Business entities must innovate to survive and grow. Every product has a life cycle, and eventually even the most successful products reach the end of their economic life.
Innovation is necessary for several reasons.
a. Product renewal. Changing the design of a product can help to renew or prolong its life. Many products therefore undergo design changes during their life, in order to maintain or increase sales.
b. Product adaptation. Products can be adapted for a new market segment. For example, a product that is marketed successfully in the US might be adapted by its manufacturer for sale into Europe, where customer needs might be different from those of US customers.
c. Developing new products. New products are continually being invented and developed. Many new product ideas are unsuccessful. However, when a new product is successful, the first firms to enter the market and develop the product will often be the market leaders throughout the product’s life.
d. Developing new technology. From time to time, new technology becomes available that creates opportunities for new products and also for new ways of doing things.
Changes in information technology and communications technology are the most notable recent examples, but significant changes are also occurring in other industries, such as energy and biochemistry.
If a business entity fails to innovate, it will be at a competitive disadvantage to its rivals.
If a business entity believes that it does not need to innovate, because it can copy the innovations of its competitors, it will always be in a position of ‘catch up’, copying competitors who have already established their leading position in the new market.
The need to innovate cannot be emphasized, as innovation keep your business ahead of competitors.