Introducing intentional innovation

Sephora image Augmented realityA key theme emerged at a recent retail leaders forum in Sydney, the notion of intentional innovation.

No matter whether a retailer is a disruptor or an established and mature category leader, the idea of deliberate and constant innovation was a core behaviour among retailing best practices.

Why? It comes down to one pointy and discomforting truth: relevance.

It is the number one issue facing all Australian retailers today. How to remain relevant is the question every retailer must focus on.

What’s the answer? Leading, defining, and embracing continual change via consistent and deliberate innovation.

The following three steps go a long way to achieving that.

1. Think inside out: New business models and structures

Intentional innovation must start from within. New business models and management structures are a primary focus for retailers and brands that want to stay ahead of the curve.

A  study by PWC* outlined the transformation approaches and measures that are leading to new types of operating models designed to survive – and thrive – in tomorrow’s retail environment.

It included four organisational capabilities tomorrow’s operating model will need:

  • Disruption – new innovative models that enable business transformation
  • Engagement – enabling more engaging, seamless digital interactions with customers, employees, and the broader community
  • Digitisation – improving customer satisfaction, employee productivity, and supplier interaction through digitised processes
  • Trust – ensuring information security to inspire trusts among customers and stakeholders.

New models need to be supported by new organisational structures, roles, responsibilities, and measures of success for senior leadership.

Digital will evolve from discrete function to a tool and skill set permeating all areas, with the rise of roles including chief performance officer and cyber and privacy director.

2. Dedicated resources

Innovation labs have become a central best practice approach for retailers keen to invest, drive, and determine new forms of data and digital innovation. Amazon spent $6.5 billion dollars last year on R&D alone in the quest to bring lean start up thinking into the organisation.

  • Sephora – multiple digital projects

Cosmetics retail powerhouse, Sephora, is rolling out four mobile initiatives on the back of testing in its San Francisco-based innovation lab, a replica full size store where it experiments with digital experiences to enhance shopping across web, mobile, and bricks and mortar stores.

The projects include Pocket Contour – a step by step contouring guide personalised to a shopper’s face based on an uploaded selfie; an augmented reality shop front video that shares brand stories and tutorials on the customer’s mobile device instore; beacons for receiving personalised notifications such as promotions and birthday offers; and Flash, offering free two-day shipping when online shoppers make instant purchases rather than compiling a ‘basket’.

3. Test and Learn – New retail store formats and experiences

  • Starbucks New York – no queue

Starbucks New York is piloting small store formats that deliver speed and efficiency by tapping into key themes of localisation, hyper convenience, and m-commerce. There’s no need to line up to order. The store has been streamlined to get customers in and out fast on their way to work: Give your order to a staff member armed with a mobile terminal as you enter, walk to the counter to pay, pick up your drink, and you’re on your way.

  • Wholefoods – low price “Millennial” stores

Meanwhile, high end, Whole Foods Market. is launching a chain of value format stores specifically targeting millennials. The concept addresses discerning millennials’ demands for high quality at great value and their scant regard for brand loyalty and mass market goods by offering smaller, lower priced stores with limited product selection. While it has been criticised for being ‘age-ist’ in some quarters, it boils down to providing an innovative solution to an identified need.

Time waits for no one. In tomorrow’s retail landscape, the customer won’t either. The winners will be those retailers who embrace intentional innovation and put in place the new digitally driven mindsets, methods, and models needed to conquer the relevance conundrum.

Caroline Ghatt is planning director, brand and retail at Leo Burnett Sydney.

* Connected Retail: Reshaping tomorrow’s operating model and metrics, PWC, April 2015.

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