The Innovation Imperative



“Innovation” is a business and startup buzzword. It implies forward thinking, creative problem-solving, and the introduction of something new. It brings to mind a frizzy-haired man tinkering with gadgets in a lab.

But “innovate” and “invent” are not the same, no matter how often they’re used interchangeably. According to Merriam-Webster, to invent is “to produce something for the first time,” while to innovate is “to do something in a new way” or “to have new ideas about how something can be done.” Innovation is not about calling one way wrong or trying to be different for the sake of standing out; it’s about reaching a deep understanding of an engine’s mechanisms, and then manipulating the system to make the whole better.


While the mad genius might actually typify an inventor, to me, an innovator is best represented by a great musician. Often the best students of music blossom into the best makers of new music because they spend time really learning their craft before trying to produce something great. If you think about it like a tree, these musicians study every nuance of the roots, trunk, and branches—and only later add their own leaves to the organism.


Eight Reasons Retail Needs Innovating

Some spaces are slower to innovate than others. Retail is one example; there's been a lot of talk lately about its imminent death. While that’s an overstatement, it is true that brick and mortar stores are struggling. And when a chain of stores goes out of business, there is a true economic impact on the entire system.

Here are eight of the top reasons that retail is in need of innovation:

  1. Difficulty of set-up process: The system is designed to benefit large brands with volume, not emerging brands with innovation, making it costly for small brands to test the market.

  2. Disconnect between merchandising plan and store execution: Retail’s 3-tier system (buyers, stores, distributors) is often disjointed without system-wide accountability.

  3. Distribution centers as profit centers: If the costs are not transparent, brands cannot accurately estimate the cost of doing business with a given channel.

  4. Lack of shared business intelligence: Brands need feedback to innovate and make better decisions at SKU, store, and consumer levels, yet retailers are concealing that information. Information sharing would benefit everyone.

  5. Flawed decision-making model: Decisions should be driven by market and brand story, not relationship between a seller and buyer.

  6. Gap in e-commerce: Physical retailers have not yet figured out how to do this well.

  7. Changing consumer habits and behaviors: Modern consumers want and expect an enjoyable buying experience.

  8. Need for an innovation culture: Does your culture allow for, encourage, and reward innovation? Or does it say “Hey, just get the job done”? Innovation only thrives in a culture that celebrates it.

In any industry, those who don’t innovate eventually get left behind. The pressure is on for businesses to respond to a changing retail world.


The Amazon Example

Many brands and traditional retailers demonize Amazon. I hear statements all the time comparing Amazon to “the next, more evil version of Walmart” and complaints that it’s created an uneven and unfair playing field. Don't be lured in. Stop to take a closer look at what Amazon is doing right and how it has used innovation to become a powerhouse to many and a business threat to others.

Amazon has generated 36% growth every year since they went public—a full 20 years ago. So the important question is: How is Amazon consistently excelling in such a tough industry, when some of the historically best retailers are failing? The answer lies in innovation, but not in the traditional business sense of the word. Most marketing executives focus their innovation bandwidth on customer-focused and frontline projects. Amazon, in contrast, spends a large part of its innovation equity on improving infrastructure and changing the status quo relating to the back-end of business (such as building Amazon Web Services, redesigning warehouses, and integrating robotics into pick, pack, and ship processes).

To understand how Amazon is winning with today's startups, put yourself in the shoes of a founder of a new consumer packaged good—perhaps a "smart ball" that tracks movement and provides instant feedback. Your prototype and concept have been celebrated by local mentors, friends, and business colleagues. You've found a manufacturer to build the first 1,000 units. And when you set up at tent at local tournaments, you're able to sell parents on the benefits of the smart ball all day long! If only you could reach more people. But there are challenges implicit in signing an agreement with a big box or sports-focused retail, and the buying cycle is at least 6 months, if not 18. So instead you launch your product on Amazon the very next day. 

Final Thought

Here’s the situation: Retail is NOT dying. Consumers will be buying goods for a long time to come. But the stores that want to be relevant tomorrow must innovate on their core business today. Instead of thinking about innovation as being in front of the customer, think about it from the back end too, in the way we operate the business and scale the infrastructure. That entails applying new techniques, processes, and innovations to improve the system as a whole.

It will be fun to see who rises to the challenge!