What does it take to create a risk-taking, innovating retail culture?

Photo: Zappos
Jan 20, 2020

At a session last week at the NRF Big Show, which explored how to motivate risk-taking and drive innovation within organizations, Heidi Isern, senior director, customer experience innovation, Gap Inc., said one priority is getting “very top level” buy-in for strategic priorities.

“What is your opportunity space going to be,” said Ms. Isern. “What are those big things you’re going to go after, ideally, because your customers have told you they’re either big pain points or opportunities for something they really desire.” 

Similar to Silicon Valley start-ups, a project with an uncertain payoff needs a “Stage Gate process” that may initially feature minimal seed funding to get started, said Ms. Isern. With progress, the project brings in higher levels of funding and gets more departments involved.

“It’s important to have those processes and very clear KPIs for when you go from one stage to the next, and then your CFO can relax a little bit because they know they’re not just throwing all this money at you. There’s actually going to be an approval process,” she said.

“Some things just have to be done,” said Dave Wood, general manager of Joules USA, the American arm of the British clothing company, about funding projects. “Some things are test and learn. Some things need a business case; we try not to get bogged down in paralysis from business cases.” 

Empowering employees was seen as a primary innovation driver for Zappos and Chloé, the French fashion label.

Alex Genov, manager of research, user experience at Zappos, said the footwear e-tailer in 2014 shifted to a self-organization management structure that eliminated titles and workplace hierarchy to help encourage collaboration and experimentation. The move was intended to “get back to those roots of the startup.”

For Alexa Geovanos, brand president, North and South America for Chloé, employees have to be emboldened to fully extrapolate the customer insights that often sparks innovation. “I think you have to always ask yourself if you’re using the people on your team to the greatest extent and in the right way,” she said.

DISCUSSION QUESTIONS: What advice would you have around risk-taking and instilling an innovation culture? What’s the best way to fund and manage projects with uncertain ROIs?

Please practice The RetailWire Golden Rule when submitting your comments.
"Innovation will be disruptive and messy. Having the fortitude to work through the disruption takes a board of directors who reward this process. "
"Just a little bit of thinking can create a culture of innovation. It need not be risky to be innovative."
"Brands can test and learn in a microcosm, such as a pop-up shop in an area that’s populated with all of a brand’s target consumer demographics. "

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20 Comments on "What does it take to create a risk-taking, innovating retail culture?"

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Jeff Sward

“Safe” means known and comfortable. “Risk” means unknown and uncomfortable. Risk is a differentiator and therefore a brand’s potential best friend. But it’s managed risk. Risk that understands the boundaries of the brand promise and how to push those boundaries, not just blow through the guard rails. And risk has to understand the odds. Not all tests are going to have terrific outcomes. So KPIs have to recognize learning as much as (maybe more than?) positive outcomes. Risk requires a certain kind of patience, so that people and the organization have the necessary time to climb the inevitable learning curve. Change does become embedded just from being embraced by early adopters alone.

Adrian Weidmann

Innovation is difficult. Everyone likes to use the word and most people pride themselves on claiming they, and their organizations, are innovative. Most aren’t. Innovation takes commitment, risk, and the fortitude to fail. Most retailers just want to survive the next quarter. The folks that need to be innovating tend to work in cultures where taking risk is not rewarded. Innovating needs to be an iterative process (not simply black and white) driven by learning and reacting. Innovation will be disruptive and messy. Having the fortitude to work through the disruption takes a board of directors who reward this process. The caveat is that they need committed champions that will fight through the challenges. Anything less will lead to failure.
Innovating concepts need to be supported by a detailed plan that clearly defines how the concept will be measured. Measuring for iterative success is a critical component that is often forgotten.

Dave Wendland

Interesting discussion, Tom. Throughout my career I have helped organizations identify where across the continuum they wish to try new things. On the one end of the spectrum is “safe” and relatively uninspiring (I don’t suggest organizations innovate with this as their goal. Safe often suggests iterative step changes embodying little imagination). On the other end of the continuum is “reckless” (again, I don’t advise this either. Recklessness can destroy an organization and its culture.). The step below reckless is “bold.” This is the space I feel retailers need to embrace. With that boldness comes differentiation, innovation, inspiration, and new results.

Funding for such projects must begin at the top. I also would encourage a cross-functional team to take the lead — all with a vested interest in its success. It’s important to understand that misfires will outnumber successes — but that is the road to breakthrough innovation.

Brandon Rael

There is a clear risk/reward proposition when driving a culture around innovation. Without taking the necessary business supported strategic risks, and by having a culture of risk adverseness, companies will stunt their growth and their ability to compete in today’s marketplace.

With that said, there is a balance to be struck between running your operations and taking strategic risks to drive innovation. Innovation is not possible without qualifying the business and experiential value to the company and its customers, as well as quantifying, measuring, and mitigating the associated risks in taking the plunge.

This is exactly why any innovation initiative should be piloted, measured, and analyzed before scaling it across the company’s enterprise.

Ken Morris

Retailers are risk averse by nature. When I was at Filene’s, now part of Macy’s, I was always forced to find a departmental sponsor to fund innovation. That meant someone had to take money out of their budget for the coming year equal to what I would spend in order for me to develop innovation in IT. Every year I would propose an exception-based reporting system and every year it would be shot down because I couldn’t get a sponsor. Ten years later when I started CFT Consulting and Systems we developed XBR and it eventually became the most widely used exception based reporting system on the market.

Sometimes you just have to experiment and not rely only on “hard” dollar savings.

Frequently, so-called “soft” savings equal innovation.

Shep Hyken

Creating an innovative culture is powerful. Unfortunately, most organizations don’t empower employees to come forward with their ideas. And, even if they do, there is often not a process in place to get those ideas to the right people for consideration and possible implementation. Our clients who focus on innovation have a clear process in place for employees to share. Every suggestion is considered. Feedback is always shared. Recognition is given when an idea is implemented. The better employees feel about submitting their ideas (good or bad), the more ideas will be submitted.

Michael La Kier

A “stage gate” process is not the key to create a more risk-taking, innovative retail culture; it can actually do the opposite and stifle innovation. An open culture is required to drive risk taking and innovation – open to ideas and open to the prospect of failure as long as it leads to learning. Fail forward, fast, and cheaply rather than wait!

Jasmine Glasheen

Brands can test and learn in a microcosm, such as a pop-up shop in an area that’s populated with all of a brand’s target consumer demographics. Even the biggest retail players, like Amazon, are doing this before scaling new ideas. Pop-up shops, testing centers, and collaborations with local retailers can help marketers create a buzz around their brand while also giving customers the opportunity to take part in a new concept’s inception process––in a time when customization reigns supreme, this is an increasingly important part of rolling out any new concept successfully.

Peter Charness

Dare to fail! The usual retail funding and ROI culture prevents experimentation. Try 10 experiments, expect one to succeed and celebrate that the other nine created a culture of learning and initiative. The rewards are not always based on hard ROI. Unfortunately funding for such initiatives is often the last to be budgeted, and the first to be cut.

Ken Lonyai

Culture only comes from top leadership. What they instill and what they permit sets the tone others follow.

Overall retail has lacked innovation culture for decades. Certainly there have been exceptions, but most retailers create some hype around a small project and then continue the same old practices.

Retailers that recognize the value of breaking that habit and want to leap forward have to first identify what’s truly broken from a customer viewpoint and what fixed would look like. Then they need to encourage new ideas that have demonstrable consumer benefits in line with consumer needs or at least find them from vendors. Lastly, they must be prepared to fund full rollouts of successful ideas, even at the expense of profitability, else it’s yet another dog and pony show for PR and investor pacification.

James Tenser

I’m a big believer in employee empowerment. But this is not merely a matter of corporate philosophy. It is made possible by thoughtful management decisions that put the best possible tools, training and trust in the hands of people on the front lines.

Every customer-facing team member should be armed with the competency and the assurance to err in favor of the customer when circumstances are ambiguous. Even if some of those choices prove to be sub-optimal, it’s imperative for management to embrace those failures without penalizing the people who made them.

Nurturing this kind of culture may bring an important benefit too, when management-led innovations are tested in the market. Service innovations depend on the people who implement them as much as their design.

Doug Garnett

Cultural change starts with the board, CEO, and the remaining C-Suite executives. Some changes needed?

Many best practices must be abandoned – because the culture of best practices is a culture or control and limitation which fights against innovation.

Most management of subordinated by KPIs need to be seriously challenged — and often abandoned. KPIs are only valid in stable situations and innovation is not stable.

But most of all, the board and C-suite have to demonstrate by their own actions the embracing of risk taking and eliminate the political punishment of those who take risk.

These are issues I’ve written about in a 4-part series about 11 diseases which kill innovation — 4 deadly, 4 less so. Here’s the first.

Doug Garnett

Marketoonist also gives us excellent insight into this problem….

Ralph Jacobson

There’s no magic here. Those retailers that we consider innovative are typically the ones that truly started with or evolved from a clean a sheet of paper. Why does a supermarket have to have fresh shops around the perimeter and dry grocery in the center of the store? Why do the traditional grocery store departments have to endure? Why can’t the store be merchandised by meal type? Breakfast, lunch, dinner, vegetarian, etc.?

Just a little bit of thinking can create a culture of innovation. It need not be risky to be innovative. I remember a hundred years ago when my retailer initiated a company-wide idea-generating program called, “B.A.D. Idea.” B.A.D. = “Buck A Day”… Meaning generate an additional buck a day of revenue per store, per transaction, whatever. Just do SOMETHING!

Lee Peterson

Easy one for me: eliminate the fear of failure, which goes right along with the fear of sounding stupid. Failure is a human condition. We just do it, so what? Also, keep in mind, there is a big difference between failure and incompetence.

The hard one is making sure everyone knows what happens when really good things happen and, more importantly, when really bad thing happen. Let everyone feel the joy of winning as well as the pain of loss.

One of the best team building exercises we ever did was tell the team, “if we don’t get this work, we’re going to have to let __ of you go.” Man, did we work together to win that one. But keep in mind, as will the first example; there is a difference between fear and truth. Be honest, people feel that.

gordon arnold

If you want to surround yourself with risk in an environment that is proven to pay big when success is found, simply go to a casino. Private and Public Equity firms use proven methods with exact steps to investigate potential markets for opportunity. If the final grade of the tests is passing then investment costs and ROI are measured in volume over time and a yes or no is obvious. People needs and market acceptance are a little more difficult to calculate largely because of price and availability, but just as necessary. The only surefire winner in an investment roll of the dice is the tax collector.

Ricardo Belmar
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
2 years 6 months ago
Just do it. Don’t be afraid to fail. Embrace the blur. Always be innovating. These words all make for a great slogan and/or mantra — but in the end, they are 100% true. Crate and Barrel’s CEO summed this up well when she said their brand had been around for 58 years but they had no right to expect they will be around for the next 58 years. Retailers are used to incremental change, cost sensitivity, and cautiously avoiding risk. Those days are over! The retailers that not only realize this but embrace it will be the ones to survive. And we see this int he brands that we most often talk about whether they are young brands or old, and their main character trait is that they no longer fear risk or failure. In speaking with retailers I find myself often reminding them that even Amazon fails (remember the Fire Phone?) yet they keep on innovating. Why? Because even for Amazon, failure is often the best teacher! That is the most important lesson for… Read more »
Cathy Hotka

We’ve seen over and over that forcing innovation by investing big bucks in a building with a foos ball table isn’t the right approach. Listening to associates IS. Retailers that actively seek out feedback from customer-facing employees find new approaches that save money and deliver a better experience.

Jeffrey McNulty

Best in Class retail organizations create an atmosphere that is inclusive, engaging, and open-minded surrounding innovation.

This strategy must come from the entire C-Suite team in order to be successful. A “fish stinks from the head down.” Embracing innovation is a high risk/high reward proposition that takes leaders who have patience and a high risk tolerance for failure.

I am looking forward to seeing more retailers embrace innovative strategies.

April Sabral

Listening to the customers and employees and taking calculated risks are necessary in today’s retail landscape.

I agree with Jeffrey. It must come from the entire C-Suite and this poses the challenge with so many competing priorities today for executives to sift through. It almost becomes which one is the most important, I think what Starbucks has done with their innovation lab for employees in Seattle is something that others should adopt. I heard them speak at Future Stores, last fall and they have a good process in place for their teams to be innovative and try things out. I saw a store that had solar panels on the top that came from an employee!

"Innovation will be disruptive and messy. Having the fortitude to work through the disruption takes a board of directors who reward this process. "
"Just a little bit of thinking can create a culture of innovation. It need not be risky to be innovative."
"Brands can test and learn in a microcosm, such as a pop-up shop in an area that’s populated with all of a brand’s target consumer demographics. "

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