Product innovation refers to the process of developing and releasing a new or intrinsically altered version of a product or service into a market. While the term may seem to imply new physical products, this term can also be used to refer to new or expanded services. Product innovation is of major importance for many companies, especially those involved with electronics, computers, or software.
While the term “innovation” typically refers to advancements in an existing product to produce a new or revised salable item, product innovation can refer to both new products and improvements upon existing products. When a wholly new product or service is made available for sale to consumers or businesses, it is not necessarily a form of product innovation. For such innovation to truly occur, the product must be unique, at least at the time of release, in some way so that it stands out among competing products or services. This is often the purpose of such innovation: the release of a new product that seemingly stands alone in a particular field.
Product innovation can also occur with reference to an existing product, however, or a product that is similar to others available in the market. This type of innovation can include anything from how the product is manufactured, including both methods and materials used, to the actual product or service. When a company introduces a new mobile phone, for example, it is releasing a product that is, to some extent, already available to the public and consumers. Product innovation in such a field, therefore, requires that a business develop new ways to produce such phones or to release a phone with features and technology not otherwise available.
Consumers are often interested in product innovation to see what new features or products are available, but businesses often see such innovation as opportunities for new revenue. Innovation that leads to a cheaper manufacturing process, or one that uses renewable resources and energy that may be less expensive in the long run, can help reduce operating costs. New products, or major innovations in existing products, can bring new customers and increase revenue for a company. In highly competitive fields, such as consumer electronics and computer software, product innovation often allows a company to establish itself in the market and develop a new business identity.