Product innovation is the creation and subsequent introduction of a good or service that is either new, or an improved version of previous goods or services. This is broader than the normally accepted definition of innovation that includes the invention of new products which, in this context, are still considered innovative.

Introduction

Product innovation is defined as: "the development of new products, changes in design of established products, or use of new materials or components in the manufacture of established products" Numerous examples of product innovation include introducing new products, enhanced quality and improving its overall performance. Product innovation, alongside cost-cutting innovation and process innovation, are three different classifications of innovation which aim to develop a company's production methods. Thus product innovation can be divided into two categories of innovation: radical innovation which aims at developing a new product, and incremental innovation which aims at improving existing products.

Advantages and disadvantages

Advantages of product innovation include: Disadvantages of product innovation include:

Theories of product innovation

Popular theories of product innovation - what causes it and how it is achieved - include Outcome-Driven Innovation and "Jobs to be Done" (JTBD). JTBD Theory is used extensively as part of a methodical approach to product innovation postulating that users "hire" a product to do a "job" and that innovation can be achieved by providing a better way of getting a particular job done. Used as a framework, JTBD is very similar to outcome-driven innovation, focusing on the functional, emotional, and social 'jobs' that users want to perform. However, this is one of two main interpretations of the theory known as "Jobs-as-action." The second interpretation is known as "Jobs-as-progress" and focuses on what the user wants to be, stating that the jobs a product user wants to do are secondary to (and a result of) the person they want to be.

New product development

New product development is the initial step before the product life cycle can be examined, and plays a vital role in the manufacturing process. To prevent loss of profits or liquidation for businesses in the long term, new products have to be created to replace the old products. Peter Drucker suggests in his book 'Innovation and Entrepreneurship ' that both product innovation and entrepreneurship are interconnected and must be used together in unison for a business to be successful, and this relates to the process of new product development.

Stages

These are the few stages that a business has to undergo when introducing a new product line into the market: After all these stages have been successfully run through, then the business can officially launch the product.

Classification of innovation

Product innovation can be classified by degree of technical novelty and by type of novelty in terms of market. Technical product innovations include the use of new materials, the use of new intermediate products, new functional parts, the use of radically new technology and fundamental new functions. Classification by levels of novelty include new only to the firm, new to the industry in the country or to the operating market of the firm, or new to the world. Existing product development is a process of innovation where products/services are redesigned, refurbished, improved, and manufactured which can be at a lower cost. This will provide benefits to both the company and the consumer in different ways; for example, increased revenue (benefits the company) cheaper costs (benefits the company and consumer) or even benefits the environment by implementation of 'green' production methods.

Measuring innovation

The Oslo Manual recommends certain guidelines for measuring innovation through the measurement of aspects in the innovation process and innovation expenditure. Measurement processes consists of collecting and systemizing qualitative and quantitative data regarding different factors of the innovation process, investment and outcome. Quantitative analysis focus on investment, impact and life cycle. Examples of key quantitative indicators include product investment, total innovation investment, product sales share that comes from innovation, manpower use, material consumption, energy consumption, time taken to reach the commercialisation phase or the expected cost recovery or payback period. Qualitative data includes benefits of the innovation, sources of information or ideas for the innovation, and diffusion or reach of innovation. Even though similar information can be obtained through quantitative methods, the guidelines argues that due to the qualitative nature of the answers, firms are inclined to provide richer and a different set of data, avoiding duplication.

Vs. other forms of innovation

While the difference between different forms of innovation seems intuitively clear, it is not always obvious what kind of innovation is occurring in practice. While there are different dimensions to consider whether it is a product innovation rather than e.g. a technology or business model innovation, it is not always possible to clearly differentiate one from the other. For example, compared to a business model innovation, a product innovation often has:

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