Product innovation is a process for developing new products or improving existing products in a unique and useful way. It’s essential for companies that want to maintain a competitive edge in the marketplace or expand and grow into new markets.
Requiring careful consideration of many different factors, product innovation requires detailed planning while maintaining the flexibility to pivot as the market demands. Ultimately, product innovation can make or break the success of your business.
Types of Product Innovation
Product innovation comes in various forms. There are three primary types of product innovation that can be used to describe most innovative products.
When a company makes minor improvements to an existing product, it’s known as incremental innovation (sometimes called sustaining innovation). Most companies use this type of innovation at some point, and some, such as software companies, employ it on a continuous basis.
It’s generally lower risk and lower cost than most other types of innovation, yet it can give companies a competitive edge by demonstrating the company’s commitment to meeting customers’ needs, even as those needs change over time.
The ongoing evolution of smartphones is a good example of incremental or sustaining innovation. With each design release, manufacturers make incremental improvements such as larger screen sizes, better cameras, and improved battery life.
Like incremental innovation, breakthrough innovation refers to an improvement to an existing product or service.
The difference is that breakthrough innovation must have a substantial impact on the company (such as opening up new market opportunities) while still being a natural fit for the existing business model.
Breakthrough innovations also open new markets by making adoption possible for consumers who previously could not use a product due to cost or accessibility.
One such example is Dollar Shave Club, which introduced a subscription model for razors. Dollar Shave Club simplified the process of purchasing razors by delivering fresh razors to its customers periodically through the mail.
Disruptive innovation is the process of creating a new product, service, process, or technology that enters at the bottom of an existing market, initially perceived as an inferior product or service, and gradually works its way up the ladder, eventually displacing the existing market offerings.
Netflix is an often-cited example of disruptive innovation. Initially, the company began as a mail-order DVD rental subscription service.
Later, the company introduced streaming services, changing the way consumers view television shows and movies and displacing traditional video rental companies like Blockbuster.
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