What are the pros and cons of constant innovation?

In the high tech world, innovation is the lifeblood. Companies spend billions on research to develop the next new thing, or add more bells and whistles to existing products. Is constant innovation necessary for high-tech to survive? Many experts say yes; without it you can't really compete in the long term or be a global player. But there are also negatives associated with constant innovation. In the average product line, you may reach a point where further innovation will either annoy your customers (due to the philosophy: if it ain't broke, don't fix it) or the cost of innovation drives up prices. You risk losing customer loyalty and market share.

The Pros
The obvious number one reason to undertake constant product innovation is to achieve competitive advantage. Whether you compete with a few large players or many small ones, product innovation can make the difference, especially if you are first to market with the specific innovation. Conversely, if you're trying to catch up with the competition, you may need to innovate just in order to survive in the marketplace. Either way, innovation will help you get to the level of where you need to be.

Innovation can help you build your brand. If the product innovation is well received and you get new customers from it, you may gradually become known as the innovation leader in your market space. That brings publicity, which leads to greater awareness and eventually, future sales.

Innovation can also be a market strategy for entering a new vertical or geographic market. It's a way to differentiate your company and product from the other companies who are in the space, and thereby get some attention for your company.

Sometimes product innovation can bring your costs down and make your product line more profitable. An example might be replacing a hardware component with a software component, in turn reducing the manufacturing costs for the product as a whole.

The Cons
Nearly everyone can think of an example of a product that works really well, and when you go to buy another one, or to buy an upgraded version, it's not the same. Not only does the product have new features for you to learn, but the old familiar features are gone! My most recent experience with this is a well-known version of antivirus and personal firewall software. After my most recent computer crash last year, I was advised to buy the latest version of this software each year to avoid future crashes. Well, the 2006 version of the software was great. It did everything I needed and I had no problems. Then January 2007 rolled around, and I faithfully went to buy the newest version. What a nightmare! Not only were the key features missing (like antispam for email, and anti-adware), but I got a shutdown error every time. After spending weeks on the message boards with other sufferers, I came to the conclusion that the company was not about to fix the software. So, I loaded the old version on my PC and removed the new version and now I have my sanity back. I have another year to change brands, because I refuse to go through that downtime again. The result: the company lost a loyal customer because of innovation.

Another negative about innovation is the potential for confusion in the marketplace. If small changes are made in a product in a product line, it may be difficult to explain what the new features and functions are and the corresponding value to the customer. That's especially true if many small innovations are made in a relative short period of time (like less than a year).

Innovation costs money. Eventually, you will have to pass on some of those costs to your customers by raising prices. Your customers may not want to pay a lot more for a product that has some slightly new features. And even if it's a whole new product, you still run the risk that your customers will compare the new product to the previous version, regardless of what was added to it.

Sometimes if you introduce a lot of new innovations, it becomes more challenging for your customer support team to support a long list of products, including those that are near obsolescence. Your past customers with older products deserve the same levels of support as those who buy the newly innovated products, so it may cost more to expand your support team and/or provide additional training.

Many Ways to Innovate
If product innovation is too challenging, remember that there are many different types of innovation beyond just adding features and functionality to a product or product line. You can apply innovation to your customer service, how you deliver your product, how you price your product, or how you bundle products together.

Do What's Best for Your Business
In deciding whether and when to innovate, you should weigh the pros and cons relative to your business as a whole. That means examining the impact on your technical and support teams, your customer, your competitors, and of course, your bottom line.