Types of Product Innovations and It's Importance
Innovation refers to an act of introducing something new or doing something in a different way. From a business perspective, innovation means generating new ideas and actually implementing them.
Product innovation has a different meaning to different people. For some it is the development of a new product that would be one of its kinds in the market, whereas, for others, it refers to radical & incremental improvements in the existing range of products. Thus, product innovation can be defined as development of a new product, changes in the design of an existing product or use of new raw material & change in the composition of an existing product.
Each company, whether dealing in pen, books or electronics, is struggling to generate innovative new product & services. In this process, rather than facing derth of new ideas they encounter more challenges in operational & management issues.
Types of innovations (Product)
When a company introduces simple innovations in its existing product & services just to stay in the game, it is called sustaining innovation. It is like introducing subsequent generations of an existing product. For example, changing the turn-around time of a service or maybe just giving a new fragrance to the product.
Effect of a sustaining innovation on revenues might be immediate but declines with time & thus the company soon looks for another sustaining innovation. This is because after certain versions the product itself has reached the end of product life cycle. These innovations act as the protective shield to the profitability of the company & gives pass of developing or funds a breakthrough or disruptive innovation for the business. Another importance of a sustaining innovation is that it gives longer life to a breakthrough product or service. Without it a breakthrough product cannot survive for ling in the current ever changing market.
Fact- Sustaining effort is applied by a company where profitability is maximum as the unnecessary costs are reduced benefits of the product improve steadily.
A breakthrough innovation is a true innovation. It results in something totally new and way ahead of the next best product or service in the market. Although, every company encourages its employees to come up with such breakthrough ideas but quite many times these ideas are difficult to implement is also a fact. Reasons for non-implementation might be:
- lack of resources
- lack of focus
- lack of market knowledge and;
- lack of technical competencies
From strategic points of view, breakthrough innovations are vital to the success of companies that work on the lines of differentiation in the market. These companies need to constantly innovate through breakthrough products to remain successful. A breakthrough innovation gives a sudden boss to the company’s profits that might drop equally fast too.
Fact- There are companies that charge premiums from customers for maintaining this differentiation throughout. But, at the same time they have to deliver a premium value back to the customer.
The innovations that render existing product or service obsolete are known as disruptive innovations. The name is such as these innovations disrupt the current market behavior or trend & make it obsolete. Also, many companies have become successful by disrupting the larger & established companies & settling themselves as a leader in the same market.
As per a research most successful companies of times fail because of their complicated product offerings. In other words, they create products as per customers demand & end up adding too many features to the same product that makes it quite complicated. At this time, the small, naïve start-ups enter the market & offer a simple product, with only the necessary features and at dramatically low prices to the consumer. Not only the less sophisticated or less profitable customers are attracted towards this new product but eventually the sophisticated customers also end up accepting it. This causes a shift consumer & thus the market share to the new product.
The disruptive innovations have a long gestation period but contribute to the long term growth of the company.
Fact- Many a times a sudden successful, innovative product or service is mistakenly termed as disruptive by the companies. Although disruptive innovation does give maximum profits to the company but this profit is generated over a period of time & is not sudden. A disruptive product or service is completely different from what is currently running in the market. Thus, it does not become an immediate success.
Companies should have a diversified portfolio by introducing different types of innovations. They should encourage new ideas while still nurturing & improvising the existing products or services. Such diversification not only prepares the company for both current & future market trends but also manages risk & reward for the company.
Why do companies need innovation?
For companies that are already doing well, this is a question worth asking. Companies that do not innovate run risk of losing market share to competitors, losing key employees or simply continue to operate inefficiently. There are several reasons why companies need constant innovation in their products & services. A few are:
Match up with the current market trends
A successful business man not only adapts to the current market trends but also anticipates the future market requirements. Innovation helps you stay ahead of the competitor & be the first one to respond to customers’ changing demands.
Developing a USP
Consumers are willing to pay higher for additional & innovative product & service. Innovation gives a company a commercial advantage especially in the ever changing market environment.
Utilizing the existing capacity to the maximum
As discussed earlier too, Innovation is not only about coming up with new product or service but also about improving the quality of the existing offerings. A constant look at the processes, raw materials, etc. involved in making the finished product is also required. For example, improvising the existing processes to better and environmental friendly process that reduces waste & pollution will attract consumers & help retain employees.