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Overcoming Problems in Software Innovation

by David Burkett, Jun 30, 2016

Traditionally, when we need something, a product will satisfy that need. Companies have thrived off the consumer's needs-based approach to spending. This drove a trend whereby companies adopted a narrow approach to innovation by just focusing on the product itself. However the landscape is changing, a narrow approach to product innovation just won't cut it anymore. 
Are you selling software or are you selling a service? Nowadays the focus has shifted onto service innovation aimed at providing more comprehensive customer experiences. This has reformed the innovation process, with companies now prioritising the customer when developing products. One area this is becoming particularly evident in is the smartphone industry.
Literature suggests that the factors affecting the adoption of smartphones differ according to user groups, mobile phone manufacturers and retailers need to develop different strategies to increase smartphone diffusion rate among the two groups. One paper found that making service-oriented considerations (attributes of the mobile phone focusing on service) a priority will affect consumers more significantly than product-oriented features. These changes in the market continue to drive the shift to adopting a service-oriented approach.
So what does this mean for software innovation? We are seeing a growing trend in products focused on servicing the end-user. Take Software as a Service (SaaS) as an example. It's centrally hosted allowing the provider (host) to service multiple clients and react to their needs. It also offers accessibility as a way of enhancing the customer experience. The more recent software trends - Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) further reinforce my point above and you don't have to go past their names for evidence of service innovation. This has forced a change in the way businesses think about innovation.  
Innovation is evolving and companies need to offer something consumers value if they want to succeed. But preference heterogeneity emphasises the differences in what various consumer's value. That is why one standardised product focused on features alone just doesn't cut it anymore. Features can't be the only selling point, people want a service. It is for this reason leading edge innovation has become increasingly service oriented. If you aren't prepared to prioritise the customer, the main beneficiary of your product, who will buy it?