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different sources of innovation
Source of Innovation Definition Examples of Innovation
Technical breakthrough Innovation that results from technical development. MP3 players; GPS navigation system; Wireless Internet service
Non-technical idea development Finding niche markets without making radical changes to the basic product category. Does not rely on new technology. ‘Build a bear workshop;’ Frozen yogurt stores
Idea from outer environment Importing ideas from other cultures, places, and settings IKEA in the US; Yoga or Taekwondo in Western nations
Serendipity Innovation through an accident, when looking for something else X-rays; Penicillin
Purposeful development Innovation that derives from heavy investment, once strong demand is recognized Prescription drugs; Pencils with erasers

It is also possible to create a new business model. Wal-Mart is a good example here, as the retailer applies the philosophy of low prices and cost cutting to every aspect of its operations, including logistics, employee compensation, managerial philosophy, packaging, merchandising, negotiations with suppliers, and so forth. This manner of innovation is discussed in more detail in the section which follows, “Product Categories.”

Product categories

There are a number of ways to classify products (see [link] and [link] ). For instance, a product can be classified by durability and tangibility. Packaged goods are tangible and are consumed in one or a few uses, such as in the case of beer, soap, or fuel. Durable goods are tangible and survive many uses. Consumer examples include furniture, TVs, computers, clothing and automobiles. According to one convention, a durable good lasts more than one year. Non-durable goods are tangible, but they provide benefits for a short time. Good examples include: gum, shaving cream, gas, batteries, and cosmetics. There are also controlled goods which are often restricted by government action, due to their potential danger or addictive nature. Good examples include: cigarettes, alcohol, tobacco, firearms, and even some over-the-counter drugs.

Business-to-business (B2B) products refer to goods bought by individuals or organizations for further processing or for use in doing business. Examples in B2B include: buildings, flour purchased by a commercial baker, crude oil, steel for automobile manufacture, insurance policies for company buildings, and business consulting services. Business-to-customer (B2C) products refer to goods that individual customers purchase for personal and family use, such as passenger cars, hairdryers, TVs, medical insurance policies, and carpet cleaning services for the home.

Convenience products are products that consumers want to purchase frequently, immediately, and with a minimum of effort. Examples here include: soft drinks, cigarettes, fast foods, newspapers, public transportation and candy bars. Shopping goods are purchased only after consumers make comparisons with competing goods based on such attributes as price, quality, style, or color. Examples in this category include: MP3 players, passenger cars, clothing, furniture, and houses. Specialty products are products with unique characters. Buyers often prize such goods and make a special effort to obtain them. Examples in this group include collectable items, engagement rings, vacation homes, yachts, art works, luxury cars, and special concert tickets.

Products can be divided into goods or services. Goods are either durable, non-durable, or controlled. Goods and services can be business-to-consumer or business-to-business. Business to consumer is comprised of convenience, shopping, and specialty.
Rough Classification of Products
Classifying products
Category Name Definition Example
Good A tangible physical entity Table, electronics, soda, candy bar
Service An intangible result of the application of human and mechanical efforts to people or objects. Haircut, dry-cleaning, gardening
Durable Products that provide benefit for a long time and are not used up when used once. Automobile, house, machines
Non-durable Products that provide benefit for a short time. Milk, laundry detergents, tissue paper
Controlled Goods Products that need to be regulated due to their potential danger or addictive potential. Tobacco, alcohol, firearms, pharmaceuticals
Business-to-business Goods bought by individuals or organizations for further processing or for use in doing business. plastics for a car manufacturer, insurance plan for plants
Consumer The goods individual consumers purchase for personal or family use. Canned soup, medical insurance
Convenience Products that consumers want to purchase frequently, immediately, and with a minimum of effort. Chewing gum, beer, cigarettes, fast food
Shopping Products purchased only after the consumer has made comparisons with competing goods on such bases as price, quality, style, or color. TV, automobile, house
Specialty Products with unique characterizations that cause the buyer to prize them and make a special effort to obtain them. Luxury sports car, jewelry,

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Source:  OpenStax, Business fundamentals. OpenStax CNX. Oct 08, 2010 Download for free at http://cnx.org/content/col11227/1.4
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