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Welcome to digital product engineering
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Carlos Sousa
Carlos Sousa

Today, companies are under great pressure to adjust and innovate. Technological breakthroughs, changes in regulatory policies, and customer demands are driving companies to develop new and better digital experiences to grow and compete.

This article explores how an innovation strategy, and a structured approach can help in that journey. We explain what digital product innovation is, the different types of it, and the process for managing it successfully. 

We will also talk about how Generative AI (GenAI) can be leveraged to speed up the product innovation process and make sure teams can be as lean as possible to deliver innovative ideas to the market.

Whether you're grappling with the challenge of staying ahead in your industry or simply curious about the potential of AI in transforming business landscapes, this exploration provides valuable insights and practical examples of AI-driven strategies that are reshaping the future of product innovation.

What is Product Innovation

First, let’s define digital product innovation. It’s the development of new digital products or significant improvements in existing ones, both incremental and radical. 

Incremental innovation focuses on enhancing existing products, mostly improving customer retention or enhancing customer acquisition funnels. This is where companies focus the most.  

Radical innovation, however, involves creating entirely new products that disrupt markets. For instance, the launch of Airbnb and Uber revolutionized the hospitality and transportation industries. This type of innovation is riskier due to the uncertainty and unknown; however, the impact can be impressive with the right mindset and approach.

A Good Product Innovation Portfolio Strategy

Innovation strategy within a company can be visualized through the lens of the Innovation Matrix, which categorizes product innovations into Core, Adjacent, and Disruptive.

  • Core are investments in initiatives that enhance existing products, such as improving the onboarding experience or making the acquisition funnel more efficient.
  • Adjacent are initiatives that use some of the resources of your core capabilities and can be leveraged to generate new product experiences for new audiences.
  • Disruptive initiatives focus on creating new products that can open entirely new markets. Think about your revenue sources in 5 years. What percentage will come from new products and services?

This framework helps organizations to map their product innovation initiatives to ensure a balanced innovation portfolio. A mix of 70% Core, 20% Adjacent, and 10% Disruptive initiatives is a benchmark for outperforming peers, indicating the importance of a diversified approach to sustaining growth and competitiveness. 

Innovation Matrix categorizes product innovations into Core, Adjacent, and Disruptive.

However, we see that companies aren’t leveraging such a balanced portfolio strategy. Most companies put most, if not all, resources into the core initiatives, leaving behind potential strategic initiatives that can have a greater impact.

We believe that implementing a more distributed innovation strategy is critical for companies to be truly competitive and positioned to succeed.

The Product Innovation Process

The innovation process is not just about the great idea moment but entails a comprehensive approach to identifying, developing, and scaling ideas. 

Most effective innovation processes, such as design thinking, rapid prototyping, and open innovation, share common phases but differ in emphasis. 

  • Design thinking focuses on a human-centric approach, where human needs drive innovation. 
  • Rapid prototyping focuses on a lean methodology where experimentation is the engine of learning and adjusting.
  • Open innovation is the approach where innovation can come from different paths, from idea management boards, hackathons, competitions, etc.

Product innovation process
These approaches should be adaptable to a company's unique context since every organization has its mix of culture, processes, and maturity. 

What we believe that companies should not compromise on is the focus on understanding customer needs, generating and testing ideas, and scaling viable solutions. 

This approach underscores the significance of a systematic, agile opportunity discovery and validation process in the innovation journey.

Accelerating Product Innovation with GenAI

Daily evidence shows that GenAI is poised to revolutionize the product innovation value chain. It enhances creativity and efficiency across the discovery, ideation, experimentation, implementation, and scaling stages.

A line graph showing Uncertainty and Risk plotted on Y-axis against Time on X-axis

At Nagarro, we have been leveraging such tools to accelerate and enhance our client's product innovation strategy, and the impact of this accelerated approach versus a more 'traditional' approach is significant because it changes the innovation mindset to be more human-centered and rooted in quick experimentation.

Nagarro’s Gen AI application, Genome AI, helps understand existing and potential customers. The platform delivers hyper-personalized experiences, smart recommendations, cutting-edge loyalty programs, and versatile enterprise planning solutions.

The use cases are endless. We have been identifying the ability to synthesize information, generate novel ideas, and facilitate rapid prototyping to transform and accelerate the product innovation journey and enable companies to explore a broader spectrum of ideas and solutions with reduced effort and cost.

Gen AI use cases

The Role of GenAI and Humans in the Product Innovation Approach

While GenAI brings transformative potential to innovation, the balance between AI capabilities and human insight remains crucial. GenAI tools can augment the development process, but human expertise is essential for defining business opportunities and strategy, validating AI outputs, and ensuring that product experiences meet customer needs and regulatory requirements. 

The collaboration between GenAI and humans is evolving, and the future of product innovation development increasingly relies on an integrated approach that leverages both strengths.


As we navigate the intersection of human creativity and GenAI in product innovation, it's clear that the journey ahead is both exciting and complex. By understanding the nuances of product innovation, adopting a balanced portfolio approach, and embracing the capabilities of GenAI, businesses can forge a path to unparalleled innovation and market leadership. 

The synergy between GenAI and human expertise will define the next frontier of product innovation, making it imperative for innovation leaders to cultivate a culture that fosters collaboration, agility, and continuous learning. 

Let's embrace this dynamic landscape with open minds and visionary strategies, propelling our organizations into a future where innovation knows no bounds.