New Product Innovation: What it is, Why it matters, and How to get it right
Sometimes in business, certain terms become so ubiquitous that we forget what they mean or why they even matter in the first place. In the daily scramble to keep pace with change, the most basic concepts can get lost to the trends, buzzwords, and disruptions that capture our increasingly scattered attention.
If new product innovation has become a little murky or meaningless to you, then you might need a reset. So let’s remedy that.
According to Business Dictionary, “product innovation” is defined as “the development and market introduction of a new, redesigned, or substantially improved good or service.” It’s not only about developing something new and original, it’s also about taking what’s already there and making it much better. In other words, not everyone has to be the first to invent driverless cars, but someone has to be the first to make them better.
Now that we’re all on the same page again, let’s get to the beating heart of it.
Why new product innovation matters
Product innovation is a challenge no matter what industry you’re in. The road is fraught with detours and roadblocks. The crash-and-burn stories are legendary. And the fear of failure can haunt even the most intrepid of enterprises.
And that’s just the development side. On the demand side, the proliferation of more consumer choice than ever before spurred by a multitude of digital channels is resulting in constantly changing customer expectations. This, in turn, is fueling a demand for greater personalization, or the ability to market, advertise to, and even develop products or services that suit individual consumer preferences.
These shifts and pressures continue to throw companies off their game — driving uncertainty and reactivity rather than deep understanding and responsiveness.
But somewhere on the horizon, there is a true customer need for which there is also an actual solution. Finding that customer need and then developing the best solution for it can be a substantial boon to your business in a number of important ways. And of course, how you innovate — your mindset, processes, and methodologies — makes a huge difference not only in accelerating time to profitability of your new or revamped product or service, but in the long-term adoption of it in the market.
To summarize, in a complicated, fast-moving world where brands no longer dominate the conversation and consumers now hold enormous sway, innovation matters because it’s the common language you and your customers still speak.
Connecting innovation to business success
Before we get to your customers, let’s first accept that there are, of course, purely business-focused reasons to innovate.
When you invest in innovation and product development, you see benefits across your entire organization — impacting everyone from executives to sales and marketing to customer service and beyond.
In a recent Inc.com article, the author laid out four reasons to pursue innovation as a driver of business success:
- Expansion. Successful innovation begets more innovation, which by nature enables your business to scale and grow.
- Competition. The unique solutions you develop help differentiate your business among the competition, giving a boost to your own revenue while nudging the entire industry in a positive direction.
- Customer retention. Innovation helps ensure that what you sell doesn’t become irrelevant or stop meeting the needs of your customers.
- Talent acquisition. Top-tier employees want to work for businesses that are at the innovative forefront of their industries. That’s where the action, the learning, and the opportunities are.
But while no company has ever said that it didn’t want to succeed, it can still sound a little alarming to hang so much promise on product innovation, especially if what you’re selling is doing well (so far) and you’ve carved out a nice niche for your business in the marketplace.
Here’s the good news and the bad news: The good news is that you might…might…be able to skate by for a while without needing to fundamentally change up your offerings. The bad news is that the chances of that happening are fairly slim.
As Thomas Ripsam and Louis Bouquet say in “10 Principles of Customer Strategy”: “Because technological breakthroughs are now common in nearly every industry, customers expect big changes to be a regular occurrence.”
They go on to say, “The most successful companies continually experiment with innovations that make life better for customers. Customers appreciate companies that can do this effectively, time after time.”
Putting it into context, incorporating product innovation into your overall business plan helps ensure that you won’t fall too far behind the competition, or, worse, fizzle out completely. You won’t be alone in this. McKinsey found that 80% of business executives are afraid that their business models are at risk for disruption, and 84% believe innovation is important to their growth strategy. Part and parcel of this is innovation in product development.
So let’s discuss how to do this.
How to get new product innovation right
Whether you’re with an SMB or a large, established company, whether your industry is tech, consumer packaged goods (CPG), food and beverage, or any other retail vertical, there are two fundamental mindsets to adopt when you set out to innovate: the first is an entrepreneurial, “fail fast” mentality; and the second is maintaining a customer-centric approach at all times.
These mindsets integrate with and complement each other. Both are served by today’s market research methodologies, big data analysis, and tools and technologies such as artificial intelligence (AI) and machine learning. And both have the same goal: to help you form the most complete and detailed picture of your target audience(s) and to determine the product concept(s) that have the most potential for profitability.
Let’s take a closer look.
The entrepreneurial mentality
Entrepreneurs understand that product innovation is a continual process of incremental testing and refinements to figure out what works and what doesn’t, and that failure along the way actually leads to knowledge, breakthroughs, and growth.
That being said, they also like to remove much of the risk and uncertainty around new ideas by arriving at the most viable product concepts faster — or getting on the right track earlier on.
How do you do this?
The practice of front-end development used to apply to software development, but now it’s widely used by many industries to identify, validate, and prioritize opportunities before you build or redesign anything. In simple terms, it’s how you determine the customer need, or needs, that you’d like to solve and the best ways in which to solve it.
Instead of throwing the proverbial spaghetti on the wall to see what sticks, you take a stepped approach:
1. Gather ideas based on customer studies and research using approaches such as online methodologies, focus groups, in-depth interviews, etc.
2. Develop product concepts that fit consumers’ needs and preferences. At the same time, conduct a competitive analysis to make sure the concepts resonate within the larger competitive landscape.
3. Validate and prioritize concepts through concept testing as a way to compare and move forward with the ones that perform at the top.
4. Assess the market by using a customer segmentation process to form a picture of your target customer, and determine the concept(s) that may be the most profitable.
5. Refine the concept by developing a prototype to put into a formal product development process and incorporate user testing to iterate further.
Each step leans heavily on customer feedback and user testing, making space for multiple iterations and incremental innovation. If something isn’t working at this stage, there’s less of a worry that it will make it into development, only to have you find out later when it’s still sitting on the shelves that it was a mistake.
The beauty of front-end development is that it can be combined with agile methodologies to:
- bring more transparency to the product development process
- increase the speed of product development
- allow initial ideas and concepts to flex and change (fail fast) based on customer feedback and other factors
- reduce the wasted effort and resources that are so often a byproduct of the old waterfall approach to product development
A customer-centric approach
Keeping customers at the center of product innovation sounds like a no-brainer, right? Taking a customer-centric approach allows you to solve customers’ very real pain points by uncovering and incorporating their preferences, habits, and buying behaviors into every stage of the product development process.
But although customer preferences and behaviors have always played a role to one degree or another in new product innovation, organizations haven’t always been guaranteed success with this approach.
While conducting customer surveys to capture customer likes and dislikes or using demographics like household income, age, gender, and geographic location does help you gain an important measure of insight into your audience, what you’re often missing is the deeper, more granular insight into your customers’ personalities — the underlying traits and characteristics that make them tick. Being able to see your customers in a more holistic way, and from that, understanding how best to reach them, is how you can really drive successful product innovation.
Today, through the wonders of big data analysis, we have better ways than ever to segment and target the customers with the greatest likelihood of adopting a product and influencing others to use it. For example, you can conduct a customer survey as you normally would and then connect the results to a scan of big data points that includes things like the respondents’ social media activity, media consumption, and personal interests and hobbies. With qualitative, quantitative, and personality data, you can form a holistic view of your customers.
This level of granular customer information enables you to segment and sub-segment to get to the most viable audience to target with product innovation. Furthermore, it helps you market and advertise to that segment — over the right channels, during the right times, and with the right packaging and product placement — to increase their awareness of your new product.
In this way, you product has the highest chance of landing and — this is key — truly resonating with your audience in the market. You decrease the possibility that some of your customers will buy your new or revamped product or service initially, but then ignore it over time. And because you developed, packaged, and marketed to the right segment(s) at the outset, you increase the likelihood that:
- your customers’ needs and desires will be met
- those customers will broadcast their delight farther into their spheres of influence, thus widening the network of potential buyers
- your product or service will have a greater chance of profitability and long-term adoption
Taking steps toward new product innovation
As you embark on new product innovation, remember that an entrepreneurial mentality and a customer-centric approach are not an either/or proposition. Rather, they work together to achieve results.
During front-end development, you can integrate customer surveys and big data analysis at the ideation and concepting phases to help you identify who you want to innovate and develop for, and continue these methodologies into concept validation and market assessment to further segment and target the right audiences. Effectively, you are blending entrepreneurial efforts on the product side with market research efforts on the customer side.
But before you do anything, understand first what your goals are with product innovation. The market is always in flux, and the speed of change and disruption is only increasing. With consumers holding more of the cards, it’s imperative to accept that product innovation is not a nice-to-have, but an essential component of a successful business in today’s world.
Starting with a back-to-basics understanding of product innovation gives you a renewed sense of purpose and helps you move in the direction you need to go. Then, embracing an entrepreneurial spirit, deepening your understanding of your customers, and utilizing the latest market research tools and technologies to support your efforts will get you all the way there.
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