When co-development makes sense for a technology vendor

Sep 15, 2014

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

Back in February, I wrote a piece outlining why co-development can make sense for a retailer. I discussed its value for the retailer, and quickly glossed over why it might make sense for a vendor.

The fact is, co-development can also make sense for a vendor in many cases.

I started out thinking that the reasons would differ depending on whether the vendor was just starting out or was an already established player in the space, but I realized the differences are all in the priorities involved.

Establishing credibility: We always advise our start-up vendor clients that it’s really important to have a "poster child" — that’s an early adopter willing to exchange reduced costs for mentions. It’s unrealistic to expect vendors to work for free, but certainly it’s realistic to expect them to work for cost, or something less than cost, in exchange for a strong endorsement from a well-known successful retailer. For their part, retailers are generally not keen on being pioneers.

Established vendors also need the credibility associated with the first install. When SAP rolled out its new Merchandise Planning system, it helped to know that Nike had been involved in the process. Similarly, Manhattan Associates and Oracle Retail have also praised their co-development partners as they roll out significant new releases.

Getting it right the first time: Nothing is worse than developing in a vacuum. I was recently contacted by a member of the press asking about a mobile application failure at a very large retailer who shall remain nameless. Apparently, the application was virtually unusable by consumers. My first observation was that, "Clearly the retailer did not try the application out on its own store personnel. They would have told the developer immediately that it wasn’t usable by an average person." I was correct, but that’s cold comfort for the retailer and vendor alike. The new application could have been brought to market more quickly and for a lot less cost had a co-development process been followed. And that brings me to my last point.

Insure that people involved in co-development are the right people: What’s intuitive to an IT person or executive may be completely counter-intuitive to an end-user. Beyond applications to be used by store personnel, it can happen in other departments as well. This is particularly important now, as a generational shift is occurring in the workforce. Boomers are moving out of the workforce, and being replaced by Generation X, Y and Millennials. In the age of tablet computing and the smartphone, preferences have likely changed. So while executives might still be comfortable with the spreadsheet paradigm, the rank and file is likely more interested in graphics.

What are the benefits and drawbacks for technology vendors of co-development projects with retailers? When does it make the most sense?

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7 Comments on "When co-development makes sense for a technology vendor"

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Mark Heckman
7 years 8 months ago

Having a retailer as an “active” beta test partner for new technology is smart on many fronts. However, retailers are currently being besieged by such opportunities and must be very selective about who they partner with and what they venture into. In any retail channel there are those chains that have the reputation and track record for innovation. Some actually have R&D stores, providing a learning lab for developing and testing technologies in real time with both associates and shoppers.

However, if you are a technology vendor, engaging one of these innovative retailers is a very challenging endeavor. They are savvy and selective in what they test. To enhance your chances, understand the retailer’s strategic priorities and position what you have to offer closely to solving the retailer’s problems and fulfilling their objectives.

Chris Petersen, PhD
7 years 8 months ago

Launching tech products today is the ultimate paradox and challenge.

On the one hand, retailers need vendor partners who have the expertise and connections to source the product. To launch a hardware product today requires much more technical competency than in the past.

On the other hand, even the largest technology vendors don’t always get it right in their own products. Microsoft, Sony and many other tech vendors have had their share of product failures in the consumer marketplace.

The one area that retailers could definitely benefit from collaboration is in the area of “apps.” Apps play an increasingly powerful role in omni-channel execution. But as Paula points out in her post, the real key for any collaborative venture is “co-development.” There needs to be a partnership that understands the consumer more than the IT inside.

Bill Davis
7 years 8 months ago

One benefit is it gives a vendor the opportunity to create a satisfied customer. Software companies need endorsements/recommendations from retailers, much easier to sell your wares when someone in your target market is saying how great your solution is, and this is clearly one way to get them. It also helps them focus on addressing real customer issues as opposed to having the vendor develop in a vacuum.

One drawback that can occur is if the retailer isn’t fully invested and engaged in the project. Sometimes when discounts are involved, firms lower the value of a project. Every technology vendor wants to make sure there is commitment to the project. Another drawback is scope creep, in that retailers start asking for work outside the core project (have experienced this on more than one occasion).

While not perfect for technology vendors, these opportunities make a great deal of sense in terms of developing a referenceable customer base.

Peter J. Charness
7 years 8 months ago

it’s a win-win for both when mutual self interests intersect. For the retailer this normally means an important project but one that isn’t on a hot deadline, as final delivery time frames are not always easy to predict on new commercial product development. For the vendor it’s validation of real requirements, which no matter how smart and experienced their internal team is, always provides a good checkpoint.

Ralph Jacobson
7 years 8 months ago

Both partners need to have skin in the game. We often do first-of-a-kind projects with our retailer and CPG clients whereas both parties have strong upside potential. Therefore, it is obvious to both teams that they must engage the right people with objectives, expected outcomes and metrics clearly defined at the onset.

Dan Frechtling
7 years 8 months ago
“Co-development” varies from user testing to collaborative coding. This ranges from simple feedback to complex pooling of R&D resources. Let’s take the most common of scenarios, an alpha or beta for an early stage technology vendor. Retailers get pre-release software at a discount in return for validating functionality. Time is the most precious resource, so retail technology vendors MUST engage retailers in co-development because they require validated learning shorten engineering time and referenceable customers to shorten go-to-market time. There is no other choice. So the next question is HOW to engage retailers, with two principles: 1. Choose battles that are big enough to matter and small enough to win. This implies retailers that are big enough to be bellwether referenceable names and provide for revenue expansion over time. At the same time, the retailers must be leading edge and convert to paying customers after a successful pilot. 2. Watch burn rate when applying discounts and investing human capital. The temptation is to go all in on a retail vendor. But this is a trap. Don’t… Read more »
David Lubert
David Lubert
7 years 8 months ago

This is a huge win for both parties. However, in my experience, using the term vendor speaks volumes about the relationship. If it is a true partnership then there is collaboration on many key levels necessary for a successful development project. From a software partner perspective, having input from actual users ensures getting it right, however, the key is making sure the retail partner truly represents your target audience. As a software partner it is vital that the retailer reference carries strong credibility within the target audience segment you are trying to sell into!

A CIO once told me that if “our” solution was to be successful he needed his competitors to adopt it as well, because if they did the overall solution would get stronger and more robust! For all my years in the retail software space this unfortunately is not widely adopted!

As long as the term vendor is used to describe this relationship then there really is no relationship from my experience.


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