What is innovation in product development? Definition and how-to guide for product managers

Want to keep your business competitive? Then you need to get into innovating, especially when making new products. But what’s innovation really, and how do product managers make it happen in their teams?

This guide will explore the concept of innovation, provide clear definitions, and offer actionable insights, all in simple language without any jargon.

Understanding innovation

Innovation is more than just coming up with new ideas. It’s about turning those ideas into tangible products that meet customer needs and push your business forward. Here are some types of innovation in business and product development:

Types of innovation

• Product innovation: This refers to the development of new products, improvements to existing products, or the addition of new features or improvements to existing products. For example, Apple’s introduction of the iPhone, which combined a phone, music player, and internet browser, was a landmark product innovation.
• Disruptive innovation: This term is used to describe innovations that significantly alter or create entirely new industries or market segments. They often replace existing products, services, or processes and can shift the way an industry functions. An example is Netflix’s streaming service, which disrupted the traditional DVD rental industry and transformed how people consume media.
• Incremental innovation: This focuses on making small adjustments or improvements to existing products, processes, or services. Incremental innovation often optimizes existing processes or enhances products with new features or slight changes. Toyota’s implementation of Kaizen, a philosophy of continuous improvement, is an example of incremental innovation in manufacturing processes.
• Radical innovation: This is about developing entirely new concepts, technologies, or business models that can fundamentally change a business or industry. It goes beyond merely enhancing an existing product and involves groundbreaking development. Tesla’s development of electric vehicles and its business model focusing on direct-to-consumer sales represents a radical innovation in the automotive industry.

The innovation process

The innovation process is a set of steps that help turn a bright idea into a real product or service. It’s a roadmap for making something new and exciting that people will want to use.

Here’s how it typically works:

1. Finding out what’s needed: Coming up with an innovative idea starts with figuring out what problems need solving or what people want but don’t have. It might involve talking to customers or looking at what’s trending in the market.
2. Coming up with ideas: Next, you need to brainstorm and come up with a few creative ideas. It could be a solo effort or a big team collaboration, using methods like mind maps or just tossing ideas around.
3. Choosing the best ideas: You can’t run with every idea, so you have to pick the best ones. This means looking at what’s possible, what fits with your business, and what’s most likely to succeed.
4. Making a prototype: Now you start making your idea into something real. You might build a model or a prototype to see how it looks and feels.
5. Testing it out: This is where you see if your idea really works. You might get people to try it, run some tests, or see how it holds up under different conditions.
6. Putting it out there: If everything’s looking good, you launch your new product or service. This includes making it, marketing it, selling it, and getting it to the people who want it.
7. Seeing how it goes: Once it’s out there, you need to keep an eye on how it’s doing. You’ll want to know if people like it, if there are any problems, and what you might do differently next time.
8. Making it bigger and better: If your new product or service is a hit, you might want to take it further. That could mean selling it to more people, making it in new ways, or keeping on improving it based on what people tell you.

Remember, these steps aren’t always a straight line from start to finish. You might loop back and change things along the way.

How to foster innovation: A step-by-step guide

1. Develop an innovation strategy

A well-defined innovation strategy aligns the company’s innovation efforts with its overall business strategies and guides resource allocation decisions.

It helps to identify innovation opportunities and set clear goals for the development process.

• Understand your goals: What are you trying to achieve with innovation? Lay out clear, achievable goals.
• Identify opportunities: Look for areas where innovation can make a big impact.
• Plan resources: Decide how much time, money, and effort you can invest.

2. Create a company culture that supports innovation

The company’s culture should encourage employees to think creatively and take risks.

A growth mindset can inspire team members to come up with innovative ideas and make them feel comfortable sharing those ideas without fear of failure.

• Encourage creativity: Let your employees know that their ideas are valued.
• Take risks: Sometimes the biggest successes come from taking a chance.
• Learn from failure: If something doesn’t work, understand why and move forward.

Example: Google’s “20% time” policy allows employees to spend 20% of their time on personal projects, fostering a culture of creativity.

Here’s how it works: Google lets their employees use up to one day a week, or 20% of their work time, to focus on their own projects. These aren’t just hobbies or side projects; they’re things that could actually benefit Google.

This policy has led to some of Google’s most innovative products, like Gmail and AdSense. It’s a way for the company to tap into the unique ideas and passions of its employees, making the workplace more exciting and leading to groundbreaking innovations.

3. Focus on customer needs

Innovation should focus solely on developing products that meet real customer needs.

Understanding your target markets and their requirements can lead to breakthrough innovations that create a competitive advantage.

• Know your customers: What do they want? What do they need?
• Create solutions: Design products or services that solve real problems.

Example: Amazon’s laser focus on customer convenience has led to groundbreaking innovations like one-day shipping.

They observed the growing demand for faster delivery, and instead of sticking to the conventional 2–3 day shipping methods, they pushed boundaries.

Investing in logistics, technology, and a vast network of fulfillment centers, Amazon made one-day shipping a reality for Prime members.

This approach not only met customer expectations but also set a new standard in e-commerce, compelling other retailers to follow suit.

4. Encourage collaboration and open innovation

Encouraging collaboration within and outside the company can lead to new ideas and insights. Open innovation involves working with external partners, customers, and even competitors to develop innovative solutions.

• Work together: Great ideas can come from collaboration within the team.
• Look outside: Sometimes, working with external partners can spark new ideas.

Example: Samsung often works with other technology companies, such as Google and Microsoft, to create new products.

They combine expertise and innovation to enhance their product offerings through these collaborations.

This approach has led to advancements in areas like smartphones and the integration between Samsung devices and Windows PCs.

5. Allocate resources wisely

Making smart resource allocation decisions ensures that the right amount of time, money, and effort is invested in the most promising innovative ideas.

This approach maximizes the company’s ability to create successful business outcomes.

• Invest in the best ideas: Don’t spread yourself too thin; focus on the most promising projects.
• Monitor progress: Keep an eye on how things are going, and be ready to adjust as needed.

Example: Microsoft is a prime example of a company that takes resource allocation seriously, especially when it comes to their various research divisions.

They carefully study where the next big breakthroughs might happen, like in quantum computing, a futuristic technology that could revolutionize how we process information.

Then, they make sure to put enough money and support behind those areas, ensuring they have everything they need to explore new frontiers.

Conclusion: Building a winning strategy for innovation

Innovation is about more than just coming up with new ideas. It’s how you turn those ideas into real products or services that meet customer needs and move your business ahead. Here’s what you need to remember:

• Think about innovation in different ways, like making a brand-new product or just making small changes to what you already have.
• Get everyone on board with being creative and trying new things.
• Always keep your customers in mind, because they’re the ones who will use what you make.
• Work together with other people, even outside your company, to get fresh ideas.
• Be smart about where you put your time and money, so you’re focusing on the best opportunities.

It’s not always easy, but with a clear plan and a focus on what really matters, innovation can become a regular part of how you do business. It can lead to better products, happier customers, and a stronger position in the market.