- What is product innovation?
- 3 types of product innovations
- Why invest in product innovation?
- Formulate your innovation policy
- The product innovation process
- Examples of product innovations
- Frequently asked questions about product innovations
The most common definition of product innovation is the creation and introduction of something new to the market. It can be anything, including new products and services, processes, and incremental improvements to existing products. When people talk about innovation, however, they usually talk about new and improved products.
So what is product innovation?
Below, we explore the concept and process behind it, as well as real-world examples of product innovation in action. Find out why it pays to invest in product innovation and what are the most important considerations for your company's innovation policy.
What is product innovation?
Product innovation refers to the creation and introduction of a product or service that is new to the market, or a substantial and novel iteration of an existing product. It includes improvements in components and materials, integrated software, technical specifications and other functional features such as usability. Through product innovation, brands like Apple and Tesla have achieved tremendous commercial success.
3 types of product innovations
Product innovation has three main categories as discussed below.
1. New product innovation
Experts label new products as either radical or disruptive because if they achieve a successful adoption rate, they can become game changers and transform the market.
However, radical and disruptive innovations are more difficult to implement, have a lower success rate and carry more risks. For these reasons, they are not common, as the challenge is not to come up with a new idea but to drive market adoption. Success requires a systematic, proven path to take ideas from conception to marketable products.
2. Incremental changes to existing products
Incremental innovation aims to improve existing products. It is the most lucrative and successful type of product innovation because it improves products that have had relatively successful launches. It also meets the needs of consumers - for example, the innovation of computing in smartphones, laptops, tablets and PCs.
3. Development of new product features
Introducing new product features is the third type of product innovation. Developers and designers create new features to improve products and increase their frequency and adoption. The trick is not to overwhelm the consumer with numerous additional features that distract from the original usability and usefulness of the product.
6 reasons to invest in product innovation and development
Product innovations are necessary for growth. Customer needs evolve as technology advances. And with technology evolving incredibly quickly, it's critical that you continually innovate your product to keep it relevant and essential.
Product innovation, when done right, product innovation has the following benefits:
1. Improved product quality
All business innovations directly improve product quality and performance. This in turn increases the efficiency and effectiveness of business processes and enables radical structural and operational reforms.
2. Intelligent expansion into new markets
Companies can find a way out of oversaturated markets by turning to product innovation. It gives them leeway to expand into new markets while attracting new customers.
3. Product Differentiation
When companies employ a differentiation strategy that focuses on one aspect of the product (such as cost value), they create perceived value among potential customers and consumers. Thus, innovation simplifies customer decisions by solving their problems.
4. Business Growth
SuccessfulProduct innovationand the introduction promotes the growth of business and industrial enterprises. It enables companies to grow, conquer new markets and generate higher profits.
5. Market Dominance
Successful companies find new ways to leverage innovation, gain a competitive edge over the competition, and dominate the market. However, to be successful, three approaches must be reconciled: new products, incremental improvements, and targeting new markets. For example, Apple dominates the global smartphone market by maintaining its competitive advantage.
Innovation requires talented people, so companies looking to innovate their products or services must seek out top industry talent to ensure success.
Formulating your innovation policy: 5 considerations
Here are some considerations before starting a product innovation process:
Innovation is not free. Companies need to allocate resources such as money, human resources and time to develop new products, services and processes. On the other hand, innovation can lead to massive cost savings.
2. Market demand and requirements
Product innovation aims to improve consumer experience and utility, so companies need to consider what the market wants and what customers demand to drive adoption.
The entire goal of product innovation is to gain a competitive advantage in the marketplace. Therefore, companies must always consider what their competition is doing and incorporate this into their innovation policy and strategy.
4. Legal framework
Is your product innovation confronted with legal conflicts (norms, laws and patents) or ethnic conflicts with social values? A company might market a product that violates state rules and regulations -- for example, the FDA labeling the launch of an energy drink with a significantly high caffeine content.
5. Value Proposition
Successful product innovation offers a unique position and achieves a competitive advantage. For example, it could save customers money and time, provide significant societal benefits, and offer better quality, convenience, or durability.
3 phases of the product innovation process
There are three phases to the product innovation process, whether a company is developing a new innovative product or making changes and improvements to an existing one.
1. Market Research
Companies can conduct primary or secondary market research when initiating their product innovation process. The aim is to collect as much information as necessary about the tastes and preferences of potential consumers and about existing market gaps.
Primary research involves gathering first-hand information individually via various sampling methods, focus groups, questionnaires or interviews. Secondary research is publicly available information from previous studies. Primary research provides specific results and is limited to the business, while secondary research is inexpensive but available worldwide.
When conducting market research, make sure:
Create customer segments
Segment your customers based on their common characteristics, such as behaviors and demographics.segmentationenables you to build a marketing persona and informs you about itProduct innovationProcedure.
Collect customer feedback
Gather customer feedback to make informed decisions for the future.
Think about how you can improve customer requirements
Finally, think of ways to enhance your product offering to your likingBuyer Personalityand target customer needs.
2. Product Development
In product development, designers and developers build and test the first test product (prototype). This phase includes continuous testing and improvement to develop the final product.
Prioritize new development opportunities
Because you will never have enough time and resources for all proposed new product development ideas, you must prioritize new development opportunities to narrow down the options. Avoid decision paralysis and break down product features by viability, feasibility, and desirability. Also rate the options on a cost-effectiveness scale.
Build a prototype to test customer response
Test your prototype to evaluate its functionality and usefulness using a focus group to gain insight into its effectiveness and limitations.
3. Feasibility study
At this point, you need to address the legal and financial constraints of bringing a new product to market. Consider sales forecasts, product prices, profitability estimates and total production costs.
Examples of product innovations
How the leading brands stayed at the top of their markets.
Apple's innovation strategy includes introducing exciting new products and enhancements (iPod, iPhone, iPad and iTunes) and maximizing use of innovative business modelsproduct success. It uses both radical and incremental innovation to its advantage, focusing on product design and functionality.
As a leader in product and process innovation, Sony Electronics continues to focus more on imagination than manufacturing. It's currently branching out from just making hardware into new avenues like TV shows, movies, and music. Other products include computer hardware, consumer electronics, telecommunications equipment, video games, robots and semiconductors.
Tesla's innovation strategy resulted in impressive in-car hardware and software integration. No other automaker has adopted Tesla's cutting-edge technology and potential for AI and deep learning. As of 2021, Tesla ranked second among luxury hybrid and electric cars. It also remains committed to world-changing technologies, such as its fast-charging sustainable batteries.
Amazon has evolved from an online bookstore into a global marketplace, device manufacturer, publishing service, cloud content provider, fulfillment network and entertainment service in the 1990s.
Huawei is a Chinese technology company that designs, develops and sells various telecommunications products, including smart devices and consumer electronics. In 2019, Huawei invested $19 billion in R&D, which paid off immediately as it sold more smartphones than Apple that year.
Frequently asked questions about product innovations
What is the Product Innovation Charter (PIC)?
The PIC is the epicenter of the organized effort to commercialize new products. It contains the reasons for starting the project, its goals, guidelines, goals and limits.
What is the difference between radical and incremental product innovation?
A radical or disruptive innovation significantly impacts a market by introducing a new product, while an incremental innovation involves the improvement of an existing product, process, service, method or organizational performance.
What is the difference between product and process innovation?
Product innovation refers to the creation and introduction of a good or service that is new to the market, or an improved version of a previous product. On the other hand, process innovation implements a new or improved method of production or delivery.
How do you measure product innovation?
You can use multiple key performance indicators (KPIs) to measure innovation, including engagement, actionable ideas, cost, projected profitability, actual profitability, and cultural impact.
What Are the Different Types of Product Innovation Frameworks?
There are three types of product innovation: new product innovations, incremental changes to existing products, and new product features.
- Radical innovation. As the name suggests, a radical innovation really changes the circumstances of a brand, whether in terms of market or of business dynamics. ...
- Incremental innovation. ...
- Disruptive innovation. ...
- Technological innovation.
- Incremental innovation. Incremental innovation, also known as continuous improvement, consists of improving a product or service in its market. ...
- Adjacent innovation. Adjacent innovation is a typical example of a successful expansion. ...
- Disruptive innovation. ...
- Radical innovation.
1) The development of a new product, such as the Fitbit or Amazon's Kindle. 2) An improvement of the performance of the existing product, such as an increase in the digital camera resolution of the iPhone 11. 3) A new feature to an existing product, such as power windows to a car.What are the types of product innovation? ›
There are three types of product innovation: new product innovation, incremental changes of existing products, and new product features.What are the 5 examples of innovation? ›
The innovations include technological inventions such as wind turbines, photovoltaic cells, concentrated solar power, geothermal energy, ocean wave power and many other emerging innovations.What are the three different types of innovations give examples of each? ›
Often, innovating involves approaching an existing idea or product from a new perspective with the goal of improving it. Although experts hardly agree on a definitive set of innovation types, there are generally three categories: product, process, and business model innovation.What is product innovation strategy? ›
An innovation strategy is the systematic identification of unmet customer needs in a given market—and selection of which unmet needs to target for growth. Identifying and prioritizing unmet customer needs allows the business to grow market share or profits through reliably successful product and service innovation.What are the 4 strategic process? ›
The four phases of strategic management are formulation, implementation, evaluation and modification.What are the strategies of innovation process? ›
- Incremental innovation. ...
- Disruptive innovation. ...
- Sustaining innovation. ...
- Radical innovation. ...
- Product innovation. ...
- Service innovation. ...
- Process innovation. ...
- Technological innovation.
|1||Printing Press||Johannes Gutenberg|
|2||Electric Light||Thomas Edison|
|4||Telephone||Alexander Graham Bell|
These four types of innovation are a version created by Greg Satell, an entrepreneur & innovation expert. Previously many scholars had created their own version types of Innovation. Clayton Christensen called his categories- Performance Improving, Efficiency, and Market Creation.What is an innovation give an example? ›
Process innovation: This refers to changes made to make a process more efficient. For example, assembly lines were a breakthrough in manufacturing. Business model innovation: This is when you transform business operations. Ride-sharing platforms, such as Uber or Lyft, are an example of this.