterprise.
Process Innovation means performing a work
activity in a radically new way. Process innovation
is generally a discrete initiative and it also implies
the use of specific change tools and technology for
enterprise engineering and transformation of busi-
ness processes [1]. Innovation is usually concerned
with creation and development of new ideas and
solutions. However innovation is not completed
until its economic impact becomes apparent. Noori
has compared process innovation with product in-
novation and studied relations between them [3].
So in the way of product innovation also process
innovation must be “commercialised” before it is
completed.
Reengineering of business processes (BPR) has in
recent years been a very popular item in manage-
ment literature. It is often connected with adopting
new technology in processes. In this study reen-
gineering works as an object element of process
innovation.
1.2. The field and aim of this study
To emphasise the importance of innovative cus-
tomer approach to business and manufacturing
processes we first outline the industrial innovation
field, see Fig. 1. The four important innovation
elements in the field have linkages and interdepen-
dencies between each other.
Linkages at this general level work in both direc-
tions, either as internal customers or suppliers to
each other. In manufacturing companies the main
stream runs in five relations: technology for pro-
cesses, technology for products, processes for prod-
ucts, processes for customers and products for
customers. In this study we focus on the elements
Fig. 1. Industrial innovation field.
relation of technology for processes in industrial
innovation field.
The aims of this study are:
1. to propose a basic model of process innovation
to support assessment of process innovation ini-
tiatives and projects;
2. to discuss opportunities and competence of the
basic model as a decision support aid for reen-
gineering of business and manufacturing.
1.3. Previous study on process innovation
approaches
The need for systematic approach to innovation
management is widely recognised in industrial in-
novation field, see Ref. [4]. This implies the need
for supporting tools, methods and models at differ-
ent management levels and even an innovation
system for the whole company. A number of
methods and models have been presented aiming at
modelling the entire procedure of innovation or
supporting different phases of innovation proced-
ure. Some process approaches are presented as
follows:
(i) The model of gradually detailing process con-
cept by Jensen and Westcott [5]. The contribution
of this study was the development of process con-
cept model and a structured approach for translat-
ing a manufacturing strategy into a set of tactical
manufacturing innovation projects.
(ii) The process application of fusion model
by Ishii and Ichimura [6]. The main finding of
this proposed method is that it is possible to
develop production design as a product character-
istics deployment process, from the technical
 J. Papinniemi/Int. J. Production Economics 60—61 (1999) 95—101
characteristics to the manufacturing characteristics.
The use of fusion model stresses creation of some-
thing new or combining in a new way.
(iii) A case study of technology adoption, product
design and process change introduced by Greis [7].
The case revealed that changes in product and
process design will affect the technologies and
operations of numerous organisations along the
production supply chain.
(iv) The generations of industrial innovation is
clarified by Sweeting and Davies [8].
1. Technology push: emphasis on R&D
2. Need-pull: emphasis on marketing, reactive
R&D
3. Coupling model: emphasis on the integration of
the R&D and marketing interface (push/pull
combinations).
4. Integrated model: emphasis on integration be-
tween R&D and manufacturing (strong supplier
linkages, design for manufacturability).
5. Systems integration and networking model: em-
phasis on corporate flexibility and speed of de-
velopment (co-development with customers and
suppliers).
Progress of industrial innovation requires readi-
ness to handle all the more complicated structures
also when assessing new process initiatives and
projects.
Also several techniques for justifying advanced
manufacturing technology (AMT) have been pre-
sented. These are usually grouped into three cat-
egories: (1) economic, (2) strategic and (3) analytic
approach. Inferences from industrial practices were
made by Small and Chen [9], who found that firms
that adopted more than one approach were likely
to attain higher levels of success than firms that
used only one method. However these approaches
stress performance factors straight, not investigat-
ing change effects in processes or innovative nature
of changes.
2. The model of process innovation
The development of the model of process innova-
tion is based mainly on the sources introduced in
previous study and author’s own participation in
97
development work of production and information
systems in small manufacturing enterprises. All of
the process innovation approaches introduced view
that the process change from different aspects, but
none of them focuses in effectiveness analysis of
a single innovation initiative.
Despite increasing importance the customer ap-
proach has not been much applied in models and
methods concerning process innovations, e.g. ma-
jor process improvements and new technology
adoption in business and manufacturing.
2.1. The purpose of the model
Creating a model of process innovation is in-
itiated from the need to handle reengineering work
more systematically and more thoroughly. Because
the model to be created handles process innovation
at conceptual and theoretical level it is called the
basic model of process innovation.
The purpose of this basic model is to improve
assessment of process innovation initiatives and
thus support innovation management by the fol-
lowing means:
(1) Analyse effects of innovation candidates on
business and manufacturing processes.
(2) Explain performance changes of processes
and of the whole enterprise.
(3) Show the procedure of transforming initiat-
ives to completed innovation. The basic model
tends to describe the essence of innovation and
linkages in industrial innovation field.
2.2. Elemental structure of the basic model
Fig. 2 illustrates the outline and items to be
examined in accordance with the model of process
innovation. The model includes two main flows of
action. The top-down flow is called workflow of
reengineering and the elements of reengineering are
divided into background, process and outcome ele-
ments. The left to right flow describes basic rela-
tions between the core elements of the model.
Examination of the basic model is carried out by
contents description of each element along both
main flows. After that the relations R1 and R2 are
examined in detail.
98 J. Papinniemi/Int. J. Production Economics 60—61 (1999) 95—101
Fig. 2. The basic model of process innovation.
2.3. Workflow of reengineering
Reengineering of business and manufacturing is
the target for process innovation. The workflow of
reengineering in this model consists of three main
elemental phases: background, process and out-
come elements.
Background elements of reengineering serve as
preliminary phases in using the model and they are
shortly reviewed as:
1. Policy directs the organisation and sets guide-
lines for the development activities of product
lines and process sequences in a manufacturing
system.
2. Analysis of current state is performed for the
selected product line and process sequence. The
purpose of analysis is to specify internal short-
ages in the selected process sequence and pro-
duce performance description of products and
processes.
3. Current product/process performance can be de-
scribed by analytical process matrices [5], which
can be used as one source pool for finding in-
novation candidates. An example of matrices is
presented in Section 2.4.3.
Process element of reengineering contains as well
structural, operational and managerial character-
istics which can be classified as follows:
E Process type: job shop, batch, repetitive, etc.
E Product structure /modularity
E Process integration: product line, group, cell, etc.
E Operation type: manufacturing and assembly ac-
tivities, design activities,
E sales activities, logistic activities, accounting and
financial activities
E Man—machine—computer connections: man—ma-
chine systems in operations
E User closeness of information: process informa-
tion systems
E Management and control: decision support and
information systems
Outcome elements of reengineering show the po-
tential results of innovation procedure accomp-
lished. It is based on the comparison of competing
innovation candidates and process concepts. As the
main result of using the model as reengineering aid
we can define:
(1) the new and improved process concept and
assess the opportunities to achieve it;
 J. Papinniemi/Int. J. Production Economics 60—61 (1999) 95—101 99

(2) the improved process/product performance and
a new competitive level for the whole company.
After this procedure of assessment we can pro-
ceed to the process innovation plan and begin to
carry out reengineering actions.
2.4. Core elements of the model
The core idea of process innovation is transform-
ing potential innovation initiatives to completed
innovation. The properties of core elements: source,
object and performance characteristics are dis-
cussed in the next sections.
2.4.1. Source characteristics
The purpose of source characteristics is to serve
as a pool of innovation candidates for business and
manufacturing processes. Candidates for process
innovation can be searched from the next source
characteristics:
1. ¹echnological enablers of process innovation are
found from many engineering fields. They serve
various opportunities for real process innova-
tions in manufacturing enterprises. They can be
characterised by Towill categorisation [10], see
Table 1.
2. ¸ack of performance in processes or products can
be specified as a source characteristic by com-
paring current performance with competitors’ or
own progress.
3. Resource opportunities consist of human and
financial resource base a firm controls or can
obtain. This characteristic is especially impor-
tant in smaller manufacturing enterprises.
2.4.2. Object characteristics
The essence of process innovation is creation of
value-added in business and manu-facturing pro-
cesses. As new characteristics of products are im-
portant for customers in product innovation, so in
the same way all participants utilising process char-
acteristics can get “customer benefits” through pro-
cess innovation. Essential changes in some process
characteristics are expected to take place when
process innovation is carried out.
So we can define object characteristics of process
innovation as change potential in process character-
istics as follows:
E Change in process type
E Change in product structure
E Change in process integration extent
E Change in emphasis of key operations
E Change in man—machine—computer connections
E Change towards user friendly information
E Change in management and control
The economic nature of changes can be either
value-adding or cost-reducing in business and
manufacturing processes.
2.4.3. Performance characteristics
The basic question of performance is how we can
construct a proper set of performance characteristics

Table 1
Examples of engineering improvement practices

Source field Technological enabler Example

Industrial engineering Set-up time reduction, Single minute exchange of dies,

Handling methods, Conveyor use,
Product design Design for manufacture
Production engineering Integration of processes, Combine two processes into one,
Sequencing of processes Re-sequencing to postpone variety
Information technology Quicker and more accurate data capture Bar-coding on order paper work and/or materials
packaging
Electronic data inter-change Orders, funds transfer or engineer-ing designs
transferred instantly
Operations engineering Kanban Production controlled via actual orders
JIT supplies Greater frequency and smaller quantities
Shared call off information Improved service levels through lower forecast errors
100 J. Papinniemi/Int. J. Production Economics 60—61 (1999) 95—101

Table 2
Non-measurable performance factors

Flexibility Machine flexibility — characterising the ease of making changes required to produce a given set of parts
Process flexibility — involving the ability to produce a given set of part types in several ways
Product flexibility — as the ability to changeover to a new set of products economically and quickly
Routing flexibility — dealing with the ability to handle breakdowns and to still produce a given set of part types
Quality Difficulty of manufacture,
Dependency upon people skills monitoring quality
Service/Delivery Ability to mobilise resources instantly to ensure that any failures are corrected immediately,
Customer relationship
Cost Overhead associated with product line or process

for assessing innovation initiatives. One way to
handle performance characteristics is to use ana-
lytical process matrices. Some alternatives of ma-
trices are introduced by Jensen and Westcott [5]:
E Manufacturing grid by quantitative measures
E Strategic improvement matrix
E Process concept matrix
E Non-measurable performance factors which is
introduced in Table 2.
2.5. R1: Effects of innovation initiatives on process
characteristics
The purpose of R1 is to find impact opportuni-
ties of innovation initiatives on process character-
istics. To capture the effectiveness chain we need to
define the relationships between various business
and manufacturing activities. Bititci and Muir [11]
have identified four areas of major importance
which form the criteria for evaluation of the rela-
tionships:
2.6. R2: From process changes to changes in
performance
The purpose of R2 is to find relations between
changes in process characteristics and performance
measures. It is a significant performance change in
processes that indicates the completion of process
innovation. So the basic idea to assess performance
of processes is using the change levers of perfor-
mance characteristics. These change levers should
thus be applied in a wide variety of evaluation
methods, because appropriate measures must be
fitted for the specific process and product line. One
way to handle change levers is to use analytical
process matrices refered in this study [5]. Also
a qualitative change lever could be connected with
each of these non-measurable performance factors.
This approach of change levers stresses manage-
ment of balanced performance characteristics rather
than measurement of single performance indicators.
3. Discussion and conclusions

E Information flow: frequency, criticality, volume,
type, route
E Shared resources: human, equipment, financial
E ¹ime relationship: sequential, parallel, indepen-
dent
E ¸ocation: physical, logical.
Effects of innovation initiatives should first be iden-
tified by qualitative description of process changes.
After that we need to quantify the importance of
each activity change by relative change measures.
The main purpose of the process innovation
model presented at conceptual level in this study is
to direct development activities towards necessary
enterprise goals. The model is intended to support
assessment of innovation initiatives and projects in
business and manufacturing processes. One impor-
tant contribution of this study is applying the es-
sence of “customer”-based approach to process
innovation practices. Translating process conform-
able needs into a new process concept e.g. through
technological enablers is a field for an innovation
 J. Papinniemi/Int. J. Production Economics 60—61 (1999) 95—101
model. Also analysis of effectiveness chain could
give more information for innovation decisions.
The elemental structure of the basic model of
process innovation is introduced in this paper. Fur-
ther study should aim at operationalising the
model for decision aid of process innovation. This
implies grasping the basic relations of effectiveness
and development of description techniques. The
plan for the future is to develop a simple, spread-
sheet-based software support system which should
make application of the basic model of process
innovation simpler. Usability and competence of
the refined model should be tested with product
line cases in manufacturing enterprises.
Creation of a new model, especially that of pro-
cess innovation, is very challenging and creative
work. Integrative and systematic approaches and
models are requested when dealing with process
close innovations!
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