A-Z Popular Blog Innovation Search »
Innovation Risk

Innovation Metrics

Lead User

10 Examples of Cost Innovation

Cost innovation is the process of dramatically improving cost for value. Although innovation is popularly perceived as being about features and functions, cost innovation is perhaps more critical to the competitiveness of nations and firms. The following are illustrative examples of cost innovation.


Automating toil to reduce labor costs and improve speed and quality. For example, an ecommerce fulfillment center that automates the process of picking orders with robotic systems to dramatically increase order throughput and reduce fulfillment cost.

Elimination of Waste

Reducing wasted time, effort and resources. For example, a factory that implements an innovative maintenance program that dramatically reduces the cost of production line downtime.


Dematerialization is the process of using less materials without reducing value. In many cases, materials can be completely eliminated with a digital equivalent. For example, a streaming media service as opposed to an overpackaged DVD product.


The design of things to be lightweight to reduce costs. For example, the use of advanced composite materials in aircraft that dramatically reduce fuel consumption.

Productivity Tools

Making tools more productive for users. For example, professional video editing software that uses AI to automatically identify entities in a scene such that they can be marked for processing. This may save a video editor hundreds of hours a year and reduce costs for a studio or project.

Economies of Scale

Producing a billion units a year tends to be much cheaper per unit than producing a million units a year. This effect is known as economies of scale and is a fundamental approach to cost innovation. For example, a bakery that redesigns its production line to produce 90% more units an hour may reduce unit costs by 20%.

Mass Customization

Mass customization is the process of manufacturing unique and customized items without sacrificing scale. For example, a single soap production line that manufacturers different soap formulations and form factors for different customers without every slowing down to reconfigure the line.


Dramatically reducing costs by focusing on your competitive advantages and sourcing to firms with superior economies of scale where possible. For example, a bank that sells its data centers in favor of using computing platforms provided by major technology companies that are an order of magnitude cheaper.


Improving the efficiency of automation, equipment, processes, practices and services in a dramatic way. For example, a government that allows most people to renew their drivers license online such that they dramatically reduce staffing and location costs.

Race to the Bottom

In many cases, customers buy on price alone such that firms with the lowest costs have a fundamental competitive advantage whereby they can beat the prices of competitors and remain profitable. This can create a race to the bottom whereby quality declines rapidly as firms aggressively innovate to reduce costs. For example, a reputable glassware company that begins to replace metal and borosilicate glass with less durable and attractive materials such as plastic. This will certainly reduce costs but may damage the brand as customer satisfaction drops and new competition step in to improve quality.
Overview: Cost Innovation
The process of dramatically improving cost for value as opposed to implementing incremental cost improvements.
Related Concepts


This is the complete list of articles we have written about innovation.
Business Models
Concept Testing
Cost Innovation
Crash Of Ineptitude
Design Thinking
Discontinuous Change
First Principles
Innovation Risk
Inventive Step
Latent Demand
Market Fit
Naive Innovation
Prior Art
Proof Of Concept
Speculative Design
Systems Thinking
Technology Winter
Throwaway Prototype
Trough Of Sorrow
Value Creation
More ...
If you enjoyed this page, please consider bookmarking Simplicable.

Business Costs

A list of common types of business cost.

Cost Goals

An overview of cost goals with examples.

Cost Cutting

The common types of cost cutting with examples.


The definition of tangible with examples.

Cost Risk

The definition of cost risk with examples.


An overview of the common types of taxes.

Employee Costs

The total costs of employing someone.

Cost vs Price

The key differences between cost and price explained with a comparison table.

Travel Expenses

A list of common travel expenses.

Capital Expenditures

The definition of capital expenditure with examples.


A comprehensive list of innovation techniques.


The common characteristics of entrepreneurship.

Words For Innovation

A list of synonyms for innovation and innovative.

Creativity Skills

A list of common creativity skills.

Discontinuous Change

The definition of discontinuous change with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map