A Dynamically Continuous Innovation Mkt 327
Classification of Innovations: According to the Perspectives of the Customer and Target Market !
Corporate success will increasingly depend on bringing new products to the market. Companies need to constantly innovate in order to keep pace with changing tastes and preferences of customers, competition from companies in the same industry and rapid strides in technology.
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No longer can companies rest on the laurels of the successful product launches in the past. Though successful innovations are few, companies need to develop a failure tolerant culture while developing and launching new products in the marketplace.
The real test is the number of successful products that the company is able to launch. Invention is the discovery of new ideas and methods. Innovation occurs when an invention is commercialized by bringing it to the market. Companies have to be active on both these fronts.
Defining Innovations :
Innovations may be looked at from various perspectives. The following classification presents the perspectives of the customer and the target market.
Customers perspective :
On the basis of the extent of change an innovation causes in consumers' existing habits, innovations can be of three types-discontinuous innovations, dynamically continuous innovations and continuous innovations.
Since the classification of an innovation along the above lines is done on the basis of the extent to which the innovation causes change in consumers' existing habits, whether the innovation is of one type or the other depends on the type of customer towards which it is aimed at. The same innovation may be continuous for one segment of customers and dynamically continuous for another.
Discontinuous innovations :
Discontinuous innovations by their very nature are discontinuous to every customer segment, since they comprise new to the world products only.
These new products are so fundamentally different from products that already exist that they reshape markets and competition. For instance, mobile phone technology and the internet drastically changed the way people communicate.
Continuous innovations :
In continuous innovation, an existing product undergoes marginal changes, without altering customer habits. Sometimes the customer may not even perceive these products to be new, though the company may have invested a lot of money to improve its existing products.
For instance, a shampoo which is different from existing products only in its brand name, fragrance, colour, or packaging is also a new product, but it does not change customers' habits in a big way.
The continuous innovation should be above the perceptual threshold of the customer i.e. there should be a 'Just Noticeable Difference' (jnd) between the continuous innovation and the existing options for the customer to perceive this innovation as an improvement. Put simply, the customer should find the new product different from the existing options that he is aware of.
Dynamically continuous :
Dynamically continuous innovation falls between the discontinuous and continuous innovation. The changes in customer habits caused by such an innovation are not as large as in a discontinuous innovation and not as negligible as in a continuous innovation.
The progression from a manual to an electronic typewriter and the advent of cable and satellite television are examples of dynamically continuous innovations.
Company's perspective :
A company defines an innovation based on what the company tries to achieve from the new product.
i. Product replacements include revisions and adjustments of exiting products, repositioning and cost reductions. For instance, Tata Motors Limited improved its first offering Indica after receiving customer complaints, and relaunched it.
ii. Addition to existing lines, for instance, addition of new brands, new technologies (for instance, Pentium IV processor, an improvement over Pentium III, or Mach III over Mach II by Gillette), new varieties of flavours, fragrances, SKUs (size of the product, for instance, a 100gm toothpaste along with the existing 250 gm tubes), product forms (for instance, liquid soaps in addition to bars) etc.
iii. New product lines, when the company launches new product lines and widens its product mix. For instance, LG has added product lines like mobile phones and music systems to its product portfolio.
iv. New-to-the-world products are those products that create entirely new markets. These products carry the highest risk since it is difficult to predict customers' reaction. Marketing research will be unreliable in predicting demand as people do not really understand the full benefits of the product until they get a chance to experience them.
It may take time for the products to be accepted. But if and when these products are accepted, the company's gains are huge. Successful new to the world products are pure technological innovations which serve a very strong latent need.
There was always the need for mobile connectivity but a simple marketing research exercise would not have revealed this need as customers believed that this need cannot be met. How many times have we been stuck in traffic jams wanting to contact our people at home but still did not curse technologists or marketers for not providing us mobile connectivity.
The idea of mobile connectivity did not cross our minds because we believed that it was in the realms of infeasibility. But as soon as the relevant technology came forth to enable mobile connectivity, customers lapped it up.
Probably, the diffusion of mobile connectivity among customers across the world has been faster than that of any other technology. Successful new to the world products are the concurrence of strong latent needs and emergence of an enabling technology.
However, it is clear that the classification of innovation from a firm's perspective can also be included in the earlier classification of discontinuous, dynamically continuous and continuous innovations.
For instance, new to the world products are discontinuous innovations, while product replacements are continuous innovations.
Firms need to understand that continuous innovations such as adding a brand variant to an existing product line lacks significant risk, but offers less significant returns, while discontinuous innovations are extremely risky, but if successful, returns could be huge.
Source: https://www.yourarticlelibrary.com/innovation/classification-of-innovations-according-to-the-perspectives-of-the-customer-and-target-market/13586
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