The Digital Revolution: Creative Destruction or Retail Reinvention?
Delivering an impassioned speech to the shareholders of the troubled New England Wire & Cable Company, corporate raider Larry "the Liquidator" Garfield, played by Danny DeVito in the 1991 film Other People’s Money, tried to explain the company’s predicament:
"This company is dead. I didn't kill it. Don't blame me. It was dead when I got here. It's too late for prayers. For even if the prayers were answered, and a miracle occurred, and the yen did this, and the dollar did that, and the infrastructure did the other thing, we would still be dead. You know why? Fiber optics. New technologies. Obsolescence. We're dead alright. We're just not broke. And you know the surest way to go broke? Keep getting an increasing share of a shrinking market. Down the tubes. Slow but sure." 1
Today, the retail industry, especially the hardlines segment2, is undergoing rapid innovation, transformation and creative destruction driven by the digital revolution. Companies that have embraced digital technologies such as Amazon.com, Apple Computer and Google are experiencing unprecedented success while others who have waited to expand their technology horizons have, in the words of "the Liquidator", gone down the tubes or are struggling to keep up. In the continuously evolving digital retail landscape, how can retailers ensure that their brands and their businesses stay on top?
Here are four strategies for innovation that retailers can adopt to ensure their businesses not only survive, but thrive, in the digital retail era:
- Digitalize your products – music, video and now the printed word (books, magazines, newspapers) have become digital products along with the rise of iTunes, Netflix, Kindle and iPad resulting in the demise of many traditional music, video and book stores. What may have been forgotten, and today taken for granted, is the many other products (and industries) that have already been totally transformed by digital technology such as the typewriter, telephone, mail, photography, maps3 and games (not to mention social networking) over a relatively short time. But of course, you cannot digitalize a gallon of milk, a pair of pants, or a set of furniture4. You can however add intelligence to your physical products in the form of QR codes, RFID tags and even microprocessors (for example wearable technology and E-textiles) – isn’t that the way the phone got smart? And of course digital technology can be used to design, customize and personalize your products – ever shell out on a custom pair of Nikes or Levis, or built your own Dell or Beemer5? Therefore, when designing a new product or service, ask the question, "How can I offer this digitally?"
- Surround your product with digital services – as the paraphernalia that are part and parcel of retail transactions such as catalogs, tickets, coupons, payments, receipts and loyalty programs (remember green stamps?) increasingly become electronic, an additional strategy is to develop a complementary set of services to support your product delivery, installation, maintenance, repair, upgrade and replacement (i.e. the consumer lifecycle). Again, although many of these services are physical and cannot be entirely digitalized they can be greatly enhanced with the use of digital technology. One example is Fresh Direct, the New York City online grocer, who goes to great lengths to ensure their customer deliveries in the asphalt jungle6 of Manhattan are made within the promised time slots.
To be continued… check back in a couple of weeks for two more retail innovation strategies for the digital age and the conclusion of this piece by "the Liquidator"!
Notes:
- You can catch DeVito’s full speech at American Rhetoric.
- The other retail segments that my fellow Industry Principals at SAP specialize in are Softlines and Food & Drug.
- Maps have become much more than just being digital – coupled with satellite imagery, geo positioning systems and augmented reality they have morphed into such things as navigation systems, traffic indicators, real estate valuation tools, business directories (my daughter once asked me what are Yellow Pages) and, the one I love best, a way to visit places you’ve never been to before (or that place long ago where you grew up that’s now a shopping mall – those damn retailers!)
- In the future you just might be able to print your own liver: Sir, Your Liver Is Ready: Behind the Scenes of Bioprinting.
- You can also pick it up at the BMW Welt, Munich – a great example of multi-channel retailing and a total customer experience.
- Asphalt Jungle, a 1950 film noir directed by John Huston.
