The degradation–upgrade product lifecycle
Companies in the process industries nowadays often try to avoid being simply commodity producers and strive to develop more functional products that offer more benefits to customers, with higher profit margins and less turnover volatility. When such products with improved functional properties are introduced on the market, they are usually soon imitated by competitors who try to produce the same type of product with the same performance at a lower cost; prices then gradually decline, and the functional products degenerate into commodities, as illustrated in the figure below. In the product degradation–upgrade cycle in the process industries, the arrows illustrate how functional products degrade into commodities unless product functionalities are continually improved. However, upgrading commodities into functional products is not the most common route in product development.
Producers of more functional products, competing on differentiation (performance), as well as commodity producers with the desire to produce more functional products, benefit from excellence in product development. However, the ability to be a cost-competitive commodity producer is related more to a clear understanding of the dynamics of the total cost structure in the production process and an ability to develop and introduce cost-efficient process technology through process innovation in the production processes. As such, the introduction of breakthrough process technology by a competitor may totally “change the game” and eliminate a market leader.
Product and process innovation as two separate, but often interacting work processes
A general definition of product development can be given according to the OECD Oslo Manual:
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.
In this definition, it is important to note the need for “significantly improved” products. Product development of non-assembled products for B2B customers is normally carried out in collaboration with the customer’s production organization, but intimate collaboration with the customer’s product development teams is naturally desirable.
Product development and process development are sometimes viewed as the same activity in the Process Industries. It can be argued that it is not necessary to distinguish the work processes for “product development” and “process development” because product development in the Process Industries also partly takes the form of development work in a laboratory. The strongest argument against this point of view is that both work processes start with different customers and end up with different customers, as illustrated in the figure below.
The following slightly modified complementary definition of product innovation underlines this idea:
Product development is defined as development driven by a desire to improve the properties and performance of finished products, even if the nature of the practical development work is sometimes development of process technology in a laboratory. Objectives for product development can be improving product properties, improving product quality (uniformity of composition), environment-friendly products, etc. Product development is then also the customer for the development of necessary process technology to produce the desired new or improved products.
Whilst product innovation must always begin and end with the customers, process development is a more in-house affair.18 According to the Oslo Manual, process development can be defined as follows:
Process development (process innovation) is the implementation of new or significantly improved production or delivery methods. This includes significant changes in techniques, equipment and/or software.
The Oslo Manual further states that, “with respect to goods, the distinction is clear.” The customer for process innovation is primarily an internal customer, and the following slightly modified extended complementary definition underlines these ideas and is used in this book:
Process development could be defined as development mainly driven by internal production objectives. Such objectives may be reduction of production costs, higher production yields, improvement of production intensities, environment-friendly production, etc. In many sectors of the Process Industries, process development is mainly prompted by the needs of production (internal customer). Another internal customer to process development is the company’s own product development.
However, the growing global competition in the marketplace and the necessity of superior product price/performance may incentivize a company not only to maintain or even reduce production costs related to a specific product innovation project but also to search for supplementary cost reductions and process innovation within the entire production system. Such supplementary processability (manufacturability) aspects on new or improved products could be concurrently considered in the design and deployment of a product development work process. In other words, it could be advisable to examine not only how a new product idea can be manufactured in existing or new production systems but also how improved efficiency can be achieved in existing overall production systems. Furthermore, when using existing production plants to manufacture new or improved products, the “transformability” of the production system is dependent not only on the resilience of the system configurations but also on the “process window”.
On the intrinsic nature of the development of non-assembled product innovation
The manufacturing process in assembly-based industries generally commences with a large number of components that are further reconfigured in a stepwise assembly process into a finished product in which many of the individual components remain traceable and often visible. In essence, in an “assembly-based” production system, the product, to a great extent, defines the most appropriate and functional production process. In consequence, even if an early product design for processability is of utmost importance in these industries, product development is only a precursor to the final development and design of an efficient production system. In contrast, the manufacturing of products in the process industries is a gradual transformation process, in which usually only a few incoming raw materials and ingredients are gradually transformed into relatively homogenous final products and often a large number of product varieties. In essence, in such a “transformation-based” production system, the production process, to a great extent, defines product properties, product quality and detailed product specifications. In consequence, product development in the process industries is, in reality, the development of a new or improved production process. Moreover, there is an intimate coupling between production process technology and associated products; thus, inherent product properties gradually emerge during an intermittent or continuous production process with no direct manual interaction. This makes the development of non-assembled products, in reality, the development of new or improved process technology – a fact which has been expressed by Karl Marx as “the process disappears into the product”, by Roussel as “the process is the product,” and by Lager and Simms, as “the process embodies the product.”
The chain of activities from product ideation to product concept development to product design is thus associated with the chain of activities of process ideation, process concept development, and final process design. Whilst a new or improved product in assembly-based industries is transferred from the R&D organization to the manufacturing organization when a product design is ready after prototyping, the design of new or improved non-assembled products in the process industries takes place in the production-oriented experimental environments of laboratories and pilot plants. Development of prototypes in assembly-based industries is thus displaced by pilot-planting or full-scale production trials in the process industries, when operating process conditions are established and test batches for B2B customers are produced. Pilot and demonstration plants thus bridge knowledge generation in the laboratories and industrial application in production systems. The instruments in use for such development activities are thus basically experimental facilities that try to mimic and simulate (physically or theoretically) such forthcoming production processes and set-ups.
This novel perspective on product innovation of non-assembled products in the process industries provides a firm theoretical underpinning and guidance in the further development of a product innovation work process for non-assembled products. Moreover, it further clarifies that all alternative process-industrial experimental environments, as instruments for product development, essentially mimic (with varying degrees of success) an envisaged production process for the new or improved product. Consequently, the different experimental environments are not only prime product innovation tools for the development and design of non-assembled products but also process innovation tools for the development and design of interdependent production process technology and future production system for such products.