When exploring different types of innovation, you’ve probably seen the term ‘product innovation’ appear. But what exactly is product innovation? Why is it important? How might it be realized? And what are some successful product innovation examples? This article will go into explaining all you need to know about product innovation. We will be presenting some successful examples. We will also be suggesting how you can adopt these into your own product innovation strategy.
What is Product Innovation?
The innovation policy platform defines product innovation as:
‘introduction of a good or service that is new or has significantly improved characteristics or intended uses’
What this essentially means is that a product innovation is around a particular tool used in an organization’s operations. This differs to process innovation, which looks at improvements in repeatable actions that an organization takes.
Although the definition of product innovation is specific, many new ways of working will involve a combination of product and process innovation. It’s therefore important to note that product innovation may rarely be seen by itself. Something as simple as switching suppliers to a new material, can involve new practices and processes to accommodate this change.
Likewise, having a new product innovation on the market can result in consequences that require new innovation. For example, a new product may lead to an improved service that now has to be advertised to customers. This would result in a marketing innovation to keep up with the product innovation.
Product innovation will usually consider the commercialisation of a new development, rather than simply the research. Simply inventing the new product would fall under the definition of R&D.
Product innovation will often utilize a new technology, repurpose an existing technology, or otherwise involve a product type that is new to that purpose. Some would argue, this is what differentiates product innovation from product improvement. Product innovation is making a significant improvement to the industry standard, setting the bar at a new level that may not have been reached before.
Types of Product Innovation
Within product innovation, there are different types, which can focus on different benefit areas.
Broadly speaking, the types of product innovation include:
- Core: new developments to existing products or services that the organization currently offers, improving what is currently offered.
- Adjacent: new products that are incrementally better, allowing the organization to increase its capacity or access new markets.
- Transformational: new products that previously did not exist, bringing transformational change to the organization that pursues it.
Benefit areas of product innovation can include:
- Efficiency: improving the value offered compared to the resources expended
- Time: offering equivalent value in a shorter time frame
- Cost: reducing the costs involved
- Performance: improving the desired output of the product
- Quality: improving the durability
- Experience: giving the user greater satisfaction when using
- Risk: reducing the margin for error or failure
Why is Product Innovation Important?
Product innovation can be a differentiating factor between your organization and other competitors. Having a successful product innovation strategy can be the key to staying ahead in a marketplace. The car manufacturer Tesla has embodied this strategy, and as a result has overtaken much more established car companies in market capitalisation.
Product innovation is also necessary in order to stay up-to-date with changes in law. A recent example would be the ban on single use plastic straws in the UK. In order to stay compliant with regulations, manufacturers and businesses were forced to adopt new product innovation to continue servicing customers.
Lastly, product innovation is sometimes necessary to keep up with the evolving demands of the consumers or wider organization. An example would be the move from fast-fashion to more sustainable fashion, as a result of changing consumer habits.
By revolutionizing the way humans interact with mobile devices, Apple was a pioneer of product innovation. Interestingly, they were not the first to invent touch screen devices. The differentiating factor was their close attention to UI and UX which made these devices so accessible and usable, amassing a cult following.
A recent entry into the market of sportswear is UK company Gymshark. Their intense focus on making clothes that are purposefully designed for usage at gyms put them ahead of established competitors such as Nike, Adidas, Puma and Lululemon.
By selling innovative furniture as ‘flat-pack’, Ikea have been able to improve the convenience and logistics of furniture purchasing, while reducing costs. This has put them ahead of other competitor furniture vendors as the defacto value furniture brand.
The Japanese car manufacturer is famous for its incremental approach to product innovation – known as kaizen. Unlike the previous examples, they avoid risky radical transformation, instead opting for core developments which compound over time.
Edison Illuminating Company
A historical example. Edison’s illuminating company pioneered the adoption of electricity by offering transformational products that improved the performance, quality and experience of what was previously attainable.
In what could be considered an industry-wide product innovation example, container ships have steadily increased in size since containerised shipping was developed. This could be considered ‘adjacent’ product innovation, as larger ships mean more cargo can be transported for cheaper, without fundamentally changing the shipping landscape.
Product Innovation Strategy
When exploring how these product innovation examples can be adopted into your innovation strategy, there are a few key elements to consider.
The first is the risk vs reward. Undertaking a transformation innovation has the highest upside potential, however is also at the highest risk of failure. Core innovations on the other hand, guarantee smaller improvements over a longer period. These improvements are less risky, and over time, will compound into significant improvements.
The next lesson that we can take from those examples is the focus on value for the end-user/customer. Some of the examples mentioned (Apple, Gymshark) were not necessarily first to market, but did offer their users the most value. You should always be thinking about the benefit areas of product innovation. Maximize these target areas, and you will likely have a much more successful product innovation.
Finally, whenever innovating, you should be tracking and measuring the impact of each of your activities. This is so that your organization can learn where to focus resources, improving you ability to innovate over time. For more information on this, we recommend heading to our blog post explaining how to define an innovation measurement framework.