The process of positively improving an existing product or service

Every year, tens of thousands of new consumer products are launched in the United States. But how many of those products survive the ultra-competitive market? According to Harvard Business School professor, Clayton Christensen, 95% of those new products fail.

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This figure shows how crowded and competitive today’s market really is, and also how aggressive one must be to succeed in it. Yet, being aggressive is not really the single, main secret for success in this case; product innovation, instead, is probably a more accurate keyword for those who want their product to be among the successful 5%.

If your product or solution is innovative, you’ve got a much higher chance to survive and thrive. In this article, we’ll explore the definition of product innovation, how we can see and identify innovation, and how we can measure it. But what is product innovation? and how can it be done smartly? Let’s find out.

June 2020 update: We have just released a new tutorial video on how to conduct product innovation research with Revuze – make sure to check it out and leave us your feedback!

Product Innovation Definition

First and foremost, the definition: Product innovation represents a new way of solving a problem a high number of consumers have. There may be no products at all on the market that address the issue, or there may be other products already on the market that address it in a different way.

In order to consider your product or solution innovative, you must be able to answer “yes” to all of the following three questions:

1. Is the product relevant for a significant number of consumers (whether you’re looking into a mainstream or niche market)? This applies especially to products that address issues that have not been addressed before.
2. Is the product better than its competitors? If so, what’s the improvement—design, technology, useability, etc.?
3. Is the innovation or uniqueness of the product obvious? Is it easy to explain to consumers why this product is necessary or better than its predecessors and competitors? While the answer may not always be an easy “yes”, this point is really important for the marketing experts who will help you with the product launch.

It takes a village to develop and launch an innovative product/service in today’s market—from the engineers to the manufacturing experts, from the marketing consultants to the legal experts, you’ll need everyone’s help to make sure you’re part of the 5%.

The Types Of Product Innovation

There are plenty of different ways you can go about developing a product, but broadly speaking you can split them into three categories; creating new products, improving existing products, and creating new product features. Let’s take a look at what each type is and how it might function.

New Product Development (NPD)

NPD is, shockingly, the development of new products. This can be anything from a radical innovation that completely shakes up the market, to incremental changes that result in new models so radically different they can’t be compared to the original.

Big ideas and grand designs are definitely a way to get to the top of the market, just look at Apple and their innovative smartphone design that combined features that previously had to be on separate devices, but in practice these rarely turn out to be successful. While your product design might be more useful overall than existing products, it will take a lot to get consumers to shift to it. Apple was successful not only because of their new design, but because they marketed it exceedingly well.

One of the key success factors in developing new products is idea management, or the process of taking your ideas and turning them into strategies and insights. It’s no good having an amazing idea if you can’t put pen to paper and spell it out, after all.

Product Improvement

You’ve probably seen updates to mobile or PC applications, new models and versions of types of smartphone – these are all examples of improving an existing product. Generally speaking, this type of change is slow and incremental. 

It can often take years and several iterations for products to have enough new features to be considered worth replacing your old ones, but your goal with this type of product innovation isn’t strictly to replace all of your older models, merely offer the option for those who need it. Take the iPhone as an example – to a person who just wishes to make calls, texts and browse the internet, the iPhone 5 is still perfectly usable despite being released a decade ago. 

Overall, product improvement is something that comes in cycles. You will rarely see a product and call it complete, especially as advancements in technology are made and new possibilities open up. Iterative improvement is the term often ascribed to this process.

Creation of New Features

Creating new features on a product takes the philosophies of both the above categories and combines them. You get the advantage of new and exciting product capabilities, but retain the brand and model name that make consumers recognise you. 

Adding new features is risky, since more often than not you’ll either have to cut existing ones that consumers may be attached to, or increase the size and/or complexity of your product in order to allow the new feature to take its place.

Going back again to the iPhone, many customers were repulsed by Apple’s decision to remove the headphones jack in 2017, which they saw as a thinly veiled attempt to push them to purchase the Airpods that were released around the same time. 

While the new iPhone model was definitely slim and had great bluetooth connectivity, consumers didn’t see it as worth upgrading when they’d have to replace their wired headphones too and many simply turned away from Apple. An important lesson in product innovation that Apple doesn’t seem to have learned – consider the features your customers want, rather than need.

Why Is Product Innovation Important?

Product innovation is important because it can help you create new spaces in a seemingly crowded market. By identifying the gaps and imposing yourself into a new space, you can find an audience and satisfy consumer needs in a way that is new and refreshing.

It’s also important to note that product innovation doesn’t always involve the creation of a completely new product that addresses a completely new issue. For sure, when the first iPhone was launched, it established a previously non-existing market and satisfying needs that consumers didn’t even know they had. Same with Kindle: Not only the first model succeeded (launched in 2007, it sold out in less than 6 hours); but Amazon managed to re-invent it with new models, for instance, introducing the touch-screen.

Innovation may happen when you improve an existing product or you add a new feature to an existing product. When phones got cameras, they gained a new feature; or when Apple dramatically improved the quality of iPhone cameras in the iPhone 11 Pro, that was an innovative move.

Of course, when we talk about innovation, we don’t refer only to products, but also to services, processes, or business models. Those are a little less obvious, but they can be just hugely lucrative and successful. Airbnb, Uber, and Netflix are examples of huge innovations.

How to Measure Innovation?

There are several metrics you can use to measure innovation; some are more straightforward than others. Commonly, businesses use sales and return on investment (ROI) metrics to measure the success of a new product. However, those metrics apply only when the new product has already been launched.

So how can you measure innovation prior to the product launch, for instance, when you are still developing the product or you have a prototype ready? How can you be sure there is an audience for your new solution? And how can you prepare for a smooth product launch?

Market research is the top answer to that question. Gaining a clear understanding of the market, the consumers, and your competition will grant you an enormous advantage when it comes to a product launch.

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Obstacles To Product Innovation

Of course, not everything is straightforward when it comes to product innovation. Most ideas that are thought up are rejected for one reason or another, so don’t be disheartened if your first idea falls flat. Let’s look at some of the reasons why product innovation might be stifled.

Testing

When you want to launch a new product or version of a product, you’ll first need to prove that it’s superior to the existing options that are available, both from you and from other organizations in the market.

This is where product testing comes in. Unfortunately, a superior design on paper might not prove to be so high and mighty in the real world, with design flaws and unexpected challenges cropping up. It’s always important to test your product, but you might not like the results.

At the end of the day, whether product innovation goes forward isn’t down to the design team. The ones in charge are the executives, the stakeholders, the ones who hold all the funding and ultimately choose what does and doesn’t go through. No matter how brilliant your innovation, if they aren’t impressed by the tests you’ll need to go back to the drawing board.

Cost

It’s not uncommon for products to end up costing far more than the estimates you make at the beginning. There are two types of costs you need to think about here – production costs and development costs.

Production costs are those associated with actually producing the product. Raw materials, any external software that you’d need to add, the costs of running the production line – these all add up. The higher the production cost, the higher the cost of the product.

Development costs are something different. You can think of them as the costs of designing, testing and re-adjusting the product into its final form. This can be in the form of raw materials for prototypes, but a large proportion generally comes from paying the product development team to do their work.

All these costs add up, and given we live in a world fundamentally driven by the dollar it’s no surprise that some products will end up getting pulled because of costs. You can have a fully functional product ready to be added to the assembly lines, but if the profit margins aren’t going to be big enough to make up the costs, most businesses will simply take the loss and move on to something more promising.

Pricing

Another factor that’s related to, but not directly synonymous with cost, is pricing. Putting the right price on your products means that the scales will tip in your favor and more consumers are likely to buy your products. 

Pricing is something that you need to think about early on, since where you situate your product within the market is likely to determine how much you’re willing to put into its development costs. A low cost product is fine to go on the market with faults, whereas a higher cost product needs more refining.

Pricing will also determine the overall acceptable level of production costs for your product. If the cost is too high your profit margin will be low, meaning the people who make the decisions will be hesitant to put it on the shelves. 

Targeted Innovation

No matter what it is you’re creating, you need to be sure that customers will use it. A poorly adapted product is one that has a lot of interesting features and uses, but lacks those that are actually useful. 

Imagine for a second, a machine that makes screws, situated in a factory. It has options for different metals, different threadings and different sizings. That’s all that the factory uses, and all that it needs. A new machine which has different settings for changing the color of the resultant screws, altering what screwdriver you would need to use, etc. would be completely irrelevant. 

Improvement for improvement’s sake doesn’t always yield results that the general public will find necessary or even useful, meaning you’ve wasted all that you’ve put into your design.

The Process of Product Innovation

Blue Oceans

The term “blue ocean” was introduced into the discourse by two professors named W. Chan Kim and Renée Mauborgne in their book entitled “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.” They define blue oceans as unexplored market spaces associated with high potential profits.

A popular example of a blue ocean was the legal music download market before iTunes was launched by Apple in 2001. Prior to the launch, millions of people were illegally downloading music from the internet; iTunes allowed consumers to digitally purchase the music, an option that didn’t exist before.

Similarly, Pandora was the first freemium music streaming service as we know Spotify, Tidal, and Apple Music to be today; its creators identified a “blue ocean” in the market and launched it in 2005.

Not everyone can identify a blue ocean, and these types of opportunities do not arise on a daily basis. That’s why innovators also keep their eyes open for gaps in specific sectors of the market; gaps are opportunities, small voids in an existing or seemingly filled market. Gaps are often specific “services” that established businesses do not offer yet. You can therefore emulate the existing business model and add the new service.

New Product Development (NPD)

As touched on earlier on, new product development is tricky to get right. Anyone can launch a product, but very few people can do it successfully.

NPD is a process which organizations use to take their ideas from concept to finished, marketable product. It consists of seven steps, each of which follows on from the last:

• Idea Generation
• Idea Screening
• Concept Development/Testing
• Market Strategy Creation
• Product Development
• Market Testing
• Launch

Keep in mind that these steps aren’t linear. You’re not necessarily finished with one step once you’ve moved onto the next, things might need modifying and conditions may change unexpectedly.

Overall, the aim of NPD is to screen out those ideas which aren’t feasible, profitable or attractive to consumers. If at any point the product is found to be lacking, it will need altering or discarding.

Continuous Improvement

Continuous improvement is a different take on product innovation. It states that innovation and improvement are never finished, that a product will never be perfect and that all you’re aiming to do is getting it to the next level.

This type of thinking is especially relevant in tech-based products, since with the advancement of technology it’s hard to draw the line between what’s going to be possible and what won’t be even a few years from now. Continuous improvement in this sector aims not to perfect a product, but to keep it up to scratch with current market requirements and/or get an edge on the competition.

This type of process follows a methodology similar to the scientific method. Four simple steps, which cycle back around to begin the next cycle:

• Plan
• Do
• Check
• Act/Innovate

Essentially, since the overall aim is to improve the product you must first plan how to alter it, implement that, then check whether the alterations were successful or not. If they were, great! If not, you simply revert to the previous standard and try again. 

Performing changes in small steps like these means that you’re unlikely to lose sight of your goal – to improve the existing standard for your product. Every failure is a lesson to learn from, as it gives you information on what features/alterations will be received positively and which won’t. Be aware though that consumer perception can shift over time – what was rejected by one generation may be thoroughly embraced by another.

Jobs To Be Done

Jobs To Be Done is a framework that exists for one purpose – identifying customer needs. In essence, it’s about finding out what customers use their products for, i.e. the “jobs” that said products would perform for them.

It’s all about looking at the root cause for purchase, and why customers reject certain changes and innovations despite them being practically sound, as they aren’t suited to what the product is mainly used for.

In short, if you learn what your products are used for and what features and innovations may assist with these, you’ll be on your way to creating a product innovation that will actually appeal to customers and be relevant to their daily lives.

How To Make Innovative Products

How to make innovative products, the one billion dollar question. The “easy” answer is: listen to the voice of your customers, understand them, and use their knowledge to anticipate where the market is heading.

Revuze explorer is our solution to create innovative products. But why should you believe our word for it? Here is an example of how we use it to help companies make innovative products:

From the following chart which was generated by our AI, we see that Clorox products are easier to use due to their design & formula and the result is in whitening & stain removing. Lysol on the other hand is falling behind when it comes to texture. A 21% satisfaction score vs 77% makes a HUGE difference and is one of the reasons which drive sales & impact the start rating.

If you are curious about how your products perform against their competitors and whether you have something to improve & innovate (hint: there is always something to improve) don’t hesitate, click here & contact us (free demo of your product of choice).

Data-driven Market Research

So, how can you get all the data you may need to understand the market and identify potential gaps or even blue oceans?

Mostly, you can do that by monitoring the market and listening to the Voice of the Customer, learning what consumers are saying about existing products. Data-driven market research, in the form of Sentiment Analysis and Social Listening, can help you get into the minds of your potential customers and respond to their needs.

People talk, they write reviews, they share their thoughts on social media. What they say about the market and about the products they use can be extremely valuable, especially if you’re hoping to launch a new product into the market.

There are many market research firms out there; however, most of them do their job manually—that’s costly and slow and it doesn’t always help you understand the market you’re interested in.

Companies like Revuze, instead, source Customer Experience (CX) Insights automatically, adapting to the specific language and jargon of each industry and giving you in-depth CX analytics about customers and competitors in a very short amount of time.

Our New Product Launch market research solution helps you prepare your product launch, prioritize MVP product capabilities; respond early to issues as soon as they emerge; and minimize the gaps between your new product, the consumer’s wish list, and your competitors.

If you want to learn more about Voice of Customer and Sentiment Analysis, take a look at our Blog.

Simone Somekh is a New York-based writer and editor who specializes in marketing and communications for B2B SaaS companies. He teaches Communications at Touro College and he is the author of an award-winning novel published in four languages.