Almost every retailer out there will tell you they need to be more innovative, and that this is hard. Retail has long been an industry focused on buying low, selling high, and optimizing everything in between. Shifting to meet an expectation of providing content, services, experience, engagement and more – this is a big shift, and not easily accomplished. Some retailers – vertically integrated brands, or those with private label merchandise – might be good at productinnovation, but that is a far cry from processinnovation – and that is a large part of what retailers need right now, as they try to make the shift to be more relevant to consumers.
The thing about innovation, though, is that while it can sometimes have an aura unapproachability – only the coolest kids get to do it, it’s the rarified air of the most future-y of the futurists – the reality is, it’s a process, just like any other. It can be broken down into discrete steps, and those steps can be refined and optimized to produce a desired outcome.
Innovation – the act of creating new engines for business growth – has actually long been studied. Doblin, an innovation strategy consulting firm, identified ten distinct types of innovation in 1997. They broke the ten types up into three higher-level kinds of innovation: configuration, offering, and experience.
Retailers have been laser-focused on the latter, particularly the last identified type of innovation out of the ten: customer engagement. This is in direct response to shifting customer expectations, which in and of itself is not a bad thing. However, there are nine other innovation types out there, and with retailers so focused on just customer engagement, they are leaving a lot on the table. In fact, I would argue that the tenth innovation – this customer engagement – would be more powerful, and retailers would have more options to create innovation there, if they spent more time looking at the other nine first.
That’s not to say that retail has not been disrupted by companies making use of the other nine areas of innovation, but I think it is interesting to see just how many examples in the other nine come from upstarts, rather than from established retailers. Retailers like Walmart and Nordstrom are acquiring their way around this problem, by going out and buying some of these upstarts, but doing so can put a big strain on corporate culture and risk muddying the retailer’s brand in the process.
It’s like trying to transplant a tree: you can buy an older, bigger tree that is already well-established, but if you move it to a new location, the shock can often slow its growth and endanger its health in a way where, if you had just bought a younger tree and let it grow, it would end up bigger than the older tree after just a couple of years. When retailers acquire upstart brands or technologies, they’re often acquiring the same shock and risk as buying that larger tree – and might’ve gotten to implemented innovations faster by focusing on growing them more organically, than they will in trying to graft someone else’s innovation onto their enterprise.
Here are the nine other types of innovation traditional retailers are currently leaving on the table, or trying to buy:
The last innovation type is the one retailers have been so focused on: customer engagement: innovations in how you foster customer interactions. The challenge with focusing on this type of innovation as your primary one is that you’re only thinking about one aspect of customer expectations: how they engage with you as they buy products. This is still a product-centric way of thinking – that your goal as a retailer is to sell more stuff. The reality of the disruption in consumer expectations is that they no longer expect retailers to simply be a way of connecting consumers to goods – the buy low, sell high, and optimize everything in between way of thinking.
Consumers expect retailers to be partners in making their lives better, even when the interaction they’re looking for is low consideration for a low value purchase. Even in that case, consumers expect retailers to at least get out of their way and make the transaction as quick and painless as possible, which is why companies like Dollar Shave and Harry’s took such a bite out of a pretty long-established category.
Consumers also expect retailers to make the world a better place, which is why upstarts have been able to exploit innovations in profit model or product design to meet niches of consumer needs that established companies could’ve easily identified and did not.
The Bottom Line
Customer engagement is important – you’ll get no argument from me there. But it’s not the only thing. Brands like Glossier that approached the market through the Instagram network are able to create completely new forms of customer engagement not because they set out to design a new type of customer engagement, but because it was a natural outcome of how they approached the market.
Retailers who are struggling to be more innovative should look beyond just innovations in customer engagement. They may find their wider exploration of innovation ultimately leads to new ways of engaging with customers, anyway.\
Source:-.forbes.cTags: At, Customer, Expense, Experience, Focus, Innovations, of, on, Other, Retailers, the, Traditional