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The evolution of product function is the result of demand evolution or system evolution, which is governed by certain laws and is predictable. The composition of function structure and function classification are proposed to lay the foundation for function evolution. The stages division and laws of function evolution are proposed to point out the direction for function design, and the approaches of function are proposed to give the concrete method of function design. The forecasting zones of function evolution are proposed to provide a practicable space. The contradiction analysis is to make evaluation of function evolution, then TRIZ tools and CAI software can help designer to solve the contradiction and generate principle solutions. Integrated above contents, the product innovation process model based on function evolution and forecasting is proposed, which provides a systematic approach to product innovation from functional design angle. A innovative design example of pill dispersing machine demonstrates the proposed method is feasible.