What Is Product Innovation | 4 mins read

What is Product Innovation? 5 Pillars to Know

what is product innovation 5 pillars to know
Chloe Henderson

By Chloe Henderson

As customer needs change, new areas in the market emerge. Many companies seek to fulfill these new demands by either adjusting existing products or developing an entirely new line. This process is known as product innovation, and when done successfully, organizations can generate an additional income source through this strategy.

What is Product Innovation?

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Product innovation is the adaptation of original products to create a solution for current customer needs. This is often used by businesses to bridge market gaps and capitalize on customer needs that aren't being met by competition.

There are actually two types of product innovation.

  • Incremental Innovation is the improvement of established products, as it is generally less risky than radical innovation.
  • Radical Innovation is the creation of an entirely new product. This means that the business must start from scratch to identify the target market, supply chain needs, and potential risks.

The term product innovation is thrown around loosely and isn't always applied to true innovations. In order for an item to be innovative, it must

  • Address an issue that a significant number of consumers experience, regardless if it is a mainstream or niche market
  • Have better technology, design, or functionality than similar products provided by competitors

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Companies that are able to perfect product innovation can recognize and take advantage of vacant spaces in an otherwise oversaturated market. This provides the opportunity to appeal to a completely new demographic, expanding the business's customer reach. Organizations can use this advantage to increase their market share and gain a stable foothold in their industry.

However, there are some significant challenges in product innovation that organizations should consider.

  • Businesses must keep an open mind on what product innovation could mean for their target market, as it often looks drastically different between companies.
  • Companies can't wait until innovation is perfected to launch it, as competition may take advantage of this extra time to introduce similar items first.
  • Project managers must remain open to criticism for their products and make adjustments accordingly.

The 5 Pillars of Product Innovation

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Employees, customers, and stakeholders are all involved in one way or another in the product innovation process. This creates a rather complicated network that needs to be managed properly to balance all moving parts.

To establish a healthy base that is conducive to product innovation, project managers should remember the five pillars.

The Innovation Ambition Matrix

The Innovation Ambition Matrix was created by Bansi Nagji and Geoff Tuff to help businesses assess their value to their target market.

The matrix consists of three segments that define different types of product innovations.

1. Core

The core consists of products that need minimal changes in order to reach new markets. For example, Uber innovated the original cab industry to make transportation more accessible, comfortable, and affordable.

2. Adjacent


Adjacent products are an extension of an already existing item, still targeting the original market. For example, Crest expanded its oral hygiene products from toothpaste to mouthwash, toothbrushes, and whitening strips.

3. Transformational


Transformational products are entirely original and open up a new market. For example, Starbucks creates seasonal beverages and establishes new ways their customers can place orders.

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The Talent Network

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Product innovation requires a collaboration of experts on the target market, customer needs, company capabilities, and product development. In order to balance this creative network, businesses must

  • Assess employees' expertise and value that they can contribute to the project. This enables managers to assemble a capable team that can handle different segments.
  • Identify the top influencers that have the ability to headline different parts of the projects. These individuals act as catalysts that keep the project moving forward.

Innovative Processes

Innovation is not completed in one task. Rather, it's continued through several processes.

  • Designing
  • Prototyping
  • Lean innovation
  • Open Innovation

Throughout each process, teams need to establish a multi-level stakeholder buy-in so executives can test different prototypes and give their input on product preferences.

Project managers should also foster creativity and incorporate members' ideas into the creating and testing stages. Members should brainstorm

1. Where can the business reach customers and identify pain points?

2. Where can employees generate ideas?

3. What technology should be used in the prototype?

4. When will the team be able to scale the model?

Objective and Resource Alignment

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The fourth pillar focuses on aligning the objectives and available resources to ensure companies set reasonable goals. The objectives should be based off

  • Financial Health - Managers should double-check their disposable income and discuss budgeting options with financial advisors to ensure the project remains within funding restrictions.
  • Development - Businesses' development phases include existence, survival, success, take-off, and maturity. Depending on what stage a company is in determines if they can supplement product innovation.
  • Competition - By evaluating the organization's competitive positioning, managers can estimate their risk appetite, potential threats, and mitigation impact.

The Organizational Structure

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Each company has its own unique organizational structure that fulfills its needs. Generally speaking, there are four primary structures.

  • Centralized - These systems ensure all information is kept in a universal interface so all departments can easily access critical data. However, decision-making falls in the hands of executives and upper management.
  • Decentralized - The decentralized structure focuses on mid to lower management, giving manual workers full control of project details without needing permission from higher-ups.
  • Hybrid - The hybrid structure is a mixture of the centralized and decentralized systems, as it is cross-functional. This means that the structure can bounce from each model depending on the project and its operational needs.
  • Incubators - In incubators, ideas are developed inside the business, only to be sent out to the parent company. However, this often leads to miscommunication and data silos.

Choosing the appropriate organizational structure determines how accurate and quick an organization can complete product innovation.

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