The Problem with Retail Innovation

By Gareth Jude | Sep 26, 2019 | 0

The problem with Retail Innovation. 

I still remember standing on the floor of the expo hall at my first NRF Big Show in New York City, looking at the expansive line of booths that seemed to go beyond the horizon. Bright colored signs, screens everywhere with attention grabbing content, and the big technology companies in the center with what can only be described as Broadway quality theater sets that are stories high. At first, I was excited by all this ‘innovation’ everywhere. I wanted to get a metaphorical shopping cart and buy one of each and every bright and shiny thing, finding (or creating) in my head problems that I might have that these solutions could solve.

It wasn’t until my second visit, with a successful retail innovation program under my belt back home in Australia, that I realized the fundamental flaw of how the industry looks at innovation. By my third visit I was downright frustrated that the industry hadn’t caught up and realized that we were operating on a flawed and misleading definition of innovation.  So, in true Andrew rant style, here are the myths we need to bust if we are to reframe retail innovation:

  1. Innovation is about Technology – deploying innovative technology is not retail innovation.  It can be part of the solution, but it in and of itself is not innovation for a retailer.
  2. Innovation is having a Store of the Future program – if I felt that an emoji eye-roll portrayed enough the strength of my reaction to this idea, I’d put it in, but it isn’t. Innovation is more than a store front, and is less successful when outsourced to a design agency.
  3. Looking innovative is a good marketing strategy – sure, for some people it probably is, however this becomes an obsessive distraction and leaders focus on what to get to market to impress boards, media and get customer’s attention. They don’t follow the golden rule that innovation must deliver value to your business, to your customers and be aligned with your purpose. Not to mention a lot of retailers forget or don’t prioritize innovating for the humans who work with their customers every day.
  4. You can’t innovate until you’ve spent years and millions on IT infrastructure – so wrong. On lots of fronts. Innovation should never start here. It does not preclude that from being a project you work on, but it isn’t where to start if you want to innovate.

The Bright & Shiny Innovator.

I was once blinded by this definition. Thinking that, when I spoke to people about innovation, it was linked to the problem’s solution rather than the process. Innovation for Samsung, Apple, or Google is technology, in part, that they create after looking for problems they can solve or value they can add to customer’s lives. The device or software they create is the output of innovative processes. Their definition of innovation is to create new technologies that inspire and enhance customers lives.  It’s exciting, and many retailers have fallen into the trap of believing that innovation for them is defined in the same way. It isn’t. As we see it, the innovation process for retail is to add value to the business, the customer and be aligned to the purpose that they’re in business. It can be a process change, a footprint strategy shift, implementation of technology, a change in culture or customer service. The possible answers should not be where we start, let alone implementing technology based on the fact they had the best free showbags on the expo floor.

The Outsourcer Innovator.

There was a time when a new store format was the most innovative process a retailer underwent, that is, outside of implementing a new POS <insert the shudder that is in automatic response in retailers when the words ‘new POS’ are uttered>.  We used to get a 20% uplift that would be almost guaranteed, and we move on. No longer. Customers are human (like you, surprising, I know), and are evolving the way they think and their expectations.  Therefore, this uplift is no longer guaranteed. However, too many retail strategies are still outsourced to design companies in the hope that this won’t apply to them.

Retail innovation, when it is done well, is a repeatable discipline that can be scaled in your organization that enables it to continuously evolve to excel in this ever-changing retail environment. Your innovation pipeline should start with your purpose for being in business, and be filtered through the lens of human drivers (your customers behaviors, needs, and the context of you in their lives) and commercial imperatives (what are the primary commercial objectives of the business).  To do this well, you will need internal capability that is a little different to what we’ve always relied on as retailers. Embracing evidence-led thinking through behavioral design thinking and data sciences. Not to mention, changing your capital investment allocation, governance processes, and embedding techniques. Building those foundations are vital, but it means that your Store of the Future (mostly a synonym for “we need to catch up”) doesn’t need to be a thing anymore, as you’ll be constantly evolving every part of your business to never be behind again.

The Looking Good instead of Doing Good Innovator.

When I first became a senior leader, I was a wonderful blend of nervous and excited. I was young, and really wanted to prove myself to the people who trusted a huge retail operations business to a 29-year-old. My work, focus, decisions, leadership style were all aimed at trying to do just that. To prove myself. It worked, to an extent, until after 6 months I realized that we hadn’t delivered much of true value to our stores and customers. There were lots of ‘things’ implemented, and lovely PowerPoint packs made, but not much else. Then my boss, in one of our regular catch ups, told me that “doing good always beats looking good in the end”. I nearly wept. Making the change in my style to focus on what my team and I knew was right, rather than what would make us look famous, saw us improve results to a greater extent and win the respect, thanks (and business) of customers and the store teams.

So many retailers fall down this same trap when thinking about their innovation strategy. The appearance of being an individual innovator in the business, hanging out with big tech companies, or writing exciting press releases about some fancy piece of tech, or design centerpiece in your stores is enticing. We must disenthrall ourselves from this feeling, and instead focus on how we most add value. If your biggest commercial imperative is to maximize sales, reduce stock losses and improve store productivity, then maybe a not so exciting, back of house program designed to improve processes is the most important project for you. If you’re still making customers wait weeks for delivery, then maybe a logistics program is your best bet. Both of these things may not make you trend on twitter, but they will deliver results on your most important human drivers or commercial imperatives.

The Rules of Innovation.

The simple rules to follow:

  1. Reframe Retail Innovation in your business; it is about alignment to business purpose, incremental value to your customers (human drivers), and incremental value to your business (commercial imperatives).
  2. Your frontline teams and your customers will know what needs to be done, listen to them more often. If you are going to look good to anyone, make it them. It will pay off more than the short-term high of a nice newspaper headline.
  3. Become known for evidence-led decision making by making behavioral and data evidence the center of every decision.

Most of all, join the revolution that has enthralled me: do good, instead of looking good. Do it by crafting a newly reframed definition of innovation for your business. Make it about your brand’s purpose, the frontline team members, and your customers, instead of just doing what is trending.

/End rant.  

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