11 November 2020

Support the challengers: why progressive retail leaders recognise the importance of start-up innovation

Coming up with ideas is hard. All businesses struggle with it, even though the ability to innovate is inextricably linked to performance – according to McKinsey and Co, 84% of executives say innovation is important to growth strategy.

It’s doubly important now – another report from the consultancy said 90% of executives believe that the COVID-19 crisis will fundamentally change the way they do business in the next five years. Not necessarily in a bad way, either; overall, 70% expect the pandemic to be an opportunity for growth in their industry. The issue is, they need to be in a position to capitalise on it.

That means coming up with ideas. So, where do these ideas come from? Will it be established players, with their scale and resources? Or will challengers and start-ups, unencumbered by legacy infrastructure and therefore more agile and faster moving, strike first?

One area that is crying out for innovation is retail, and in particular the retail supply chain. While the last year has seen immense disruption, and incredible performances from retails of all shapes and sizes to continue to support customers, longer term changes need to be made. With rolling lockdowns and localised restrictions, retailers need to be able to pivot quickly with little warning. That means having supply chains that can do the same – historically not the fastest of functions.

How then do retailers inject the necessary innovation into their supply chains? There is certainly the potential a lot of disruption in the sector – from better transparency across entire logistics networks, to automating transportation, warehousing and distribution. Artificial intelligence, machine learning, Internet of Things, blockchain – all technologies that could be used to improve the efficiency and agility of supply chains, while improving resilience to disruption. But how do retailers inject that into their own operations?

One opportunity could be for established operators to partner with start-ups and sector challengers. For the former, it offers a fast route to innovation with less risk – a start-up with a strong team and starting to see sales is a more proven entity than trying to build the equivalent in-house. For the latter, there is the access to the resources and reach of the larger company.

This is not a new concept – many global entities run incubators and formal partnering programmes with start-ups. Yet often the focus is on investment, or equity in exchange for access and support. At a time when cash flow is restricted, many corporates may be shying away from funnelling funds into non-core activities.

What start-ups need is support that doesn’t require surrendering ownership of their business. Ideally, any opportunity with a larger organisation should cover five points:

— That the activity covered by the partnership is paid – even if the start-up has started generating revenue, an unpaid pilot is effectively a small business financing a larger one’s innovation. By receiving payment for their work, start-ups can continue to operate while still receiving the benefit of the partnership.

— That start-ups work with real customers – often corporate incubators and accelerators can operate in a lab setting, whereby much of the work is theoretical. If corporates want to see real change, then start-ups need to be able to work alongside business units and buyers, so that they can see what the real need is, and tailor their solutions accordingly.

— Real-time access to experts – while the most positive feedback is repeat business, quite often there is greater value to be had from when things go wrong, or don’t quite work. There needs to be continual dialogue between all parties so that both sides can see what needs to change (both within the corporate’s operations and the start-up’s solutions) and act accordingly.

— A clear progression plan – a pilot that only fixes one problem is of limited value. As within any change, true success can only be realised if there is the opportunity and the mechanism in place to scale across the wider business. So, a pilot partnership might focus initially on cargo tracking to improve transparency on one product line – but there needs to be a plan to scale it across multiple product lines, or business units. This is particularly important where a group of businesses is running the accelerator – there needs to be a strategic vision and pathway for successful partnerships to be deployed across a number of companies in the group, if not all of them.

Accelerators are not new, but if both corporates and start-ups want to get value out of them in disrupted markets, they need to be clear on the opportunity, what they are prepared to share and how each is going to add value to the partnership. Being able to come up with ideas, and more importantly turn them into viable solutions that meet the needs of customers, is critical for businesses in all sectors if they hope to progress in the coming months and years.

Jaap Van Vreden, Sourcing and Procurement Director, Lenta

Jaap has over 30 years’ international experience in the retail industry across sourcing, procurement, marketing and brand management. Prior to joining Lenta, he was a consultant for Li & Fung and implemented category and procurement management in supermarket and hypermarket chains.
Earlier in his career, Jaap worked as CCO for Modis in Russia and for over eight years held VP positions in Ahold USA and CEE.

Source:  Supply Chain Online

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