TRUE INSIGHTS: How to find the next big thing in technological innovation
Friday 29 April, 2016
In our third analysis we discuss the ways in which retailers can access sustainable sources of innovation.
Few retail executives would take issue with the notion that finding a reliable, consistent source of innovation is a key priority in a competitive landscape which is, by uniform consent, changing at an unprecedented pace. And yet establishing an innovation pipeline is not like building stores or investing in a supply chain; by its nature it can be erratic and is, in this respect, more akin to the hit-and-miss world of pharmaceutical R&D activity than it is to conventional retail capex or business development.
Moreover the innovation scene, for want of a more suitable description, has become increasingly loud, confusing and fraught. In part, this is a function of the hyperbole which naturally attaches itself to the world of startups, particularly those incorporating a technological edge. Buzzwords abound – it is de rigeur for all new businesses to be described as “disruptors”, talented executives are “rock stars” and the ultimate goal is to join the select band of “unicorns”.
Spectacular success stories provide aspirational fuel for the current generation of entrepreneurs – Facebook, Airbnb and Uber have all exploded into the (global) public consciousness in a timeframe in which, historically, businesses could scarcely have got off the ground. And there is no question that this is a global phenomenon – innovation is as likely to be fomented in Delhi as Derby. Probably more so.
Meanwhile budding entrepreneurs are, despite residual scar tissue amongst traditional finance providers such as banks, faced with a plethora of funding opportunities. The government is eager to foster an entrepreneurial, technology-led segment because it encourages investment, creates high-skill employment, drives growth and enhances productivity (the latter being the Achilles’ heel of the UK economy since the financial crisis). New, alternative financing opportunities, such as crowdfunding, are also gaining in popularity/mass market participation.
In this environment the “fear of missing out” amongst incumbent retailers is prompted both by the excitement of uncovering a competitive edge (the ephemeral gold dust of retail) and a paranoid terror of becoming disintermediated. The spectre of Woolworths stalks every UK retail boardroom.
So how should retailers go about ensuring that they have access to a pipeline of innovation? As things stand there are three main avenues which retailers can pursue to secure new retail developments.
The first is simple; pay someone whose task is to scour the world looking for it. Undoubtedly this can be effective – it is a full time job to keep on top of the startup activities in Silicon Valley, London, Berlin and Tel Aviv (amongst others) so prepare for a hefty travel expense budget. In our experience the relative success of this strategy is generally defined by the level of executive management engagement with the process; creating a corporate culture in which the quest for innovation is nurtured and encouraged is a sine qua non of effective business development.
A second, more expensive, option is for a retailer to develop its own internal innovation centre. As John Lewis’s successful JLab venture demonstrates, this can be a great way of driving incremental innovation and providing solutions to immediate business issues. It also helps to promulgate a culture of innovation within the host organisation. There are, however, some potential limitations and risks to the approach. First, large corporations do not always carry huge appeal to young entrepreneurs with dreams of changing the world – rightly or wrongly, many potential innovators will be put off by the fear of becoming part of a corporate silo. Second, and related to this, internal innovation centres can fall prey to command and control by head office. Instead of the centre acting as an unconstrained Petri dish of ideas and technologies, the risk is that innovation becomes iteration as business challenges are passed down to the “hub” for the “tech guys” to solve. Baby steps, not quantum leaps.
Finally there is the scope to forge relationships with accelerators, such as TrueStart. Accelerators have become an established part of the startup landscape in recent years, providing a launch pad for nascent businesses seeking facilities, mentoring and access to venture funding. While most accelerators are industry agnostic and, accordingly, offer a wide breadth of startup ventures (fintech appears to be the current flavour of the month) at TrueStart we are exclusively focused on the retail and consumer sectors. This specialism, we believe, confers benefits for entrepreneurs, who gain access to a business ecosystem specifically tailored to their activities, meanwhile our retail partners gain perpetual, pre-emptive access to retail-relevant innovation.
Ultimately there is not a single strategy for capturing innovation which will work for all retailers. By its nature, finding the next big thing is not easy. Our experience, however, is that a blended approach encompassing a high level of executive management engagement, the development of a culture and organisational structure which encourages entrepreneurial business development activity and embedded association with external sources of new ideas and technologies tends to distinguish the strategies of the most forward-thinking organisations.
On May 11, TrueStart will be hosting their annual future of retail and consumer conference R:evolution, where international influencers such as Mike Jones (initial backer of Dollar Shave Club) and Allison Johnson (responsible for the launch of the iPhone and iPad as Vice President, Marketing Communications at Apple) will join industry masters such as Ben Lewis (CEO River Island), Marc Allera (CEO EE) and Kris Engskov (President Starbucks EMEA).