Staying Ahead of the Game – The Importance of Continuous Innovation in Retail
The topic of innovation in retail has always been an extremely important one for me, and whilst creating the presentation for my talk at Meet Magento New York it became apparent, that whilst there were a lot of aspects that could be shared, my talk would focus on four key learnings that are paramount for retailers both small and large.
However, it was important to set the foundations of the learnings (the research) first, why should we innovate? More importantly, why should we continuously innovate? And not because of the obvious reason: “because we must stay ahead of our competitors”. I wanted to show that there was actually a much deeper reason as to why…
The Kano model
Noriaki Kano, a Japanese researcher and consultant, published a paper in 1984 with a set of ideas and techniques that help us determine our customer’s (and prospect’s) satisfaction with product features. These ideas are commonly called the Kano Model, and are based upon the following premises:
- A customer’s satisfaction with a product’s features, depends on the level of functionality that is provided (how much or how well they’re implemented)
- You can determine how customers feel about a feature through a questionnaire
- Features can be classified into four categories:
- Performance: When you’re buying a car, its gas mileage is usually a Performance attribute. Other examples might include your internet connection speed, laptop battery life, or the storage space in your Dropbox account. The more you have of each of those, the greater your satisfaction.
- Must-be: Other product features are simply expected by customers. If the product doesn’t have them, it will be considered to be incomplete or just plain bad. These types of features are usually called ‘Must-be’ or ‘Basic Expectations’.
Here’s the deal with these features: we need to have them, but that won’t make our customers more satisfied. They just won’t be dissatisfied. We expect our phones to be able to make calls. Our hotel room should have running water and a bed. The car should have brakes. Having any of these won’t make us happy, but lacking them will definitely make us angry towards the product or service.
- Attractive: There are unexpected features which, when presented, cause a positive reaction. These are usually called Attractive, Exciters or Delighters. The first time we used an iPhone, we were not expecting such a fluid touchscreen interface, and it blew us away. Think of the first time you used Google Maps or Google Docs. You know, that feeling you get when experiencing something beyond what you know and expect from similar products.
Just remember that our brains don’t have to explode for something to fall under this category. It might be anything that makes you go: “Hey, that’s nice!”
- Indifferent: Naturally, there are also features towards which we feel indifferent. Those which their presence (or absence) doesn’t make a real difference in our reaction to the product. This means that it doesn’t matter how much effort we put into them, users won’t really care – they’re essentially money sinks.
Now that we’ve got a complete picture of all the Kano categories of features, it’s important to take note of a fundamental fact: they are not static, they change over time. Whilst this is arguably more UX focused research, the takeaway here is about the natural decay of delight.
The Natural Decay of Delight
How your customers feel about certain product attributes now, is not necessarily what they’ll feel in the future. Attractive features will eventually turn into ‘Performance’ and ‘Must-be’ features as time moves on. For example, let’s consider the iPhone example again; the sort of fluid touchscreen interaction that wowed us in 2007 is now deemed as a basic expectation.
If we go back to every memory of amazement we’ve experienced with past products, how would we feel if the same product was presented to us again today? When enough time has passed, it’s very likely that you’ll consider that once magic feature as a ‘Performance’ or ‘Must-be’ attribute now.
This disenchantment is due to many different factors, including technological evolution and the emergence of competitors, all vying to bring the same functionality after the first mover. Hence why continuous innovation becomes a real must for retailers.
If you are a retailer, then you might want to take the principals of the Kano Model back to your team. However, the first problem that you might encounter in getting them to innovate, is that you have to now work to get them on board. Which leads me to my first learning…
1. People are at the heart of true innovation
If you haven’t got a team of people who will come together to support you in your idea to drive or grow a business, then you, unfortunately, have extra work to do before you can even truly begin to innovate. An example of a retailer that has managed to successfully achieve this, and have truly brought their team of people together, is the Lego Group.
For Lego Group, access and innovation became not only about developing products for the company but also about enabling more children to experience the joy of learning through play – unsurprisingly, this deep sense of purpose was highly motivating to LEGO’s employees.
The magic recipe, in relation to Lego’s success:
- Put people first
- Inspire through purpose
- Connect innovation with a deeper sense of purpose
Innovation has nothing to with how many R&D dollars you have. It’s not about the money. It’s about the people you have, how you’re led and how much you get it Steve Jobs
So, if people really are at the heart of true innovation, then you must prepare your business to succeed in the long-term. Rather than being exhaustive and draining on the teams that you work with, focus instead on being empowering and energising.
2. Innovation can also mean employing simple tactics to stay ahead
My second learning is based on the idea that innovation doesn’t mean investing in the next big thing, or coming up with a brand new idea. Sometimes it can be about doing something simple and iterating from there. To quote Lari Lehtonen, Head of Product at Nosto Solutions:
The word “innovation” misleads people to think that new flashy technology equals innovation in e-commerce. But often building the brand and story consistently, from the ground up using simple tactics yields better results Lari Lehtonen, Nosto Solutions
And he’s right. Sometimes it can prove more valuable to focus on the quick wins and implement what you know will work. We can look at the retailer, Pura Vida, to exemplify this idea.
This charitable jewellery retailer innovated by employing social selling, user-generated content, and tying it into their overall strategy. Creating a monthly club and leveraging reviews was their simple, but highly successful, form of innovation, and it has served them extremely well.
3. Taking risks can lead to great innovation
My third learning is based on the idea that innovation naturally means that you will need to take risks – this is just as true in life, as it is in business. Sometimes there will be failures, which will need to be accepted and moved on from, but sometimes taking the risk will lead to something spectacular and great!
Adaptability and constant innovation is key to the survival of any company operating in a competitive market Shiv Nada, Founder of HCL Technologies
Take Uniqlo for example. They went up against the likes of Zara, H&M, and Forever 21 to bring affordable fashion to the masses, becoming yet another contender in the global, fast-fashion retail market. Typically retailers like this will manufacture clothes purely for trends – once one trend has ended they move on to the next, and then the next and so on, continually trying to keep up with each other to release the latest trend first.
Uniqlo took the huge risk to forego the following of trends, and instead went to work on creating durable and innovative clothing, that was accessible and affordable to everyone. You only need to look into their HEATTECH line, consisting of specially curated fibres and the use of milk protein within fabrics, to be incredibly impressed with their product innovation.
The brand’s key success factors include its unwavering commitment to innovation and its company culture. Tadashi Yanai has repeatedly stated that his company is “not a fashion company, but instead a technology company”. It seeks to bring innovation into clothing manufacture and design, creating unique clothing lines to meet customer needs in new ways.
Uniqlo took the risk to go against the grain of the industry, and they are now a multi-billion dollar company. They are also on track to surpass the likes of Zara and the Inditex group by 2020 – which is what they set out to do.
4. Don’t let fear of change stop you from taking risks
Now, this section is related to my previous learning about being prepared to take risks, but I think it’s important to discuss why we mustn’t let psychological fear stop us from saying “yes” to new opportunities and successes.
Inherently people are afraid of change, this is just a fact, unfortunately. Fear of change can cripple many managers and CEOs, stunting their growth and in-turn having a ripple effect on their business and its people. This happens time and time again, and I have personally seen this not just in retail, but outside of retail too.
You can’t allow tradition to get in the way of innovation. There’s a need to respect the past, but it’s a mistake to revere your past Bob Iger, CEO The Walt Disney Company
A great story here is about Blockbuster and Netflix. Back in 2000, when Netflix had only 300,000 subscribers and relied heavily on the U.S. Postal Service for the delivery of their DVDs, they were losing money and so were offered acquisition by Blockbuster for $50 million. Blockbuster proposed that Netflix, which would subsequently be renamed as Blockbuster.com, would handle the online business, whilst they would take care of the DVDs, making them less dependent on the U.S. Postal Service. This offer was declined by Netflix.
Today, Netflix has 137 million users worldwide and their market value is over $150 billion. The key point here is that Blockbuster had the opportunity to do something radical, but instead chose to stick with the comfortability of what they already knew was working. Instead of taking the ‘risk’ of something unknown, their hesitation is essentially what cost them the business – they let the fear of change stop them from taking the risk.
Key takeaways for continuous innovation in retail:
- People are at the heart of true innovation
- Innovation can also mean employing simple tactics to stay ahead
- Taking risks can lead to great innovation
- Don’t let fear of change stop you from taking risks
To round-up my talk on “Staying Ahead of the Game – The Importance of Continuous Innovation in Retail”, I shared a few stories of innovation where, despite fear, leading retailers in the luxury vertical took the risk. Feel free to keep an eye out on the #MM18NYC Twitter account for my session release, and hopefully you’ll be able to hear these success stories for yourself.
A huge thank you to all the team involved in hosting and running #MM18NYC – the conference was fantastic, and I thoroughly enjoyed my time with you all in the Big Apple!