Innovation in the UK Retail Sector - Nesta

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Innovation in the UK Retail Sector Director about fifty to sixty percent of like-for-like food retail growth in one of their markets comes from innovation rather than ‘business as usual’. This drives companies to change their strategies, structures and propositions. As the CEO of a leading discounter pointed out, “Innovation on a strategic level is about positive change and improvement, I don’t want to innovate and make things worse.” Sometime change entails radical innovation or reinvention of the business model which requires leadership from the very top of the organisation (Hristov and Reynolds, 2005). “Our department store model was in decline, we had to do something and go back to our routes of being more radically innovative. We had to redefine ourselves, and that’s what we did” (CEO). 5.5 The regulatory environment was included in 18% of responses. However considering that the driver it becomes apparent it has a wide ranging area of impact associated with all other drives. A wide-ranging regulatory environment (addressing relates to competition and consumer protection legislation, planning, transportation and the environment) is seen as important in shaping the direction of many retail innovations. In their pursuit for growth retailers constantly see the need to adapt their strategies to the environments in which they operate. In the spatial planning regime has given rise to new types of shopping outlets at new locations (see Vignettes 5.1 – IKEA, 5.2 – responses to regulation and 5.3 – Currys customer recycling proposition). We grow organically through buying land and building the stores ourselves. This however is not always possible. In some markets such as the UK, there are hardly any locations left, and there we combine organic growth with possible acquisitions. (Executive Chairman) “In many service industries de- and re-regulation can trigger the scope for innovation. In retailing the liberalisation of opening hours of shops in combination with changes in the spatial planning regime has given rise to new types of shopping outlets at new locations” (van Ark, Broersma and den Hertog, 2003). 5.6 Technology: (18% of respondents). The role of technology is seen increasingly as supportive to the customer facing functions in retail organisations. Without ignoring the technological dimension, interviewees appear, to reinforce the generally nontechnological focus of retail innovation. Indeed, some commentators point toward lack of enthusiasm among some retailers to innovate in the ICT area. There are however many notable examples of retailers who behave as early adopters or generators of retail technologies (Hristov and Reynolds, 2005). (See Vignettes 5.4 – Marks & Spencer and 5.5 – Tesco in a Box) “Retailing is not like some aspects of manufacturing which is primarily about technological lead. In retailing these [factors] are going to be further down the interest list, retailers think in terms of ‘how can we better understand our customers, listen to customers, deliver what they need in the right format and so on’… ‘oh, and by the way, how can we usefully deploy technology in order to achieve that?’” (Strategy Director). Page 36
Innovation in the UK Retail Sector “Big, big, big, which is why I do development and IT, because the two are interlinked, whether it be new software that allows us to do things we haven't done before like link together databases, whether it be new technology like handsets, what mobile phones are going to do with Bluetooth, 3G, I mean all of that is a driver of innovation… So it’s how you tie the technology into practical usage at some point in the future,” (Business development and IT Director). 5.7 Retailer-supplier relations: (12%) This final driver of innovation highlights the importance of the relationship between retailers and their suppliers as an intrinsic part of the two way innovation diffusion innovation. The link appears particularly strong in retail areas such as NPD, buying, logistics and ICT. The continuous growth of retailer brands, diversification, geographical expansion, and multi-channel retailing, coupled with the constant quest for greater efficiency strengthen this complex but essential relationship. (See Vignette 5.6 – Waitrose.) We don’t manufacture anything, so although we have product development technologists and buyers here, obviously with our suppliers there's an equivalent team, so there would be product developers, technologists and commercial people there. And we talk about a partnership and there's this constant well who does the innovation, where do the ideas come from” (NPD Director). b. Internal to the retailer Figure 5.2. Internal drivers of innovation 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 71% Strategy and business planning Source: Hristov, 2007 36% Organisational culture and structure 32% Top management vision and leadership 5.8 Strategy and business planning account for 71% of all responses. Senior managers characterise strategic planning as a decision making process which translates the retailer’s intent into a realized strategy. This involves the development of sales, profit or competitive objectives in line with the retailer’s business model and in pursuit of opportunities in the market place. ‘Strategizing’ involves the allocation of financial, human resources into new competences. The interviewees drew clear connections between strategy and innovation. The predominant view is that strategy drives innovation 21% 12% Operational efficiency Innovation reward mechanisms 9% Availability of resources Page 37
Page 1 and 2: Report for NESTA December 2007 Inno
Page 3 and 4: Contents Innovation in the UK Retai
Page 5 and 6: Innovation in the UK Retail Sector
Page 9 and 10: 2. The nature and contribution of r
Page 23 and 24: v. Retailers’ reverse innovation
Page 35: Innovation in the UK Retail Sector
Page 41 and 42: Vignette 5.3: Currys customer recyc
Page 43 and 44: 6. What are the barriers to retail
Page 47 and 48: 7. What are the measures of retail
Page 49 and 50: . Types of Measures Innovation in t
Page 65 and 66: . Promoting innovation in sustainab
Page 69 and 70: Conclusion/Next Steps: Innovation i
Page 73 and 74: Recommendation 4: Innovation in the
Page 77 and 78: Appendix 1 Research Methodology 350

Innovation in the UK Retail Sector - Nesta

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