June 2, 2020  
 
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Product Innovation

Written by Samuel Muriithi for Gaebler Ventures

To ensure that its operations in the market remain relevant, a small enterprise must have the perpetual ability to satisfy its customers' needs. This can only be achieved if the business' products/services are what the customers require. What then are the reasons that make product innovation so important an issue for small businesses?

Product innovation for small enterprises is more of a fundamental requirement simply because all products and services generally follow a life cycle of introduction, growth, maturity, and eventual decline.
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After the decline stage the replacement of a given product becomes imminent. This life cycle offers two thinking points that really signify the importance of product innovation. Firstly, every small enterprise that engages in some sort of production should realize that the competition from other firms' new products will serve to erode both sales volumes and market share. Secondly, the failure to change or replace a product will only result in diminished sales and profits, and perhaps a total stalling of the business.

Product innovation is an essential component of a small enterprise's bid to sustain a given rate of profit. A typical profit curve will illustrate this observation very lucidly. This curve illustrates that the profit margins start to fall even as the sales volumes are in ascent, the reason being that much more must be spent on the marketing and sales effort thanks to competition forces. To stay ahead of the pack therefore, product innovation, and at just the right time, is an inescapable reality.

A close observation of the most successful companies around will show that a good portion of their current sales revenues and profit margins are being earned from products that were not part of their roster some 5-10 years ago. This remark further highlights the importance of product innovation for small enterprises, and is further stressed home by the famous management maxim 'innovate or die.' The introduction of new products/services is not only important for sales and profits but for both a sustained market existence and business growth.

The current crop of consumers is a totally different kettle of fish from the conventional customers of the past. With their increased disposable incomes and access to an abundance of product choices, modern-day customers are more selective than ever. The market is awash with products that are only marginally different from each other; a more subtle way of describing the imitations that the discerning customers of today have to sift through. A small enterprise does not have the resources to compete against mass manufacturers who churn out tons of imitations. The only way for such an enterprise to penetrate the market is to offer an entirely new option through consistent product innovation and not imitation.

The small enterprise cannot afford to be ignorant about the threat of ever-diminishing levels of natural resources. A depletion of these could sound the death knell for the business. In this regard, product innovation for small enterprises is clearly essential. There is need for a proactive research effort in trying to establish what alternatives of production resources can be pursued once the presently used ones start to become unavailable.

Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.

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