‘Why is product innovation considered by many organisations to be important?’
As written by Innovation Process Management (IPM), innovation is not just about having good ideas; it is about managing new ideas, improving old ideas, understanding and anticipating markets and technologies. According to Brassington and Pettitt (2000), product innovation involves an organisation breaking into totally new ground, where previous consumer experience cannot be utilised. Product innovation is a risky process as the organisation will have to overcome ignorance, suspicion and scepticism. Brassington and Pettitt (2000) believe that product innovation is normally a result of technological breakthroughs. Whilst the Cambridge MIT institute (2004) explains that product innovation is very important to organisations in today’s market because of this hyper-competitive business climate. This is reinforced by a quote from Gerbeau, P of the Open University that Innovation is risky, but in business you need to take risks to survive. Research and development takes a lot of time and money, but without innovation a company will not have much of a long-term future. This quote gives an underlying reason as to why product innovation is so important to organisations.
Product innovation is important to organisations because as described by Brassington and Pettitt (2000), it gives them an opportunity to educate the market and to a certain extent dictate demand. Brassington and Pettitt (2000) illustrate that the underlying reason why product innovation is considered by many organisations to be important is because if a product is successful, a company will achieve high levels of respect and a great reputation as a market leader. Further, successful product innovation could lead to the organisation gaining a better relationship with its shareholders and further there is scope and potential for the company to achieve better and larger investment proposals. Also, it is more likely that successful product innovation will enable a company to employee the best possible staff and thus continue to be successfully innovative. So, innovation can provide companies with a competitive edge but an organisation must ensure that innovation is likely to be successful. Specifically, as The Business Link suggests there is no point in considering innovation in a vacuum. This said it is obvious from the abovementioned that it is neither a cheap or easy process.
Better Product Design describes how product innovation can be thought of as a complete business process by introducing new or improved products to market. It spans the entire product life-cycle from initial identification of market/technology opportunity, conception, design and development through to production, market launch, support, enhancement and retirement. If an organisation is successful in being innovative then it can gain a competitive edge and will provide the company with higher profits until other organisations can catch up. In today’s market, this competitive edge is unlikely to remain for very long. However, as The Cambridge MIT Institute explains, successful product innovation allows an organisation to enter a new market. This can be extremely beneficial as the company will become more diverse and during an economical slump the company may not suffer so much financially.
Furthermore, as Innovation Process Management (IPM) illustrates, it is important for organisations to develop products that provide a genuine competitive advantage in order to excel. Although the development of new products is a thoroughly complex activity, it is a realistic fact that many products will not achieve commercial expectations. Thus, if a company can introduce a new product into today’s market they will reap the benefits. This further reinforces that it is important for organisations to produce innovative products as introducing an existing product is unlikely to successfully penetrate a market.
Although product innovation is important as the abovementioned illustrates, it is also a very risky process because as Brassington and Pettitt (2000) mention consumers may take the view that they have managed perfectly well without the item in the past, so demand will be low for the product as people may have no need for it now or consumers could be suspicious of a completely new concept. Furthermore, nowadays it is difficult for organisations to stay ahead of the competition due to the increased presence of technology.
A good example of where organisations need to have product innovation is in the car industry. Gerbeau, P from the Open University explains that the car industry’s challenge is to meet the demand for more cars and comply with political pressure for zero pollution transport. Gerbeau, P goes on to explain that innovation in the car industry has become evolutionary rather than revolutionary. Cars are nowadays commodities, chosen principally on price. But people have lots to choose from within the price range they can afford. Now the focus is on adding value using innovations from information and communication technologies. The aforementioned example illustrates the importance of product innovation for organisations. For myself I look for three main features, firstly the make of the vehicle make, secondly the safety reputation of the company and thirdly the gadgets that accompany the car. This illustrates that it is important for a company to establish a reputation for product innovation to ensure that it will be successful. However, the car industry is a saturated market and it is therefore difficult for any one manufacturer to introduce an innovative product. Instead manufacturers use advertisements to try to persuade the consumer that their particular car is different from all the rest. In essence, they sell an image, because really there is very little product differentiation and as a result car prices are stable with very few manufacturers being able to dictate industry prices. Thus, if a car company is able introduce a new product it is likely to lead the market until its competitors catch up.
Organisations should bear in mind this quote from Innovation Process Management (IPM); when you are ahead of the competition, there is no one you can follow and if you look back too much, you may stumble and fall. This reinforces that product innovation is important to organisations as it enables them to survive and profit in today’s markets. If an organisation becomes content with following market trends rather than taking risks by investing in innovation, they are very unlikely to be successful in the industry, increase the company’s profit margins or increase their market share.
Bibliography
Brassington, F & Pettitt, S. (2000) Principles of Marketing. Second Edition, Prentice Hall
Innovation Process Management (IPM). Innovation Management. (Internet), Available at http://www.ipm-marketing.co.uk/Innovation%20Management1.htm, cited 20/11/05
The Cambridge MIT Institute. (2004) Managing Innovation Strategically. (Internet), Available at http://asp2.miuk.com/cmilive/documents/Managing%20Innovation%20Strategically%202004.pdf, cited 20/11/05
Gerbeau, P (The Open University) Reinventing the Wheel. (Internet), Available at http://www.open2.net/rulesofthegame/reinint.html, cited 20/11/05
Better Product Design. Innovation. (Internet), Available at http://www.betterproductdesign.net/innovation/, cited 20/11/05
The Business Link. Use innovation to grow your business. (Internet), Available at http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073792538, cited 20/11/05