Disruption Inside Out
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Disrupting Retail Industry From the Inside Out

Content Summary

This article is part of our Retail Reloaded series. The series offers a new vision for retail businesses through an evolved use of technology.

Our hypothesis suggests three core strategic actions. SAVE, ACCELERATE, and SHARE. These strategies will guide you on both how to best use technology and where a retail business should be developing new capabilities, new skills, and, importantly, a new vision for the future.

In this article, as part of the SHARE strategy, our aim is to inspire you to tap into the potential of innovative digital products built through special kinds of partnerships.

Customers expect brand innovation. It can drive growth, even during tough economic times. Retail enterprises must innovate at the same pace or faster than their known, as well as their yet undiscovered, up-and-coming, competitors.

Unfortunately for your business, everyone today is a competitor. Besides, there’s no way for anyone to know what the competition is presently working on.

Important tech breakthroughs enable companies to leap from a startup to unicorn in a matter of days and before you know it, your business is overthrown by the next thing. Continuous innovation is a must and it can only be achieved through investment in technology and people.

We must innovate, develop, and deliver faster to keep up with constant technology advancements and the changing customer demands. We can’t sit around and wait to see what will happen. We have to change now. It’s a game of discovery.

We will argue that there are three possible innovation paths:

  1. Companies building products to digitalize internal workflows (usually corporations)

  2. Companies building products to help others digitalize (usually startups)

  3. Companies doing both (usually corporations that spin off startups).

In this article, we will consider the latter, when internal innovation gets externalized through new ventures. This is popularly know as Disruption Inside-out and it is something that HTEC knows a lot about.

Recognizing the potential of corporate innovation

Digital technologies don’t just threaten large corporations, they can be a source of immense value-creation.

Given the greater capacity of larger companies to fund innovation from their cash flows, it is argued lately that they have an edge over startups and are overtaking the innovation game. There are still numerous business workflows out there that yearn to be digitalized. When innovating to streamline, track and document concrete internal processes, companies often come across amazing discoveries.

These discoveries are then built into digital products designed to address the existing pain point(s).

Through a natural implementation within own organization, companies are able to test the value of an innovative solution when applied to their niche use case.

As opposed to startups, which have to search for testers and early adopters externally, corporations are innovating within their field of expertise which means that they already have a critical mass to test product prototypes and MVPs early on. This is an enormous competitive advantage. Moreover, startups often lack the resources, experience, customers, and scale necessary to succeed.

Take our client StenaBulk, who are pioneering the digitalization of the maritime industry, as an example. Their goal was to increase productivity through intelligence and vessel performance tracking. Together, we developed an award-winning application that provides supreme tracking, monitoring and managing of their huge fleet in real-time.

Upon realizing a 60% increase in productivity and process improvements, Stena decided to spin off a new venture which will offer their maritime intelligence platform to other industry players.

Once a product proves to create value for the company, which translates to speed, convenience and integration, companies face the next big challenge — launching a disruptive new venture to bring the product to the market.

Today, it costs more than ever to bring a new product, both digital and physical, to market. Product innovation is becoming more targeted while supply chain complexity is rising.

Spinning off corporate innovation from the inside out

As we mentioned earlier, established retail companies have the talent, ideas, brand, resources, capital and customers to disrupt complex markets such as retail. The two things that most of them are missing are deep technology expertise and the ability to scale quickly.

The logical solution for many savvy retailers today is to accelerate their digital product innovation through a partnership with a tech company which can support their vision in the long run with its engineering resources ready to scale.

In such a case, Expertise-to-technology, retailer’s domain expertise is married to a technology provider’s ability to create a piece of novel technology. This innovative digital product is based on a deep understanding of a customer pain, that goes hand in hand with the art of the possible in terms of technology and methodology, and leads to a series of prototypes tested within the retailer’s organization, that can ultimately yield disruption.

When the success is measured through continuous tests and improvements and confirmed within the retailer’s organization, the two companies can confidently spin off a joint venture to bring the piece of technology to a wider market and offer it to other industry players with a similar business need.

But, why would a retailer even want to enter into a long term partnership with a tech company as opposed to spinning off a venture on its own?

Joint venture of retail and technology

There are a couple of good reasons why a partnership between a retailer and technology development company would make sense in today’s world.

The cost of digitalization. Through a shared venture, a retailer can offset the cost of building digital products, as its tech development partner may be interested in providing tech development services for a share in the future spin off venture.

Continuous development. From a marketplace standpoint, a company must be able to create a digital product, deliver it and continue innovating on it faster than the competition. Most traditional retailers do not have the technical expertise or the capacity to constantly deploy necessary improvements.

Shared interest. This one is obvious. For a piece of a pie, the tech company will be more invested in making the venture a success.

Speed to market. Whether it’s a platform, an app, a device, a robot, or something else, it requires a different strategy for market penetration than the classic retail products would. Tech service providers have the necessary experience forged in the battle of bringing many different digital products to the market across verticals, customer segments and geographies. This knowledge is priceless, as it is the turning point for any product.

Innovation mindset. Large retailers have a long tradition which often means a certain culture that was built over time and is laggard. Laggards must first put a lot of attention into fixing the basics: building new and critical innovation skills, gaining leadership support, and establishing strategic direction for innovation efforts. In order to speed things up, technology service provider brings its agile approach and product discovery techniques which serve as the driver of positive culture change.

Risk mitigation. Innovation equals risk. By partnering up with a tech service provider, a retailer can monetize on the investment. In other words, through a spin off, the company gets a chance to externalize its internal innovation and achieve an ROI or even profit from it. This justifies the risky investment in innovative digital products.

The ability to scale fast. This is probably the strongest reason why retail domain expertise needs a tech partner. When the venture starts getting traction and the need for growth becomes a precondition for survival and future success, a retailer will not have the knowledge, the ability or time to hire engineering talent needed for fast product scaling.

Capturing the value

As new digital technologies are introduced at faster-than-ever rates, there will increasingly be opportunities to capture new markets and unseat incumbents.

There have been numerous transformations in the way corporations address innovation and the technologies that they incorporate into their products: big data, cloud, and integrations are used to improve efficiency, while technologies such as mobile, ML, AI and IoT are leveraged to create the next generation of digital products and ventures.

To imagine, create, deliver and bring to market entirely new digital offerings in response to emerging retail business needs, requires a set of technical skills rarely found in traditional retail corporations. As a retailer, you will need help to disrupt your business and to bring that disruption to the world. This is where HTEC can help. We have helped many companies disrupt entire markets with innovative products that serve millions of users around the world. You can use the form below to get in touch with us for a free technology consulting session.

In our next article, we talk about the tectonic changes that are shaping the future of retail and how to become the change enabler to secure your position as a loved brand. We will focus on the question: What can a brand do for a customer today?

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Jovana Milankovic Osterday

Writer

Hi, I'm JoJo, a San Francisco based writer and a digital world explorer at HTEC Group. I write about humanity in the age of disruption through the stories of exceptional people, truly innovative practices and companies that are challenging the status quo. At HTEC, we call this "The art of possible".