Innovation is essential to what we do as product people. It’s also our biggest struggle.
Most of us know how to create great user experiences and lead an engineering team to astounding success. But very few of us have truly innovated.
I’m not saying we can't—of course we can! It’s simply a process that takes a long time.
The good news is that there are lots of successful product innovation stories from which we can seek inspiration. So, let's get into it!
What Is Product Innovation?
The term “product innovation” is a bit generic. We call something an innovative product if it has started solving an existing problem much better than others or has tackled a customer need that was considered unsolvable.
But, we usually don’t like to dig a bit deeper and understand which part or aspect of that product was really innovative. I mean, you can definitely say Apple’s iPhones were revolutionary products. But what were the real innovations in them? You might say that the touchscreen was ergonomic. Yes, but the real innovation behind it was the use of capacitive touch technology and multitouch UX.
So, you might consider product innovation to be an umbrella term for the different aspects of product development where companies do something novel. Some of the areas where you can apply your innovation strategy include:
- Business model: How you (and your suppliers) make money with the product.
- Processes: How you prototype, build, distribute, and support your new products.
- Technology: The engineering solutions you created to solve the problem 10x better and get a competitive advantage over others.
- User Experience: The way your users navigate your product and solve their problems with it.
- Management: How you have organized the work in your company and led your team & stakeholders towards success.
The internet is full of content on the last two types (and they are usually incremental innovations). So, I've decided to focus on the first three and share a couple of examples of product innovation for each.
Business Model Innovation Examples
An innovative product does not have to be one with novel UX or technology. Sometimes the way you make money is what sets you apart.
The two products that I want to highlight here have revolutionized the tech world by setting up business models that quickly became industry standards.
1. Spotify’s Subscription Streaming Model
We have gone a long way in terms of distributing music. Back in the good ol’ days, you had to buy an entire CD to be able to listen to your favorite single. Then artists started distributing music digitally. Although this model lets you buy a single song instead of an entire album, you still had to spend hundreds of dollars to build yourself a decent library.
Enter Spotify, the company that completely revolutionized the music industry and made the song purchase model obsolete.
The idea of paying a flat monthly fee for unlimited access to millions of songs was a great value added for consumers. Now, you could have thousands of dollars worth of music in your library at a fraction of the cost. As a result, earning decent user traction and growth was an easy sell.
But Spotify had one massive obstacle to overcome—convincing the super-conservative music industry to stop selling albums and switch to the subscription model.
Record labels were simply afraid that their revenues would plummet. But this model also had one massive advantage for them. It had a good chance of making music piracy obsolete.
For decades, music labels could not enter any 3rd world country (especially the post-Soviet space) because people there could not afford their prices and would pirate their songs instead. But, if there were a platform where you could listen to millions of songs for a couple of bucks a month, pirating music would not make any sense to you.
This was an offer that the industry could not reject. So, soon, everyone was on board—making Spotify the dominant streaming service in the market.
2. Salesforce Popularizing the SaaS Model
Probably the most important business model innovation in the software world was SaaS. And you cannot talk about SaaS business without mentioning Salesforce.
While it was not the first company to rent out software for a monthly fee, Salesforce was definitely the one responsible for popularizing it.
Salesforce wanted to use the SaaS model as it would create a steady and predictable cashflow and significantly simplify their financial management.
But, just like Spotify, they had to deal with highly-conservative customers (which were large entrepreneurs in this case) who did not like this model. So, to convince companies to pay them a monthly fee instead of making a one-time purchase (like they are used to), Salesforce had to make sure that their product came with a lot of benefits for enterprises.
They made a strategic decision to build a web-based application instead of a classic desktop program. Thanks to this, they could offer:
Continuous feature updates: With a traditional one-time purchase, you would access a single version of a product. In order to get new features, you had to buy the new version. With a SaaS web application, though, you would constantly get new features and updates without having to pay extra for them.
Fast security patches: If your software had a security bug, you would have to issue a patch and ask the company admins to install it on hundreds or even thousands of workspaces. With a web app, the patch would apply to everyone immediately.
Easy deployment and user management: Again, this was about the gruesome task of installing a desktop program on multiple computers and managing them. With a web SaaS app, all you need to do is add a new user to your dashboard, and they can access it from any device they want.
This was definitely a win-win strategy, and very soon, enterprises all over the world started managing their customer relationships with Salesforce.
Process Innovation Examples
The second category of product innovation is the one that usually gets the least attention from product leadership. In most cases, leaders are content with following industry-standard processes and don't often prioritize innovation in this area.
However, what we—the product people—usually fail to understand is that disruptive innovations (that can earn you most of the existing market share) can happen with the way you run your processes, too.
To prove my point, let me talk about Tesla and Nike.
Tesla’s Over-the-Air Software Updates
No car manufacturer in the world can come even close to the quality of the software you get in a typical Tesla electric car. Heck, you can even argue that a Tesla is mostly software and computers with some car wrapped around it.
Tesla drivers get a fantastic user interface for controlling your car with lots of features, as well as advanced AI that predicts crashes and even drives the car for you (always keep your hands on the wheel, though).
But, probably the single most important innovation in a Tesla is its automatic OTA update process. Just like your phone or laptop, your car will download a newer version of its operating system and ask you to install it.
With each update, you can get lots of cool additions to your car, like a new autopilot, a bugfix for something that annoys you, or even a new feature called Joe Mode. This is definitely a value added for Tesla customers. However, the main beneficiary of the OTA process is the company itself.
Telsa has ditched most of the physical buttons that you can find in a typical car and turned them into software features. So, if anything goes wrong with one of these features, instead of going through a costly recall process, they will simply push a bug fix with their OTA system.
Moreover, OTA updates allow Tesla to respond rapidly to new market and regulatory changes. A great example of this is the EU regulation that banned autopilot at certain speeds. To comply with such regulations, traditional car manufacturers will usually recall all of their cars in the EU and add this limitation.
Tesla, on the other hand, pushed a tiny software patch to its EU cars over OTA and instantly solved the compliance issue.
Nike’s Mass Customization
The NIKEiD program of this renowned shoemaker lets users build custom shoe designs using their online platform and order them online.
Note: To be fair, Nike was not the first shoemaker to offer mass customization. But it was the first one to do it on a massive scale, which required a series of process innovations.
This one’s not entirely a digital product, but it definitely deserves a mention, considering the importance of the innovation it brought to the world of commerce.
Personalization is one of the biggest trends in the product and marketing world right now. The more customization you offer to your customers, the better you can meet their needs.
But there’s a significant problem to solve here. Modern mass production and logistics processes are built with standardization in mind. The main reason behind this is economies of scale—it is simply cheaper to produce tens of thousands of copies of the exact same product.
So, in order to enable mass customization, Nike had to completely transform its supply chain and logistics processes. The factories producing Nike shoes had to have more flexible machines that could change the shoe design/configuration on demand.
Shipping products to customers became more complicated as well. While Nike would ship you a standard shoe model from its nearest warehouse, the NIKEiD shoes had to be shipped directly from the factory. So, Nike had to innovate with their processes there, too.
Technological Innovation Examples
Finally, we have the product innovation category that takes the most effort from your team but also gets the largest boost in your value proposition—technology.
The number of successful new technologies deserving a mention is quite long (e.g. Kindle, Bluetooth, video streaming of Netflix, Amazon’s cloud, real-time messaging, etc.). So, I’ve simply picked the two that I personally like the most.
2023 was most certainly the year of radical innovations in AI. We saw ChatGPT handling your day-to-day work and even helping you with job hunting. Then there was Midjourney and DALL-E creating images out of the silly prompts we gave them (surely, I was not the only one asking them to draw Yorkshire terriers dancing polka in Slavic costumes!).
While most people used them for fun, companies (including tech giants) saw great potential in these technologies and started building meaningful products out of them.
In terms of image generation AI, Adobe’s Firefly is arguably the most successful one. It added a series of practical features to Adobe’s creative tools that let you select subjects on the image and replace them, add people or items on it, and even expand it.
I am pretty sure that you have seen a million TikToks and YouTube shorts with artists demonstrating these features and even having fun with them.
And probably the most impressive part of Adobe Firefly is the quality of the work it produces. The talented machine learning folks at Adobe have undoubtedly raised the bar for generative AI.
Dropbox’s Native Integration And Delta Sync
You might be noticing a trend here—the majority of the companies we talked about didn't roll out a product that had never been seen before. Instead, they offered something that was 10x better than their competition.
Dropbox is among them. When it launched in the late 2010s, the market was already full of cloud storage services. However, honestly, all of them were terrible in terms of usability.
This created an opportunity for Dropbox. If they could come up with innovative solutions to these problems, the cloud storage market would be theirs.
The problems with existing products were the following:
Manual File Upload to the Web
While keeping your files online was great value added for many users, it had a major problem: you had to upload everything manually.
This was not a problem if you only needed to store a couple of files online. But managing your entire company storage in the cloud (as in, thousands of files!) was a gruesome task.
How Dropbox Fixed It
They came up with two technological solutions that fixed this problem.
- Native integration with a computer folder. It meant that you would simply store your files in the Dropbox folder on your device and manage it the same way you do for your other local files.
- Automatic sync. Dropbox would monitor this folder for changes and automatically sync it to the cloud.
With these two, Dropbox created a customer experience that was far more natural and seamless.
In fact, this solution was so successful that nearly all other major cloud storage services started copying it.
This is the pinned folder section on my computer. You can easily spot Microsoft’s OneDrive and Google Drive Folders beside Dropbox, too (don’t ask me why I have three cloud folders).
Slow and Heavy Sync Process
The other downside of cloud storage was the speed and excessive use of bandwidth when uploading your files. Again, this was especially prominent for people and companies with lots of files (and they were usually the best paying users for these services!).
How Dropbox Fixed It
Dropbox engineers created a special algorithm called Delta Sync. It was able to read the contents of the files, find the parts that changed, and sync them instead of the entire file.
Creating this algorithm was one of the harder technological challenges Dropbox had to overcome. But the effort was definitely worth it as users have long considered Dropbox the fastest and the most lightweight storage service out there.
Building Something Innovative Is Hard...But Doable
I hope I didn't give you the impression that only the "big guns" of the tech world are capable of creating something innovative. In fact, most of them innovated during their “mom’s garage” startup phase, and it was their innovation that made them the tech giants we know today.
So, believe me, you are definitely capable of building something disruptive, too!
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