Innovation has become an area of focus for private enterprise and public organisations alike. Done well, it can lead to better products. Innovators observe how processes and people interact, what customers want and need and how the organisation meets these needs. These innovators drill down to understand the key customer requirements and look at ways in which things may be done differently to improve the experience.
Competent Product Managers understand that a product consists of more than simply a core offering. The entire experience is important – how a customer learns about the product, how they purchase it, how they actually use it and where they buy it. Products and services can be differentiated from competitive offerings by enhancing not only the core product but also these other elements.
Applying some of the innovators techniques to Product Management, Product Managers can differentiate and deliver an exceptional product or service experience.
Applications of Innovation
The Doblin Group’s popular ten types of innovation model helps to show how innovation can be applied across a product. They suggest that there are four broad groupings in which innovation can be applied. These are referred to as finance, process, offerings and delivery:
- Finance: This group relates to the underlying model and structure of the business and its relationship with partners, customers and collaborators. We think “Strategy” may have been a better term as it’s not purely financial factors.
- Process: This group covers the operational procedures that allow the product or service to be developed. The model divides this group into core or internal processes which are supported by enabling processes – those that may be outsourced to other entities.
- Offering: This group covers the application of innovation to the actual product or service. It incorporates performance related enhancements, changes to the extended system that supports a product and the service aspects offered to make the purchase or use of the product easier for the customer.
- Delivery: The more marketing related elements of positioning, distribution, branding and overall customer experience make up this end-user facing group.
Where to Innovate?
Taking a moment to think through some well known or discussed innovations, we see that a great deal of effort takes place around the core product. For example, when a chip manufacturer introduces a new range of slightly more powerful processors, or when an automotive manufacturer improves fuel efficiency.
However, analysis shows that this form of lower risk innovation tends not to provide the greatest return. This could be due to the diminishing returns of increasing performance, or it could be that multiple competitors focus on the same factors and there is therefore less opportunity to go around.
Smarter organisations focus on other areas. They may focus internally, looking at the way the business operates, what its costs are and which aspects of its operations it excels at. Others may look at the external environment to understand what customers want most and work out how existing products and services can be tailored to best satisfy these wants. The best organisations do both of these and focus their innovation efforts on those elements which will provide greatest value to customers.
Australasian Innovation Examples
We had a quick brainstorm and looked at two local examples:
Fisher & Paykel’s DishDrawer Dishwasher
Whereas many other whitegoods manufacturers focused on low cost models of operation to be able to offer products at low prices, Fisher & Paykel has focused on innovative product design that better serves customers.
The Dish Drawer dishwasher looks somewhat like a filing cabinet in that it has two separate drawers. Different items are loaded into each drawer: heavy, dirtier items like plates in the bottom and finer items like crystal glassware in the top drawer. The shape and structures in each compartment make it easier for users to load and unload. The appliance uses different settings of temperature, water pressure and other factors to clean each drawer’s contents in a different way.
Fisher & Paykel combined the intuition of its design and engineering teams with studies of how people used dishwashers in their homes. They noticed common problems that people experienced: dirty items not being cleaned well enough; fragile items being damaged; difficulty in loading and unloading.
Fisher & Paykel has continued to enhance this product over time, making different size models, introducing more fashion-inspired design elements and improving water efficiency.
In addition to focusing on the offering, Fisher & Paykel also engaged a global network of whitegoods manufacturing partners. This allowed it to establish wider distribution and licencing of manufacturing to make its products available to a wider audience than it could feasibly serve through its own manufacturing capacity. Fisher & Paykel focuses its brand messaging on its innovative products and has built a unique and positive reputation in the market.
Thomas Dux Grocers
Thomas Dux is a subsidiary of Woolworths, but you wouldn’t guess it. With just eleven stores in upmarket areas of Sydney and Melbourne, Thomas Dux has developed a differentiated positioning in the market. As a subsidiary Thomas Dux uses the existing Woolworths supply chain and supporting operational elements of the national food chain. These enable it to operate the basic business – food retailing – but it has developed a unique offering and experience for customers.
Inspired by traditional delicatessens and farmer’s markets, Thomas Dux offers a drawcard of locally sourced fruits, meats, dairy and bakery products as well as a limited product range of generally mid-to-high end food products. There is a focus on organic products and those that come from sustainable producers.
Thomas Dux has innovated in the service application as well. Its staff are knowledgeable and shoppers are encouraged to ask questions and interact with employees. The core offering of a local grocery shop is augmented by a well designed website that provides useful information such as recipes, food facts and tips.
The combined effect of these innovations has created a unique customer experience that helps shoppers feel that they are part of a community.
Implications for Product Managers
When looking at a portfolio of products and services, product managers should take a holistic look at what their product is and how it meets customer needs. Take note of where your innovation efforts and those of your competitors have focused and look at other areas that add value to customers but which may have been overlooked. Stepping into less familiar territory may lead to some attractive opportunities for change.
It’s also advised to determine if a combination of innovative changes can be developed, enhancing a product or service in multiple factors to make it really stand out.
Let us know if you have any interesting examples of where you have used innovation in particular applications.