Products of Innovation: Definition, Examples and Benefits
Updated July 21, 2022
Innovation is making an idea or invention of goods or services that create enough value for customers to want to buy. Creating unique products and services and getting them to market before competitors can benefit a company, often being critical to its reputation and continued success. Understanding the process of product innovation and reasons to use it can help you develop professional capabilities valuable in any industry. In this article, we define what product innovation is, outline the benefits of it and explore specific types and examples of product innovation to help you better understand the business term.
Read more: What Is the Innovative Process?
What is product innovation?
Product innovation is the development and launch of a new product or service that directly affects the market it sells in. It can also develop improved versions of existing products in a market, enhancing the functionality or desire for an item by taking consumer feedback to make improvements or discovering additional features and technology to add. Most often product innovation is achieving an improvement on existing products, though creating a true invention also happens.
What are the benefits of product innovation?
There are many benefits of product innovation besides the continuing success of a business, including:
Making something useful: Producing an item that customers want and that solves for an issue or makes something better
Earning higher revenue: Increasing a company's sales and profits
Inspiring future creativity: Encouraging new ideas from employees and competitors to continue innovating
Reducing costs: Saving money spent on product manufacturing or other businesses related expenses through process improvement
These benefits are key to the success of a company and the risks of not promoting product innovation can lead to market share losses, less profit and high employee turnover rates.
Product innovation usually aims to help one of the following things:
Time: Reducing the total time spend on a project, like new computer software that helps architects create blueprints and floor plans three times as fast.
Efficiency: Improving upon the input and energy needed to achieve a goal, like improvements made to rockets, satellites and other aerospace technology.
Cost: Making products that offer cost savings to a consumer or cost less to produce, like light bulbs that save money on energy bills or a drop in the cost to produce solar panel technology since it was invented.
Performance: Making significant improvements to how a product performs, like the speed and storage capabilities of a computer.
Quality: Improving the durability, availability or reliability of a product, like energy saving home replacement windows.
Risk: Reducing risks associated with producing or using products, like improving the safety or sustainability of an item, like seat belts, anti-lock breaks or airbags in a car.
Experience: Improving the intangible elements of a product that have to do with sight, sound, smell, touch or feel, like moisture wicking clothing materials.
Companies and businesses can succeed in product innovation by fostering a work environment that promotes creativity, the open sharing of opinions and ideas and a healthy relationship with leaders.
What are some types of product innovation?
There are four standard categories for the product innovation:
Product innovation: Creating a new object, device or item, like a smart watch
Radical innovation: Creating a unique business solution, like cloud computing
Process innovation: Creating an alternative method to production or processes, like mass customization
Technological innovation: Creating novel ways to manufacture or produce goods and services, like renewable energy
Some of these categories use the concept of disruptive technology, which affects the field or sector they work in on a large scale. One example would be the use of ride share platforms and how they impacted the taxi or transportation industry.
What are some examples of product innovation?
Here are some examples of product innovation, including several items most people use every day:
The automobile industry and its companies release new vehicle lineups every year, often with fresh features, designs or technology. Historically, automobiles have gone from roll-up windows to power ones, stationary seat placement to manual seat maneuvering to electronic push-button movement and now have even more advanced elements, like self-driving automation. Elements like seat belts, anti-lock breaks and airbags are also examples of innovation that reduces risk and improves safety.
The cellular phone industry changed since its inception in the 1980s, going from a product primarily used by those in business and sales to becoming an everyday item of most Americans. The purpose of cell phones has also changed from making phone calls to replacing other electronics, like cameras, video cameras and gaming devices, further developing into smartphones. The shape, size and cost of cell phones has shifted over the decades and innovation continues with features like touch screen, wireless charging and flexible, roll-up screens.
Televisions (TVs) once showed black and white video before color TV became available in the early 1950s. TV screen sizes went from small to large, first marketed as an entire piece of furniture. Over the decades, product innovation lead to the creation of slimmer, more lightweight and affordably priced TVs with voice-activation and smart capabilities. From heavy floor models, to boxy table top ones, televisions of today now feature incredibly thin flat screens or even curved screens for a more powerful viewing experience. Accessories have changed, too, from VCR to DVD players or devices for streaming services.
Computers were first large, slow and expensive, often only used for government or business affairs. Through product innovation and technological developments, computers that once took up an entire room moved to desktop versions for personal use and later evolved into portable laptops that allow you to use them virtually anywhere. Computers of today are faster, more lightweight, have more capabilities and uses and have price points that allow more users to purchase them. Product innovation of computers also helped develop the internet and World Wide Web.
From classic wrist watches to advanced smart ones, these functional pieces of jewelry can now do so much more than tell time. You can send text messages, record your daily steps, set alarms, make and answer calls, take notes, measure your sleep and check your heart rate, all because of product innovation.
The clothing industry also used product innovation to offer more diverse fabrics, materials and styles. For example, wrinkle-free fabrics developed for business attire mean ironing is no longer needed and moisture wicking materials often used in athletic gear help you stay cool and dry while being physically active.
Even a simple tool like a bike lock undergoes product innovation. What were once key locks now can come as solar-powered devices that feature keyless entry, GPS capabilities and crash or theft alert technology linked to your cell phone or computer.
This travel gear essential has gone through several rounds of innovation, from handled carrying cases to storage on wheels and most recently becoming smart devices with features like charging plugs, Bluetooth technology, keyless locks and GPS locators.
This product invention solved for the problem of taking photos of yourself, which became more common with camera-equipped phones. The phone attachment or grip lets you hold out your device at arm's length to take a picture of yourself or with a group of people and became one of the highest selling accessory items in the global market since its development in 2014.
Online subscription packages established a creative way to experience fitness and now allow you to visit a range of health studios rather than one gym or location. You can explore new types of exercise with this innovation, like yoga, barre, weight lifting or cardiovascular activities, or get a workout in while traveling, for example.
Forms of payment
Even electronic forms of payment benefit from product innovation. Take credit cards, for example. Safety features like the pin and chip technology help secure your accounts and proximity technology now allows for tap payments where you simply touch your card to the payment reader without swiping. More advanced technology like smartphone payment methods let you store your banking or credit card information to pay instantly online, in applications or in person at stores.
Product innovation, particularly with the concept of disruptive technology, has led to changes in paid transportation offerings, like taxis, for example. The development of ride-sharing platforms used with smartphones created an instant, cashless service with transparent pricing that allows you to track your route, share updates with friends and family and choose the vehicle size you need.
Airlines also use product innovation to stay relevant with travelers, reduce their environmental impact and create unique offerings. For example, they may reinvent their onboard service offerings, like meals, establish loyalty programs, make improvements to seatback entertainment technology and find fuel and flight automation improvements or software.
Read more: What Is Product Development Strategy?
How do you measure product innovation?
The most common way to measure production innovation is through innovation metrics, which date back to the Industrial Revolution. With new advancements and technology, not all companies employ innovation metrics or use them with the same criteria, as they can sometimes provide a limited view. Here are some of the typical metrics when considering how to measure product innovation:
Sales figures: The total percentage of sales generated from products introduced over a certain time, like one year or five years
Research and development (R&D) budget: The annual R&D budget as a percentage of annual sales
Research and development headcount: The total number of employees in an R&D department as a percentage of annual sales
Patent filing: The total number of invention patents filed in the fiscal year
Project count: The total number of active projects in development
Submission count: The total number of innovation ideas submitted by employees, departments or work groups
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