Importance of Innovation in Operations Management


Innovation in Operations management refers to operational innovation. It is the practice of evaluating and developing new techniques to improve the existing business process. This approach of operational innovation is not restricted to a specific department or functional unit. It runs across the entire organization at all levels to review and revise all process and ongoing systems for advancement. It is used in conjunction with enhancing customer service, launching a new product or service or to intensify marketing strategies.

Operational innovation puts new processes in place and does not limit its scope to routine performance improvement practices. It is an ongoing process where strategic changes may be initiated as and when needed to foster operational innovation.

How does it work?

To embrace and enjoy the benefits of operational innovation, companies should be ready to promote a culture of innovation within the organization.

  • People responsible for carrying out business operations can be encouraged to share their inputs on challenges faced and suggest innovative solutions. Such sharing of information can create a wide and dynamic range of ideas providing more prospects for operational innovation.

  • Generating ideas is fundamental to carry out operational innovation. This should be given vital importance as only great ideas that are capable of highlighting a broad view can lead to envision long term business prospects.

  • Hindrances in the way of development or improvement of business should be accurately identified and work together to evolve diverse and creative ideas to overcome them.

  • Integrate the best ideas to the existing process and aid seamless adaption into the current system of operations.

  • Operational innovation being continuous in nature, the new ideas put to practice should be monitored to assess the impact on outcome.

  • Insights from monitoring and measuring new task performance will help to determine subsequent targets and objectives.

Importance of Operational Innovation

Operational innovation contributes to a major role in newly refining existing operations and product lines enhancing customer value, market penetration and revenue. It also helps upgrading the current workflow patterns and methods. Technology used as a measure of operational innovation brings efficiency to the business processes. The major significance and benefits that operational innovation introduces to a company are given below.

Solution to complex business issues

Operational innovation helps to solve complex issues that might arise in business. It could be a process unit that triggers heavy cost, unproductive resource handling, underutilised man power or even unforeseen uncertainties that affects entire global market and industry. All such negative situations can be overcome through innovative ideas and its operationalization. Both internal and external resources can be leveraged to generate novel ideas to replace and simplify the complex situation and improve business performance.

Generating ideas from people involved

Involvement of all the stake holders will ensure locating inter and intra organizational gaps. People involved are the best resources to get inputs from, as they are responsible for carrying out the business process on a regular basis. Encouraging them to develop ideas to overcome the functional road blocks and analysing them productively can bring about practical solutions to operational hindrances. Employees, customers, suppliers and other stake holders can be leveraged to generate and share ideas.

Taking advantage of unique and best practices

Novelty in business process leads to uniqueness and adopting best practices to use. This results in gaining competitive advantage in market. It helps a business entity to stand out among its competitors and thereby fuelling revenue generation. Uniqueness of the product and better quality due to adopting best practices results in improved customer satisfaction.

Enhanced productivity

Another considerable outcome of operational innovation is increased productivity. It is found to have universal effect on the overall productivity including people, process and functional models. It facilitates the business to boost performance with limited resources and avoiding risks.

Market penetration

Innovative thinking can help the management and marketing team develop distinctive marketing campaigns to invoke attention. New ideas give rises to strategic promotional and advertising techniques that help easy market penetration and increase revenue to the company.

Cost reduction

Operational innovation results in reduction of operating costs and wastages. Redundant and unproductive operational areas are discarded as part of executing innovation efforts. This helps in reducing the costs incurred and the new processes help to optimize business resulting in increased revenue.

Flexibility and Adaptability

Adversities, natural calamities and uncertainties always pose challenge to any business entity. Operational innovation is a solution to overcome such a scenario. New and advanced ideas to tide over the turbulent market conditions make the organization more flexible and keep it adaptable to any adverse condition. This makes the business more stable and profitable.

Product and service innovation

Introducing a new product or service to the market is a sequel to operational innovation. It could be an entirely new product or delivering the existing product or service in the best possible quality. It is basically directing outcome based on customer preferences and market trends. This approach puts customer expectations ahead of business needs.

Maintaining transparency

An organization upholding the principles of operational innovation will have an open and transparent work culture. This will allow the people involved to generate, share and exchange new ideas and thoughts that could improve existing process and methods. Employees will be more motivated in a transparent structure where they feel engaged and valued.

Improves sustainability

Operational innovation is iterative in nature. Continuous rethinking, introduction of advanced technologies and delivering products according to the dynamic market trends benefit the company to gain an edge over the competitors. It ensures market dominance and stability. It also boosts the business value and reputation to win customer loyalty.

Operational Innovation for Business Success

Innovation in operations is the key approach that results in superior sustaining business performance. Below listed highlights the benefits of operational innovation that leads to organizational gain.

  • Increased revenue generation and customer satisfaction.

  • Reduction of wastages and operational cost

  • Grab potential market share

  • Foster good employee relations

  • Giving business a competitive edge through innovative products, marketing and sales strategies

  • Improved reputation and brand value.

  • Introduce opportunities for new business relations and partnerships.

  • Helps business to remain stable and adaptable in uncertain market situations and crisis.

  • Better customer retention, increased turnover and profitability.

  • Revolutionised process with advanced and state=of-the art technologies.


In short, operational innovation initiates and helps a business to transform its operations towards success. A work culture that motivates to generate, accept and share the new ideas is detrimental for operational innovation. Healthier employee relations support better employee retention, effective communication and dedicated workforce. Awareness of existing gaps, ways to overcome them and effective integration of new ideas increase the success of operational innovation.

Innovation is the key to problem solving and creativity. Innovation can be productively integrated to the process flow in place with the aid of technology. This will practically allow interdepartmental communication and collaboration with ease. Operational innovation also helps to adapt to the market dynamics by tackling issues from a distinct perspective to stay ahead of competitors. It helps to efficiently allocate and utilise resources including people, time and money.

Updated on: 18-Apr-2023


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