What is product innovation, and why is it important?

Every year, thousands — if not millions — of products are unleashed into the world. These range from brand-new products to improvements on things that already exist. Regular pizza to stuffed crust pizza? That’s product innovation. Giant brick phone to sleek touchscreen? Innovation.

Product innovation has been around for centuries — since, well…the wheel, which is an innovation in itself. But in today’s society, where we need to be on top of every trend, it can make or break a company. And if one particular type of product isn’t doing so well anymore, companies must quickly change their game plan and come up with something different before they lose out.

The process of creating new products or updating older ones is what we call innovation, and it’s a must if you run a business. For companies that put the time into product research and development, it can be highly lucrative and rewarding when successful. So, how do you do it? And, more importantly, how do you avoid a massive flop? We have some tips.

What is product innovation?

Product innovation refers to changes that improve design, materials, feel, look, capacity, functionality, and overall user experience. An improvement can be tangible, such as a physical product, or intangible, like software or services.

Product innovation helps companies stay relevant in their market and continue growing and improving over time. A company’s ability to innovate is considered essential for its long-term viability.

Companies need to venture out of their comfort zone and get creative when designing new products.

Take Apple, for example. The release of the first iPhone changed the look and use of phones forever, thanks to its sleek touchscreen and internet capabilities. The result? The iPhone developed a cult following, dominated the market for years, and sent Apple’s profits sky-high. So, why is product innovation important? Simple. If you want your company to (at the very least) stay afloat, you have to create products that people want to buy.

What’s the difference between product innovation and process innovation?

Product innovation is what you design and create, including the quality of the materials used. Process innovation refers to how you manufacture, distribute, and sell it.

A real-world example: Google excels at both forms of innovation. The company invested millions in its Android operating system and drove device sales by investing in its site, creating effective ad campaigns, and even partnering with other companies. The result? Android is a worthy adversary to Apple.

Why is product innovation important?

Many people think there’s no need to innovate if you’re already running a successful business. But this just isn’t true.

• Product innovation is good for the bottom line. Businesses that introduce new products earn higher profits than those that don’t. Companies in the top quartile of new-product introductions generate a median return on sales more than three times greater than those in the lowest quartile.
• Diversifying brings in new opportunities. Product innovation drives expansion by opening up new market opportunities. It also helps firms diversify their business and tap into totally different customer groups.
• Anticipating the needs of your customers boosts retention. If you’re constantly innovating, customers will never see you as irrelevant or out of date.
• Innovation helps you keep up with the market. Whether you innovate or not, other companies will. And those competitors could potentially steal your customers. Innovating helps you differentiate your business and race ahead.

Innovation is good business. The problem is, that while most people can spot an improvement, few can develop ideas on their own.

This is because it’s hard to spot the opportunity and even harder to get that idea developed, funded, created, and marketed. Innovation also poses a significant risk: 95% of new products fail. When you consider the money that goes into development and release, it’s pretty terrifying.

The Google Glass disaster is proof that even with the most extensive product development team and bazillions of dollars behind you, product innovation isn’t easy. But, don’t let us scare you off! Here are some tips to help you.

5 quick and easy(ish) steps to flawless product innovation

1. Brainstorm ideas based on customer research and competitor research. Include a mix of data-gathering methods, including focus groups, surveys, and customer studies.
2. Develop concepts that satisfy customer needs. Continue conducting analysis to make sure these products fit into the competitive landscape. Does the product solve a problem or simplify a process? Is it redundant?
3. Validate concepts via testing. Keep gathering feedback as you go, being sure to listen to what works (and kill what doesn’t).
4. Use customer segmentation to assess the market and determine which of your concepts will be most profitable.
5. Refine your concept via prototyping. Develop a Minimum Viable Product (MVP) to control costs and limit waste. And why stop there? Keep iterating until your product is the best it can be.

How to innovate: best practice

Here are some key things to bear in mind.

First and foremost — do your research

Understand what your customers want. Talk to them about how your product could be improved and which areas you can branch into.

Doing this will help you to produce products that people need and want — and not something that just sounds like a good idea. It’s essential to avoid falling into the trap of staying in your own bubble, rather than asking potential customers what matters to them.

Asking for feedback is also important when it comes to avoiding big mistakes.

Crowdfunding sites are one great way of doing this cheaply, but they come with many pitfalls. The people who pledge to your project aren’t always a representative sample of your target markets. There are countless ways to collect feedback, from conducting interviews and sending out surveys to hiring a market research company. The important thing is to put the customer at the center of everything you do.

Learn to fail fast

Product innovation involves incremental testing and refinement to figure out what works and what doesn’t. The goal is to make improvements in the shortest time period with the least amount of money wasted. The faster you can do this, the quicker you’ll learn.

With every “failure,” learn to adapt quickly to make your innovation work. Maybe, you need to change the way you run focus groups or adjust your pricing strategy based on what you learn from customer feedback.

Use MVPs as a roadmap for improvement. Set up an initial product with just enough features to be released to the public and tested with real people. The purpose is to quickly get it into customers’ hands before you spend weeks or months over-engineering something that nobody wants.

Stay true to your core values

Your company culture establishes the beliefs and behaviors within your organization. These core values should drive everything you do as a company. So when you innovate, don’t get too distracted by what competitors are doing. Focus on staying true to your core values and doing the right things for your company and your customers

Don’t neglect cost

Your company’s financial health affects everything from employee salaries to R&D budgets. Try not to get caught up in all of the bells and whistles of creating The Next Big Thing if it means you’re neglecting the overall health of your company.

How project management software can help

Even the best product ideas can fall apart if you don’t have an efficient process to manage and develop them. How will you assign jobs, measure progress and success, communicate between remote team members, and identify bottlenecks in the manufacturing processes?

Project management software can help companies innovate without breaking the bank. It provides a unified platform for teams to collaborate, allowing employees around the world to quickly share ideas and coordinate schedules in real time. This, in turn, makes it much easier for everyone to work successfully towards a shared goal — a must in the fast-paced world of product innovation.