Product innovation concerns the innovation of physical products, products that are tangible and so there can be a radical new product or an incremental innovation (we will discuss radical and incremental innovation in a different Pill).
In contrast to such physical products, services are generally not tangible, take for example a supermarket that starts to deliver groceries at the customer’s doorstep. This delivery of the groceries, so not the groceries themselves, but the bringing of groceries to someone’s house is a new service for the supermarket.
Product innovations and service innovations have in common that they concern the output of organizations, output in terms of what they deliver to the outside world.
Process innovations concern innovation in how a firm conducts its activities. Imagine a human resource department of a firm that tracks employee performance in paper files by collecting reports on yearly appraisal talks. If this HRN department will move to a new system in which a manager and employee jointly fill out a form on the appraisal talk on a computer, then the process of keeping track of employee performance has been innovated. So, this would be a process innovation.
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