Importance of New Product Development Process in the Mobile Phone Market

As in most sectors of the economy, new product development and innovation in the mobile phone market are critical drivers of firm value, sales and profitability. In the case of the mobile phone market, a highly competitive sector where several providers vie for customer preference and loyalty, the visibility provided by new devices and services is an especially important component of brand success, a fact which can easily be seen in the relentless introduction of new models and service packages by mobile phone manufacturers and cellphone service providers.

Innovation and Firm Value

Innovation and product development yield a series of patents that protect the intellectual property of developers and, ideally, ensure a return on research and development investments. These patents, of course, are valuable in themselves and can even be bought and sold by companies, meaning that the innovation process creates company value through patent ownership. Market research from UC Berkeley, moreover, indicates that investors are more likely to buy shares in companies they perceive as technological leaders in the field, creating an appreciable effect on the market value of firms with aggressive innovation strategies. The report even distinguishes between truly innovative new products and imitative product development, where manufacturers copy the advances of their competitors. While both processes create value, truly innovative product development has the most pronounced positive effect on firm value.

Innovation and Consumer Preference

Although stock values are important to companies, sales are ultimately the key driver of profitability. With sales, however, new product development is also decisive. Particularly in affluent markets like the Unites States, consumer research by the TNS Global Technology Index shows the importance of innovation to consumer preference, with consumers demanding new technology in the devices they buy and formerly cutting-edge innovations like touch screens becoming part of consumers' standard expectations when they buy a new mobile phone. Simply put, companies that fail to keep up with consumer expectations quickly lose consumer attention and loyalty.

 

Innovation in All Areas

Innovation isn't only about the newest bells and whistles on your cellphone. In fact, some of the most successful innovations involve holistic improvements to the entire mobile phone experience. The sales success of the iPhone, for instance, shows the importance of the innovative software support that accompanies the product. Early iPods barely made a dent in the market until the iTunes system provided consumers with an easy way to manage and obtain music. That same interface has been critical to iPhone success, with downloadable content and apps, both free and paid, contributing both to the user experience and Apple's bottom line.

Innovation in Emerging Markets

Although affluent markets drive the trade in the most cutting edge smartphones, emerging markets are the main growth sector for the mobile phone industry, with consumption growing by over 15 percent every year, according to research from Ovum cited in a 2011 eWeek Europe article. These markets have few consumers that can access the most expensive and sophisticated new products but have a huge number of consumers that demand more practical features like reliability and affordability. These consumers, along with companies' desires to establish leadership positions in their explosive markets, are also driving innovations for a very different consumer group, particularly as broadband Internet access through a cellphone is rapidly becoming the least expensive way of accessing the Internet in emerging countries.





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