We had an interesting discussion during our monthly teleconference on May 30th revolving around Product innovation vs. Business innovation. I have summarized here some of the main points that came up during our teleconversation.
One of the first things that we discussed was: Which comes first – Product innovation or Business innovation? There was some consensus that innovation generally starts with product innovation and goes on to business innovation in the traditional bell-curve fashion. That is, you start with an innovative product and it goes on to a growth and then mature phase and at that point of time, you have to improve your product or service and re-invent to sustain yourself. That’s where business innovation comes in.
Business innovation should be given more importance in product companies because even if you have a great product with great features – if there is no market demand for the product, then it is considered a failure. The probability of success of a product is higher when you know that the business impact of the product is going to be high, and therefore you need to assess the product’s impact on your company’s bottomline before development begins.
Another interesting point that was brought up during the discussion was the danger involved in product innovation – in other words, making the product more perfect without realizing the financial impact or ROI of it. This was seen to happen more often when the CEO was from a technical background. In business innovation, there is always a close watch on the ROI of any development effort.
One difference that was brought up, in terms of the source of ideas, was that for product innovation, it came from a somewhat controlled environment of existing customers, prospects and sales personnel and you more or less knew the target audience. For business innovation however, new technologies, trends and expectations had to be taken into consideration. At the same time, one had to be careful and make assumptions regarding adoption and buying rates; and consult industry groups, outside experts and review competitors before taking the decision to go forward.
On whether there were differences in funding for product and business innovation, one view was that it was more likely for product innovation to be self-funded well as business innovation had more chances of being externally funded.
Also, for existing products, there already exists a revenue base which can be used to fund innovation. Well as with business innovation, you probably have 12-24 months to obtain the ROI on your efforts – while there is more pressure to deliver, there is also more flexibility to change the product approach or plans.
There was also consensus that today’s products need to be more user-friendly and require minimal training – to cater to that, more customer involvement has become the norm in product development, release cycles have become shorter and UI design has gained more prominence.