What are the types of new products that a firm can introduce? What are the problems associated with introducing a truly innovative product? What are the necessary conditions to create a radically innovative product?
Answer: New products range from new-to-the-world products that create an entirely new market to minor improvements or revisions of existing products. Most new-product activity is devoted to improving existing products. Truly innovative and new-to-the-world products incur the greatest cost and risk. Although radical innovations can hurt the company's bottom line in the short run, if they succeed they can create a greater sustainable competitive advantage than ordinary products and produce significant financial rewards as a result. Companies typically must create a strong R&D and marketing partnership to pull off a radical innovation. The right corporate culture is another crucial determinant; the firm must prepare to cannibalize existing products, tolerate risk, and maintain a future market orientation. Few reliable techniques exist for estimating demand for radical innovations.