What is Product Innovation?
Definition of Product Innovation
To define product innovation, it’s great to start off with what innovation is. To put it simply, innovation is doing things in a new way. It could be a new product, new process or a new service. For more about what innovation is you can check out our article, What is Innovation in our Innovation Learning Series.
Building on that definition, product innovation is introducing a new product or service into the market or improving an existing one. This could be an entirely new product, adding a new feature or significantly improving the feel, capability, look, function and experience of a product or service.
What’s the Difference between Product and Service Innovation?
Product innovation refers to the development of new or improved products or new features to existing products, while service innovation refers to the development of a new service, improved method of providing existing services or a new way to access services. Both types of innovation can drive business growth and competitiveness.
Importance of Product Innovation
- Solving a need/pain point: Product innovation helps solve observed pain points. Companies that improve and innovate are able to meet the needs of their users and therefore stay relevant by anticipating the needs of their customers. This way such companies remain ahead of the competition as their products are never out of date or pushed out by a company that is innovative.
2. Reduce Non-consumption: It helps to find new and affordable ways to reach those who are otherwise unable to access specific services and products. In order to reach this category of people, the product is redesigned to be more accessible.
3. New Market Opportunities: Product innovation opens up new market opportunities and helps businesses expand their customer groups. It could be making a product more affordable or even adding features to meet the specific need of the market. This increases sales and profit as more people can now access the product.
4. Reduce Cost: Innovation helps to find efficient and more affordable ways to deliver products and services. Incorporating product innovation at each stage of the production process helps to reduce production cost as well as create products that reach a wider market due to affordability.
Types of Product Innovation
Product innovation could happen in either of two ways; either by creating an entirely new product or improving an already existing product.
- New Innovative Products: These are products that when introduced into a market disrupt existing products or they radically solve long standing pain points. Products like this often create a new market and therefore adoption rate is usually slow. New innovative products have lower success rates due to higher risks.
2. Improved Innovative Products: The purpose of this innovation is to make existing products even better by applying small incremental changes to them. It is essential because it is the most lucrative and most successful type of product innovation. This type of product innovation allows for the exploitation of a product’s full potential and enables it to better fit the users’ needs.
Challenges of Product Innovation
- Product Validity: The question of product validity answers if the product actually solves a need, especially one that your users are willing to pay for as well. It’s easy to give into bias and create something you think is needed rather than what your target market needs. Carrying out market research and speaking to target users can help avoid this challenge.
- High costs: It’s possible to develop a product that costs too much. Once this happens, It becomes difficult to increase your profit margin and eventually rather than making profits, you incur losses. It helps to focus on what really creates value and what adds to the costs in the long run. Early cost management goes a long way.
- Pricing: Deciding on a proper price structure can be difficult especially when it comes to innovative products. Involving pricing early on in the innovation process and product development can put you ahead of the competition. Pricing is especially important because a great product without people willing to buy it is pointless.
- Complexity: It’s great to add new features and improve existing products but if overdone each added feature begins to have an effect opposite from what was intended. Feature creep illustrates this perfectly. Feature creep happens when excessive expansion or features are added to products; it is often the result of a lack of clear product vision or goals, and it can lead to a product that is over-engineered, difficult to use, or fails to meet the needs of the target market. It mostly happens with computer software and consumer and business electronics. The best approach is to keep it as simple as possible.
In a fast paced society where there are new technological advancements every other day, staying relevant in any industry means that you have to move with/beyond the times. Fast-paced also means that the needs of users are constantly changing and evolving. Product innovation requires businesses to stay abreast of these changes. It’s important to remember that when innovating, you want to find the best possible solution that meets an actual need of users who are willing to pay for it and have no difficulty using or accessing the product.