Guest Slot – Analysis Insider – Sarah Wilson

Innovation and entrepreneurialism are increasingly necessary in the world of retail – as companies need to adopt the most efficient ways of working and also create some differentiation from their competitors.

So much is happening to create efficiencies through the likes of outsourcing and globalisation that retailers simply have to be involved. And in these tough times it has never been more important to have a differentiated proposition.

Customers now expect a unique proposition from retailers and it has been proven that they are willing to spend more if the merchant provides them with a product and service that cannot be found elsewhere. At B&Q for instance, they are now offering style and design services along with the products on the shelves.

But let’s not be in any doubt that adopting a mindset of innovation is very difficult, there are all sorts of barriers in place:

• Often employees are too busy doing their regular jobs to have time for working on innovation initiatives. It is doubly difficult when you consider that there are few incentives for employees to think up new ideas.

• Some retailers would argue tax is also a barrier as high street operators pay rents unlike their online-only competitors. Without this financial drain there is the widespread belief that the pure plays can be more innovative.

• Direction for innovation can be fuzzy. People need the freedom to be creative, some boundaries or guidelines can help focus their efforts and motivate them to achieve outcomes. Without structures in place, the risk is innovation gets a bad reputation – wrong ideas are prioritised and time and resources can be wasted.

• Speed to implement – often in large organisations there is an inability to implement new ideas quickly and to make them operational. Numerous committees discussing a new idea can result in people losing the will to live.

• The fail-fast mentality has yet to be embraced by some retailers. Making the right call and recognising when to curtail innovations that are not working – it’s okay to say that one didn’t work, let’s quickly learn why and move on.

The big issue therefore facing the retail industry is – how do you innovate in big organisations?

Academic learning has shown that it does not happen by osmosis. Companies have to let people spend time collaborating, away from their day jobs in order to develop new ideas. Some are really embracing this thinking, for example John Lewis have recently run an internal competition to select new ideas from among the workforce.

This has resulted in an autumn trialling of an online personal shopper service for womenswear. This is a great example of not just creating the time and the opportunity for staff to collaborate, but also the structure to help prioritise the right ideas.

John Lewis obviously sees real value in encouraging and nurturing innovation and it’s not just from within the organisation. Last year they ran the ‘Great British Innovation Event’ where a number of technology start-ups pitched their ideas – Dragons’ Den-style – to a panel of experts in retail. One was selected for implementation within the business.

This is innovation at its best because it involves a business actively asking for ideas internally and externally. We often find bringing together people from a broad cross section of an organisation, creating the right conditions and letting the creative juices flow can have amazing results, which if implemented create real value as demonstrated by JLP.

Tesco understood this when it recently held a ‘Hackathon’ involving 10 teams of developers from all parts of the company who came together to create a new application/service within a 24-hour timeframe.

What would help develop such entrepreneurship among employees is having idea generation as part of their career paths. To create the right structure to help all people – regardless of their levels of creativity – in an organisation would be potentially very powerful for retailers.

In reality, today’s large merchants are not set up for this. But they can and arguably have to be. A starting point could be for their senior managers to encourage and support employees to develop ideas and innovations. Crucially these people need reassurance that if they have an idea that ultimately fails then they will not be sacked as a result. There has to be some accommodation for failure.

Arguably retailers will need to go down this route if they are to thrive in the future. Imagine being able to set up formal structures to nurture innovation, enable employees to work on ideas, create an environment that requests ideas from people, and then link this to an individual’s career development.

Maybe there is a rich vein of, so far untapped, ideas just waiting to spring into real growth opportunities. The future could then be very rosy indeed for all concerned.

Sponsored column by Sarah Wilson, retail specialist at consultancy Egremont Group