Companies, products, services etc. does in my opinion not have to be rocket science, advanced technology or something like that to be innovative. Let’s look at my definition of innovation, which is the quote of Peter Drucker: “Change that creates a new dimension of performance”. If you agree with that quote, you will probably agree with me when I say that product innovation not necessary is high tech. This will be the starting point of the rest of the post.

Internal and external innovation advantages
I like to divide innovation advantages into two groups when I compare products: Internal and External. I use internal innovation to describe innovative differences when comparing a company’s own products. Most companies have a basic assortment and an advanced assortment of products. With external innovation advantages I mean innovation advantages of one company’s product compared to a competitor’s product in similar category. I will in the following use simple examples to demonstrate the internal/external way of thinking. I use ketchup as an example – it’s a simple product we all know.

Internal innovation
Let’s take a look at Heinz Ketchup. Even though it’s a simple product without any high tech features, it’s possible to talk about product innovation. The regular Heinz tomato ketchup has been made since 1876, but a lot of variants have been developed since then. The new variants are developed to increase the market size and market share. Ketchup is no longer just ketchup. This is some of the variants Heinz offers:

• Organic Ketchup (for the environmental aware customer)
• Reduced Sugar and Salt Ketchup (better for your blood pressure and weight)
• Hot Ketchup (a spicy ketchup)

As illustrated above, by changing the ingredients, the ketchup gains advantages and become a new product even though it still is ketchup. Let’s take the Organic Ketchup as an example. Organic ketchup is made from organic tomatoes, and this product now appeals to environmental concerned customers who want to buy products made from natural organic ingredients which haven’t been exposed to chemicals etc.

In this case the innovation is represented by changing ingredients from regular to organic, which will be considered an added value by customers, and make customers feel good about their purchase. So in that sense you can say it’s an increase in performance.

External innovation
The opposite to internal innovation is external innovation. By external innovation I mean added innovation compared to the competitors products. A very good example of external innovation is the Heinz Stay Clean Cap bottle. After a while all ketchup bottles get greasy around the cap. Not a pretty sight on the dinner table. Heinz then introduced the Stay Clean Cap bottle, which made it easy to get the ketchup out of the bottle without getting a messy bottle.

This way Heinz gained a competitive advantage to other ketchup brands. The Stay Clean Cap bottle is in this example the external innovation. Heinz innovated their product compared to the (external) competitive products on the market, and for those who didn’t had a ketchup brand preference the smarter bottle could be the reason for buying Heinz.

The grey zones
In many cases internal innovation can also be considered an external innovation. So I typically use the internal innovation to define internal product segments and product roadmaps. I define Internal innovation as what you do to increase the market size/potential.

The external innovation I use to list unique selling points, do market segmentation etc. compared to competitive products and companies. In other words, I define external innovation as what you do to gain competitive advantages.