Arguably the external force possessing the greatest potential for changing how marketers and industries compete are those associated with innovation. When most people think of innovation they immediately assume it has to do with computers and other high-tech equipment. While the majority of innovative new products rely in some way on computer technology, it is not a requirement for something to be considered innovative. Instead, an innovation is viewed as anything new that solves needs by offering a significant advantage (e.g., more features, more convenient, easier to use, lower cost, etc.) over existing ways (e.g., products, services). For example, a designer of automobiles may develop a new layout for a car’s dashboard using existing products (no new technologies). This new design reduces the amount of time a driver must take his eyes off the road in order to select a new music station. If this new layout is viewed positively by customers, governmental groups and the media it may gain widespread acceptance by other vehicle manufacturers who will make similar designs available in their products.
As noted in the above example, for an innovation to be truly important it must be widely adopted within a targeted group (e.g., within an industry, by a target market). Once adopted an innovation becomes important if it leads to behavioral changes including changing how consumers and business satisfy their needs. These changes present both opportunities and threats to marketers. For instance, over the last few years several small companies have created productivity software products (e.g., word processing, spreadsheet) that operate over the Internet. These products do not require the software be downloaded to a user’s computer. While these innovative products are not new in terms of the features they offer, they are new in terms of convenience in accessing documents from anywhere and the ability to share with others. It remains to be seen whether these products will alter behavior, though it appears that one leading maker of traditional productivity software, Microsoft, has recognized this as a threat and is expected to respond with its own version of web-based software.
Because of the potential innovation has in affecting products and industries it is no surprise that many marketing organizations direct a significant amount of funds to researching this external force. In fact, in many industries, such as pharmaceuticals and computers, spending on technological research and development represents a significant portion of a company’s overall budget.