Strategic Manufacturing System and Process Innovation. A framework for small and medium sized enterprises

Abstract

This thesis describes the development of a framework for strategic system and process innovation in Small and Medium sized manufacturing Enterprises (SMEs). The developed framework structures the innovation process into three phases of Plan, Prepare and Process. It provides a set of guiding principles at each phase that enables the management of the smaller companies to develop or select appropriate tools and methods for their innovation requirements. The framework is a significant contribution in this area of research as it was developed specifically for the needs of manufacturing SMEs. SMEs play a crucial role in the national and global economy. They are responsible for most net job creation in OECD countries and make important contributions to productivity and economic growth. However, they are also very vulnerable to changes in their business environment as they have very limited resources and capabilities. In the current business climate, characterised by uncertainty, global competition and high levels of technological change, most SMEs find themselves unable to cope with the requirement to be in a constant state of change and innovation. Effective management of change and innovation is a critical capability that all manufacturing companies must possess to survive and compete. However, in spite of the importance of SMEs in the economy and their known limitations, there are very few frameworks, tools and methods developed to enable them to effectively manage innovation. It is argued that there are two main reasons for this. The first reason is the absence of in-depth understanding of the specific characteristics of SMEs that govern the dynamics of innovation in their organisations. Second, is that after several decades of research on management of technology and innovation, there is still no comprehensive model of identifying the determinants of successful innovation, especially in the area of system and process innovation. This study overcomes these issues by firstly adopting an action research approach, through which the researcher was embedded in a manufacturing SME for several years and took part in numerous system and process improvement initiatives. This provided the researcher first hand with a large body of contextual information that is crucial for understanding a complex phenomenon such as system and process innovation. In order to make this knowledge useful for the development of the framework, a holistic model of organisational determinants of successful innovation was constructed, based on an extensive systems-based review of the related areas of innovation management literature. The model was used to systematically reflect upon the system and process innovation projects that the researcher had been leading in the case company. The result was the identification of specific characteristics of manufacturing SMEs that impact the success of system and process innovation. These were categorised into three groups. The first group are those characteristics that influence the strategic aspect of innovation in SMEs. The second consists of characteristics that affect the context in which innovation is to take place, while the third group consists of those that affect how the innovation process is carried out. The framework was therefore structured in three phases in order to address the effect of the above characteristics on innovation in SMEs. Finally, the framework was successfully applied in a manufacturing SME and enabled its managers to apply a strategic approach to system and process innovation. Two system and process innovation programmes were started, which focused on long-term competitiveness of the company while addressing the short-term needs of the business. These were “Environmentally Benign Furniture Design and Production” and “Customer Driven Furniture Design and Production”. The framework proved instrumental in promoting a systematic approach to strategic development and creative problem solving. It was helpful in directing the innovation drive of the owner/manager towards strategic decision making, while complementing his knowledge with strategically significant information from the company's business environment. Moreover, the preparation phase of the framework provided a structured and systematic approach to understand the drivers and obstacles of innovation, and to develop mechanisms to use the drivers and overcome the obstacles. It also proved helpful in identifying sources of knowledge and setting up mechanisms to acquire, store and disseminate knowledge.