Today firms must maintain high levels of efficiency, quality control, customer responsiveness and speed, but even the full set of these attributes is not sufficient for sustainable competitive advantage. A further challenging requirement is to innovate successfully, not only in product development but also in production. Traditionally, innovation is regarded as successful product development, and delivering innovative products of sufficient quality at a reasonable price is seen as the primary means of acquiring and maintaining competitiveness. In this context, the role of production development is simply to provide production solutions required for the realization of new products. However, production development (sometimes called ‘production improvement’ or ‘process innovation in production’) may also involve continuous incremental or radical improvement of current production processes or systems in terms of productivity, cost, speed, quality, and/or flexibility.

Previous research provides a rather narrow view of production development, largely ignoring value creation, which obscures its importance for organizations. Due to the lack of attention to innovativeness in production development, limited effort is also made to understand how to manage production development projects as innovation processes, where the emphasis is on obtaining value. This retards progress and restrains organizations’ competitiveness, and to some extent the potential social benefits (such as increases in sustainability) of new production technologies. Thus, the primary objective of the research this thesis is based upon was to increase understanding of distinguishing features and valuable outcomes of production innovation, together with challenges in managing production innovation processes. Data underlying this research were collected through case studies of development projects in firms operating in several industries.

The research findings show that the pursued outcomes of production innovation are mainly cost reductions and increases in quality. Nevertheless, production innovation also contributes with expansion of product design space, and strengthening innovation capabilities, which in themselves provide sustainable competitive advantage. Further, production innovation is highly dependent on successful implementation – a complex endeavour involving internal organization, external customers and other actors contributing to the production system. Organizations lack support for capturing, prioritization, decision making and resource allocation in production innovation processes, a topic that warrants further research.