**2.1. Product innovation**

There was a time when innovation was called new product development (NPD). All that mattered was product performance, with customers making rational choices based upon the attributes and relative performance of a product compared to alternatives. The job of NPD was to create a flow of new products (or more often existing products with new/improved features) that could be demonstrated to be superior and preferable.

Most of these new products were borne of the same capabilities and expertise as their predecessors. They were designed by the same teams and produced on the same lines. They were mainly incremental innovations. The job of marketers was to stay abreast of what customers valued most about their products and then to package and position new products in a way that would emphasize those benefits. Competitors found themselves engaged in a "new/ improved" arms race, sometimes choosing to differentiate on performance and sometimes on value.

As markets have matured, products have tended to converge. The same technology and know-how have become widely available. At the same time, the capacity to innovate has become more specialized and dispersed. Organizations are increasingly faced with the classic "Innovator's Dilemma" [1] where the capabilities that have taken an organization to a position of success become rigidities that can inhibit innovation, leaving the ground open to more flexible competitors.
