BrainTrust Query: Do retailers need to find new ways to innovate?

By Kenneth A. Grady, President and Attorney, K.A. Grady PC
(www.kagradypc.com)

Everywhere you turn, someone is talking about innovation. Tom Kelley, author of the recent book, The 10 Faces of Innovation, calls it "the lifeblood of all organizations." According to some industry experts, there now exists a greater need for retail innovation than ever before.

Yet the retail industry seems to have few innovation stories to tell. Each year, only a few chains pop up as the new, cutting edge retailers to watch. Some stores, such as Teavana or Massage Envy, push into new territory. More often, however, stores focus on different ways to reach existing target markets.

Many mature retailers attempt macro innovation, announcing plans to remake their stores or product mixes, or reposition themselves in the market. Not only are these retailers innovators, their innovation is on a "bet-the-business" scale. Whatever its form, macro innovation is risky and fails more often than it succeeds.

In contrast, there is what I call micro innovation. Micro innovations address small pieces of the business that could positively affect sales. Each micro innovation can be reversed easily if it does not work. Edward Filene was a retail micro innovator. He created special departments within a store, a concept that evolved into specialty shop collections in department stores. Although, today, many of Filene's ideas are old-hat retail strategies, they were true micro innovations when introduced.

Micro innovation can be very powerful. A retailer with 1,000 employees has thousands of customer contact points each day. Every contact can inspire a micro innovation idea. Cumulated across many employees and stores, these innovations can transform a retailer from within. Micro innovations may be unique to one store, or may work across all stores in a chain. They may be ideas borrowed from other chains, or something entirely new. Each one alone may result in a minute increase in sales or profits, but when all the innovations are compounded across the whole chain, the effect is enormous.

Despite the benefits, retailers inconsistently practice micro innovation. Retailers' systems to internally share micro innovations are hit-or-miss. Store managers may or may not share innovations with district managers, who may or may not share innovations among themselves or with regional managers, and the process continues (or not) up the chain. Often, senior managers must approve innovations before they can be spread around.

Today, technology can speed the sharing and approval process and eliminate missteps. For example, companies can create corporate "wikis" where employees can share, comment on and improve innovations. Each day, everyone in a company can evaluate micro innovations with the click of a mouse.

Discussion Questions: If innovation is the lifeblood of the retail industry and, through technology, retailers can rapidly and continuously evaluate and share innovations, why does it seem as though very little innovation exists? Do retailers need new and more effective ways to innovate?