Product innovation is the creation of new products or the improvement of existing products to meet user needs.
For instance, “product innovation” could refer to the innovation itself or the process of launching or improving products.
1) New product innovation at Zing Computer is critical to achieving our growth objectives (process)
2) The Zebra flat-top computer, a product innovation by Zing Computer, has been extraordinarily disruptive and generated $1 billion in sales in less than a decade.
The difference between product innovation and renovation
Generally, product innovation implies difference and uniqueness. With an existing product, perhaps product innovation resulted in a meaningful and differentiating improvement. If the feature(s) that have been adjusted are small so-called “incremental” improvements, it’s probably more fitting to define this as “renovation” vs. innovation. With new products, product innovation infers that the product invention creates or defines a category (iPod, Kindle, Swiffer, automobile) or meets consumer needs or substantially expands a category via a new feature or technology (resealable, clear packaging).
What are the benefits of product innovation?
Product innovation is a key component of many companies strategies for these reasons — while often a risky endeavor, product innovation can lead to significant value creation. Launching innovative offerings can lead to first mover advantages, where the manufacturer reaps outsized benefits due to increasing barriers to entry. This manifests as a company is rewarded via intellectual property or increased brand equity for having offered the product feature or benefit before competitors. In the case of intellectual property, this protection usually is acquired by achieving some sort of trademark filing or patent. With regard to brand equity, the company will have usually advertised the product and become associated with the product benefit. Later entries are then perceived as “me-too” offerings that are undifferentiated from the first mover or better put, the “first market maker.” Examples of this include Microsoft’s attempt to steal market share from the iPod with the Zune music player. While first movers are generally rewarded, it’s the first mover that gains mass appeal and scale that generally benefits. The iPod wasn’t the first digital music player, simply the first offering that contained the right bundle of features and effectively caught on in the market place. Does anyone even remember the Roxio music player or any of the other original MP3 players? Additional benefits to product innovation: by increasing the degree of difference between the manufacturer’s offerings and the competition a company can increase the uniqueness of its products, which reduces price elasticity and improves the firm’s business model. Lastly, it deflects the impact of competitor’s continuous product improvements.