The innovation challenge

Spotting when it is time to do something different

In conversation with:

When retail and hospitality businesses fail, it is always a tragedy - particularly when you consider the thousands of colleagues, dozens of small suppliers and legions of loyal customers who bear the brunt.

With hindsight, though, most business collapses look like they should have been avoidable. There is usually a strategic choice the business could have made at some point in its history which would have led to a different outcome. It might have been expanding faster, or embracing the digital world earlier, or refreshing the product range. It might, on the other hand, have been about avoiding an expensive mistake like an international expansion which didn’t pay back.

The apparently simple trick, then, to keep your business thriving and growing is to spot these key business decisions early and then get them right!

At some level, indeed, almost the entire job of the Board and senior leadership in a business can be summarised as trying to do that - worrying about how to evolve a business so that it doesn’t get left behind by changing consumer needs but also trying to avoid expensive projects that don’t work.

So how should we do that?

One of the joys of having Moving Tribes work with partner businesses is the ability to pick their brains, and this week I sat down with Justin and Sue from Barracuda to debate just this topic - how do businesses get the ‘innovation challenge’ right?

Emerging from that discussion, we identified three steps that the best retail businesses take to drive innovation successfully. Over the coming weeks I’ll address each of them, starting today with the first, but possibly the hardest step:

Recognising the need for change

The first step in changing your business is recognising that it is time to do so. Your market might be changing, your customers’ needs evolving and new technologies nipping at your heels but when is the right time to seize the moment?

That is a particularly hard question, because the answer is usually “before it becomes obvious”. Too many businesses have found that their business model still seems to make basic sense (and generate a profit) long after the point where they really should have started to evolve and change - like Wile E Coyote running off a cliff but not falling until he notices he is in mid-air, these businesses carry on doing what has always worked until, suddenly, it doesn’t any more.

Consider, for example, all those businesses who wrote off the internet as a niche and low margin channel and convinced themselves they were right because “95% of business in our sector is still done in stores” - until that became 90%, and then 85%, and suddenly they were being left behind by those who had become multi-channel earlier.

Conversely, every business is surrounded by opportunities to try something new - there is always a new technology or new idea being pushed by start-ups or a new way of doing business being heralded by consultants. You can’t chase everything, or you risk diluting and damaging your core business. So identifying the need to change direction needs to be not so late that you have missed the opportunity, but not so early that you end up chasing fashionable but pointless innovation.

So how do you decide when your business needs a radical change of direction? Here are three tips from my discussion with the Barracuda team:

1 - Have the right people around your table

It might sound obvious, but it is leadership teams and Boards who make the big decisions about corporate strategy - so have you set yours up so that they get those calls right?

Do you have the right diversity around your table - of background, perspective, nationality? The big downside of a team where everyone looks and sounds the same is that you can all have the same blind-spots. It might be comfortable working with people who fit ‘in your gang’ but it is very dangerous.

Equally, do you have the right skills around the team? If there is no-one who understands the digital world, for example, then how can you expect to be making the right decisions about how to approach that world?

And are you having the right discussions? To continue the digital example, too many Boards brought in non-execs from the digital world but then failed to listen to them - giving them a slot at the end of the meeting to ‘sound clever about digital’ and then metaphorically patting them on the head and carrying on with business as usual.

2 - Know your customers

How much time do your senior leaders really spend with actual customers exploring what it is like to buy from you and what else is going on in their lives? We’ve explored before here at Moving Tribes that just doing a ‘royal visit’ and wandering around a shop does not really constitute meaningful time with customers.

Finding the time to really talk to a group of customers (and of course those who choose not to be your customer too) can be incredibly instructive and can unlock insights that you might not otherwise glean from Powerpoint Board packs. What role does your brand play in their lives? Are they choosing between you and competitors, or are they just choosing not to consume your products at all? Are you facing a demographic ‘timebomb’ where younger customers just don’t see you as relevant? All of these are things you’d rather find out before they were obvious in your trading figures.

3 - Get the best from your teams

If you are a retail or hospitality business, then you employ a lot of people who talk to your customers all day - but do you ever talk to them? Having an advisory group of your front-line staff, recruiting younger colleagues as digital or social media ‘mentors’ or finding other ways to set aside time to really listen to your colleagues is a powerful way of staying connected to what is really going on in your market.

And no, you can have all the suggestion box email addresses you want, but that is not the same!

All around us are businesses making big strategic bets. They might be investing in experiential retailing like Majestic with their purchase of Vagabond wine bars. They might be shifting format like the grocers, DIY chains and garden centre operators who are moving back into the High Street from the retail park. They might be looking at new channels to market, or investing in driving new business based on data analytics.

Which of those moves will pay off? It is a safe bet that it will be the businesses who understand their customer best, and have real insight into their changing markets which will get it right, and those who are inward facing, too focussed on company politics and disconnected from their customers who fail.

Coming soon - the step beyond recognising the need for change - figuring out what that change should be!

P.S. Not only did this post come from discussion with the team at Barracuda Search, but it is free for you to read (and send to your friends) thanks to their kind sponsorship