Product Innovation: Why It’s Not That Important

by Oct 29, 2019Business

The most disruptive innovation comes from elsewhere 

Whenever I speak about innovation, one of the companies I point to is Apple. Of course, some would argue that Apple is less than innovative these days. But just about anyone would acknowledge that Apple has produced a strong line of innovative products–especially the iPod, iPad, and iPhone–in the past.

But when it comes to the topic of innovation, creating products is just one form of innovation–and it might not even be the most interesting one. Let me point to five different areas that some highly successful companies have innovated in ways that go beyond products. As you try your find your mafia offer for the market, these are all worth considering.

1. Customer Experience

Creating a sense of unique customer intimacy, one where you design an experience for your customer that no one else can match is a powerful form of innovation. The classic example here is Disney. Beyond just creating interesting hotels and theme parks, Disney generates “magical moments” and experiences–those Magical Moments–that no other theme park can match. It’s not about the technology behind the rides as much as that feeling of being somewhere special with your family and friends. You just don’t get the same experience in any other theme park.

2. Super Service

I work with an ultra-high-net-worth investment firm in Virginia called PagnatoKarp. It’s hard to compete in the world for financial services and advice and especially hard to differentiate yourself from all the other firms out there. But what PagnatoKarp has done is innovate in the way they cater to their customers by offering concierge-level service. They will literally do just about anything their clients need–from walking their dog to booking a private jet or safari vacation, to doing their taxes–in addition to managing their money. I know they even had a psychologist on staff to help counsel the families of clients about issues around wealth. The point is that they have innovated by creating a service set beyond their core wealth management business that helps them win new clients all day.

3. Financing

When we think of the world of software, we might think innovation is tied only to the introduction of new features. But one of the truly biggest innovations in software was when firms shifted from charging clients an up-front fee for their software and then subsequent support charges for updates to the model we know call software as a service, or SaaS. Now, companies typically pay a renewable monthly fee to access their software online–which makes their businesses very predictable and profitable. It’s no surprise that the market currently values SaaS companies highly because of this. So again, this is an example of an innovation that didn’t involve a product. Rather, it involved how companies created a whole new way to finance it.

4. Talent

We’ve all heard about the War for Talent that’s going on today resulting from historically low unemployment rates. That has forced companies to really come up with creative ways to recruit and retain the best people. Now consider what the online retailer Zappos does. They actually have many innovations when it comes to attracting great employees, from bringing your dog to work, to attractive officers and vacation policies. To fit their culture, Zappos looks for a particular kind of employee–someone who is fun, engaging, and service-oriented. But sometimes people who don’t quite fit this model slip through the cracks and get hired when they probably shouldn’t have been. So what does Zappos do? They actually offer any employee $2,000 after their first month on the job to quit. While that might seem counterintuitive–they’re paying them to leave?–the point is that Zappos actually weeds out the bad apples from its culture. If someone knows they don’t fit, they’ll take the money and walk away–which actually saves Zappos money in the long run because almost all of their talent is a perfect cultural fit.

5. Business Model

This is for me the most powerful area a company can innovate. A prime example, which I write about in my book, Great CEOs Are Lazy, is Netflix–which has actually employed three different innovations to its business model in its lifetime so far. The first was its shift from the traditional brick-and-mortar store to offering online DVD rentals with no late fees–an innovation that has essentially killed off its giant rival, Blockbuster. Their next innovation was to shift from DVDs to offering online streaming–something they were ahead of just about everyone one else on. The third innovation Netflix employed is when it became its own movie studio where it created its own sets of content such as shows like House of Cards. These shifts show how Netflix has been willing to destroy its own business model in order to innovate and stay ahead of its competitors. I’m confident Netflix may already be working on its next iteration of how it will innovate its business model to keep pressing its lead. Virtual Reality movies anyone?

When it comes to your business, how are you innovating in ways that go beyond products? To be frank, if you can’t tell me that your business is employing one or more of the five approaches I have outlined above, then you probably don’t have a business that can grow fast enough to reach its full potential.