Key Findings: Disruptive Innovation in Retail Consumer Markets

Last week the University of Sheffield sent me the great news that I’d passed my MBA with Merit. Something I’m absolutely delighted about. This post summarises and expands on the key findings in my dissertation and provides an opportunity to download the report for those who are interested.

Disrupt quickly with the right people

You are either going to disrupt or be disrupted. Pick one.

Of course the sensible choice is to be the disruptive retailer. You’ll be the one who monetises the next big thing. The one who creates or gains a new base of customers.

With the choice made, the next stage is to form a team that can find, harness and turn a profit from new technologies or methods of doing things. This team – the Disruptive Growth Engine – will need sponsorship from the very top of the organisation to ensure that they are protected from historic business problems. Despite this protection they still need to turn out a profit (even if it is wafer thin).

It’s a simple concept so far. Point 1, be the disrupter. Point 2, the CEO forms a protected group with the mission to turn a profit using new technologies.

Retailers are going to struggle with this though. My research found that whilst retailers are good at understanding their existing customer and serving them, they struggle to innovate and react. The motivation to disrupt through innovation is high but the ability low.

Overcoming this challenge will require the right people. Not necessarily new hires but certainly those with a finger on the pulse of new technologies, creativity and entrepreneurial flair.

Isn’t it too late? Retailers are already disrupted

No it isn’t.

One day (perhaps in the distant future), Amazon and iTunes will be disrupted. This is the core theory of disruptive innovation. Every product will continue to improve until the point that it leaves a gap for a nimbler, technology rich company to exploit.

So for retailers who have survived thus far they need to turn their attentions to disrupting the disruptor.

Let me suggest some areas for consideration:

  1. Consumers told me that they dislike queuing, crowding, poor service and a lack of stock/choice in store. However they like the experience, hands on nature and deals that are found in store. How can technology help to deal with the issues and bring the good stuff to more people?
  2. Watch merger and acquisition activity in the press to identify new business models or technologies that can help solve consumer issues. Note that I’ve very deliberately said consumer not customer here.
  3. Who doesn’t buy your product? Why don’t they? Do they buy it from a competitor or are they non-consumers? What jobs do they have to complete? Point your disruptive growth engine at these questions

Coming to a store near you: Technology for retail

Robotics, automated knowledge work, the internet of things, automated vehicles, 4G/5G mobile internet, 3D printing and advanced materials are all technologies for investigation.

Could tomorrow’s retail store of products on shelves be replaced with 3D printers using advanced materials and robotics to build custom made products. Internet connectivity could then be built into the goods, monitoring usage, location and possible issues.

However care should be taken not just do the same thing in new ways. Disruption requires the innovator to find new consumers. In this case the same technology could be used to reduce the cost of an existing product that is inaccessible to many. Alternatively the same technology could create a way for people to do something new or in new ways.

Digital: Caffeine for disruptive innovators

One inspiring paper I used in the dissertation challenged retailers (and all businesses) to pirate ideas from the web.

The author wasn’t suggesting that one participates in copyright or patent theft, but that we learn from what is occurring online. For example, movie piracy was a huge issue for Hollywood. Why? Because people wanted to watch new films and were happy to do so at a degraded quality on their computers. Rather than fight this, Apple embraced it and provided digital films and TV programs for download through iTunes. A decision that has created substantial revenue.

Digital technology and culture is accelerating innovation and growth. Out of nowhere games companies have appeared and eclipsed the valuations of established main stream games companies. Social networks that were built using fairly simple technology are rapidly valued in billions of dollars without turning a penny (or cent) in profit.

Digital’s success lies partly in the low entry cost. A website can be easily constructed with a text editor and free graphics editor. Apps for mobile require little cost to begin building. All that is required is an idea that a tribe can buy into.

There’s also a cultural impact of digital. Digital allows quick failures. Prototypes can be launched and scrapped in minutes. Advertising programs tested and optimised. It’s better to have tried and failed than to have never tried at all is the attitude that retailers need to embrace. It needs to be part of the culture. The proviso of course is that the cost of the failures is within reasonable bounds!

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Creative Commons License
Disruptive Innovation in Consumer Retail Markets by David Sealey is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Some of the key books behind the dissertation

David Sealey is a trusted adviser to senior executives on getting the most from their investment in digital and data. David created Storm81 as a place to share his passion for business, digital technologies, multichannel marketing and everything else around these topics.

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