What is a seamless sustainable competitive advantage
Hasn't the development of many products over the past decades been impressive?
Phones first went mobile, then digital. Everyday objects such as the toothbrush or the oven have been equipped with useful, smart additional functions. They all communicate with their users in real time if necessary.
The 21st century is characterized by innovation
We live in a time in which innovations are in demand and actively used by consumers like never before. Whole societies have rarely been as curious and open to new technologies, developments and alternative offers as they are today. Often times, innovative products also define and symbolize the desired lifestyle of their users.
Product innovations can be used as a lever for market growth and differentiation. Developing innovations and implementing them in the market by means of a well-planned, strategic approach can secure their competitiveness in the medium and even long term.
The hype that finally started about digital assistance systems such as Amazon's Alexa or Google's Assistant is now able to help them finally establish themselves on the market and secure the companies behind them significant shares in this future market.
In the following article we clarify what managers should consider when implementing a successful product innovation strategy in a planned manner and how this can be used to gain a competitive advantage.
To do this, we first define existing types of innovation, clarify any potential competitive advantages that may arise and give some tips that should be observed when launching the product.
Here we go!
Definition and classification
We all like to use them in everyday language. But mostly wrong: because the termsinvention and innovation are often mistakenly used synonymously.
An invention, however, only lays the foundation for a potential subsequent innovation.
More precisely, an invention describes the implementation of new ideas within a concept phase. An innovation only emerges from this as soon as the actual application (benefit) of this invention can be defined.
The development of a completely new type of technology only becomes an innovation in an economic context, for example, as soon as it is used to further develop existing products, production processes or underlying business models. This presents something new to the market: a new idea, a new method, a new device, a new process, or the like.
If it is specifically about the innovation of products, then this is part of the respective product policy of a company.
The product policy of the marketing mix
Different types of product innovations
If we try to classify product innovations, this is possible on the basis of their degree of novelty. Scientific studies mostly define two types: incremental and disruptive innovations.
... only define minor product changes or improvements. Because of this, they are often perceived by consumers as not particularly attractive.
The switching costs are simply too high due to the seemingly insignificant innovations. Accompanying marketing measures are therefore a fundamental prerequisite for the success of such step-by-step product developments.
For example, with its step-by-step innovation tactics, Apple has been able to successfully market the iPhone series with small product improvements and clever marketing processes for years.
... describe true market innovations in this regard. As a result, existing products or entire product lines are replaced or at least largely overtaken in terms of their value proposition.
Consumers must first learn the meaning and benefits of such new products and acquire new knowledge in order to understand these disruptive products and ultimately be able to apply them.
Create competitive advantages through effective product innovation processes
Regardless of type, innovation can give companies a significant edge over their competition.
Such a (comparative) competitive advantage arises primarily from a tension between the customer and the company perspective:
The former is achieved by realizing a relative customer benefit. Simply put, an offer made available to the consumer must be perceived as attractive and also offer real added value.
From the company's point of view, it must also be possible to produce and sell this offer economically, i.e. generate profit and also be defensible. Imitation by the competition should at least be made more difficult by patents, licenses or in-house know-how.
The comparative competitive advantage (KKV)
Depending on the industry and the resources available, companies are driven by different motivations to develop innovations and thus to positively influence the effectiveness and efficiency side described:
- Securing technology leadership within an industry
- Opening up new markets
- The development of future markets
- Securing market share
- The prevention of market share losses
- The cost reduction in production
- The exploitation of economies of scale
The points mentioned already illustrate the potential for companies to differentiate themselves from their competition through continuously developed or disruptive products.
If a company successfully presents its new product on the market as a first mover, it benefits from the time advantage it has created and can gain important market shares until competing products are introduced.
This also differentiates it from the competition and gives it the opportunity to position its own brand as an innovator. However, the high market launch costs are usually only offset by mass adoption by consumers.
But successful innovation management is also a prerequisite for the success of the so-called second movers in order to be able to compete with an existing first mover offer.
Time and quality as central success factors
A look at the smartphone market shows why product developments are so important within the scope of the KKV. When Steve Jobs presented the first iPhone at a KeyNote in 2007, Apple Inc. was the first mover in the market for smartphones without a physical keyboard.
The product was easy to use, of high quality and designed to save its users time.
This gave the company a head start until competitors like Samsung were able to gain market share with simulated technologies. During this time, however, Apple managed to trigger a real hype around its iPhone series and, as a brand, continues to benefit from its innovative positioning at the time.
The technical-related continuous further development of smartphones on the hardware and software side also became a basic requirement for their sales.
Blackberry had to experience painfully that the low innovative strength and the clinging to old technologies will no longer be tolerated by the market from a certain point in time.
Develop the company's internal innovation potential
In order to be able to achieve a sustainable competitive advantage through product innovations, space must be created for new product ideas and developments.
From a company perspective, managers should coordinate several functional units that exist in parallel.
Because the innovation potential of an organization essentially depends on the quality of the cooperation between those responsible in the areasmarketing, Innovation as Product management from.
If these components interlock seamlessly, their greatest possible synergy effects can unfold.
Marketing, innovation management and product management must overlap seamlessly
While the marketing function essentially serves to identify customer needs, it is the task of product management to include these needs in product development and to take them into account throughout the entire product life cycle.
The connecting component is innovation management. It is responsible for the active acquisition and implementation of new ideas in the area of product policy, which in turn is part of the marketing mix and is responsible for product management before and after the product launch.
This subdivision helps managers in particular when actively designing corporate structures for planning innovative product developments.
The one previously definedComparative competitive advantage (KKV) can be achieved precisely through this internal collaboration:
Market research data from marketing can help in product development to create added value. In addition, targeted communication measures enable differentiation in the market (effectiveness).
By ensuring the economic implementation of this product policy, the product and innovation management on the other hand are able to implement the required protection against imitation (efficiency).
Overcome internal and external innovation hurdles
If decision-makers want to actively promote and develop innovations, they have to consider possible hurdles inside and outside their organization.
Similar to the PESTEL analysis, different factors also play a role here. Efforts to innovate will fail, for example, if the products ultimately developed do not take into account the cultural conditions of the target markets.
A company's resource strength represents a similar hurdle. Large companies have advantages here, especially when it comes to developing and launching disruptive innovations. Their size and awareness increases the chances that new types of products will be accepted more quickly by customer groups. Companies that do not have these characteristics have to compensate for this disadvantage through efficient branding strategies and highlighting the added value of their new product.
Along with these factors, others enable the innovation potential of organizations.Politically liberal-led countries are often characterized by the promotion of innovation and broadly structured research investments, while authoritarian-led states often only allow innovations there if they serve their own purposes.
The holistic assessment of the micro- and macroeconomic environment of a company are therefore essential prerequisites for successful innovation management.
Companies are confronted with internal and external barriers to innovation
Gradual development of new products
But how can companies actually develop innovations step by step and systematically?
There are basically five forms of systematic innovation development:
- Purpose extension
- Change of attribute dependencies
The subtraction describes (as the name suggests) the removal of a product component to obtain an alternative or new product.
A cup without a handle becomes a mug, a bicycle without a seat becomes a recently introduced half bike.
An example of a subtraction innovation. Source: halfbikes.com
Such product changes may often seem futuristic. But they build on an already established concept and refine it by means of changes that have not previously been questioned.
Here, too, the name already reveals the principle of operation. A proven product is simply multiplied.
One example are spirit levels, which have an integrated vertical and horizontal scale. This saves the customer having to buy two spirit levels.
A not as effective example is multiplication in the razor blade area. Here the market leaders compete for the dry razor with the most blades. It remains to be seen whether the function really improves the cutting effect. From a theoretical marketing point of view, it is definitely innovative.
The division describes the breakdown of a product into its individual components. What used to be the record player is now a sophisticated sound system consisting of several speakers and a subwoofer.
The division as a method for developing new products
In this innovation development, the individual components of an existing product are rearranged.
From the customer's point of view, this is precisely why it is important to offer real added value. In the above example, the sound quality must differ significantly from the original product (the record player) in order to be successfully sold on the market.
4. Extension of purpose
Mercedes is a good example of expanding its purpose in the area of innovation development.
In the past decade, the antenna has disappeared from most new cars. Mercedes was one of the first automakers to quickly integrate these into their windshield wipers. The original purpose of window cleaning was expanded to include the reception of ultra-short waves.
Unscrewing antennas in front of the car wash became obsolete and at the same time served to establish a more modern design.
5. Change of attribute dependencies
Many products are dependent on external circumstances. For example, the sale of ice cream depends mainly on weather conditions. The product is accordingly dependent on another attribute (in this example the weather).
Another example is Nestlé. Many years ago, the company faced a sales problem with its prominent iced tea brand in winter. While consumption in summer was at a high level, sales fell proportionally with falling outside temperatures in other seasons.
In order to reduce this seasonal dependency, the company introduced other types of ice tea with winter flavors and also developed product variants that could be warmed up at home like a kind of mulled wine.
Influence the diffusion of innovative products positively
No matter which of the above methods is used to develop new and innovative products. The final product should solve the needs of customers and better than any existing solution on the market.
The easier it is for consumers to understand and understand the benefits and added value of an innovation, the easier it will be to adopt it in mostly saturated markets.
In addition, the compatibility with existing processes forms an essential cornerstone for rapid market diffusion. The abolition of the jack connection in current smartphone generations could only be successfully implemented through existing alternative and wireless headphone systems, for example.
In order to successfully place innovations in the market and to plan for the greatest possible acceptance in advance, decision-makers should keep the following growth and life cycle model of diffusion theory in mind:
Adoption lifecycle with gap according to Geoffrey A. Moore
The model describes different consumer groups who integrate product innovations into their lives at different times.
Innovators are the earliest to adopt new innovations and see them as an integral part of their lifestyle. They are characterized by a high willingness to experiment and are therefore often opinion leaders to which subsequent consumer groups orient themselves.
Early adopter after a short time follow the innovators, but wait for the new product to be put to the test before they use it themselves. They also belong to the group of opinion leaders in a society and are positive about most innovations. This group often has a younger average age than subsequent adoption groups and is also characterized by a high level of education.
Theearly majority however, it initially waits until innovations have proven themselves. This group is less willing to take risks than the innovators or early adopters and is generally characterized by a high level of education, recognized social status and good income.
Thelate majority on the other hand, is critical of innovations and only adopts such products if social norms or economic factors induce them to do so.
The group ofStragglers is the most difficult to convince of product innovations. They have a high and often unfounded risk awareness and prevent any voluntary innovation adoption. They only use such innovations when they are no longer offered any other alternative.
Overcoming the adoption gap
If managers try to implement a disruptive innovation in the market, the theory is that there is an existing adoption gap between the group of early adopters and the early majority.
The underlying thesis is that consumer groups willing to innovate must be served differently than consumers in a mass market. While early adopting customer groups are won over, for example with an innovative, niche-like brand position, consumers expect more solid communication content in the transition to a product suitable for the masses. Here the expectations on the consumer side shift towards reliability and functionality in everyday use.
In order to meet these expectations, it is important to conduct reliable market research in advance about the existing expectations in the respective target market segment. Only in this way can products and services be successfully introduced and at the same time stand out from their competition.
Conclusion - innovations have to be implemented according to plan
As beautiful as the dream of getting rich quick with a good and new idea is: Startups, SMEs and large corporations must carefully plan the resulting new products and use them to meet the needs of their consumers.
A comparative competitive advantage arises for companies when the effective interlocking of marketing, innovation and product management functions creates real added value from the consumer's point of view, which differentiates itself from existing solutions on the market and cannot easily be copied by third parties.
In particular, decision-makers have to take into account the different expectations and needs of different consumer groups. In this way they can positively influence the diffusion of innovations in the market and ultimately overcome the threshold from niche to mass market. A step that the competition first has to follow.
I am interested in your opinion!
How did you like today's post? Do you actively plan and implement innovations in your organization and where do you see the greatest challenges? I look forward to an exciting discussion in the comments section!
Written by Martin Heubel
As an experienced marketer, Martin Heubel supports entrepreneurs in the successful marketing of their products and services. Here in the blog he shares his knowledge with newcomers and interested marketers.Learn more about Martin Heubel »
A response to "Understand product innovations as a competitive advantage and implement them successfully"
I believe that in today's competitive society, new types of innovations are the most important thing for companies in the technological and engineering field. The market and its requirements are constantly changing and as a company you always have to see that you can adapt to the latest trends as quickly as possible and offer the necessary know-how. That is quite simply what we have to prepare for in the 21st century.
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