Some Conversations are too good not to build out, so we’re going to hit the “refresh” button on a challenge question we offered for discussion last November: “Why do retailers choose to be ‘fast followers’ rather than first movers when it comes to responding to the needs of 21st century shoppers?”
A lively month-long dialog ensued among BMC Black Belts Dave Carlson, Tom Lemke, and Ray Stone, and readers Lance Jacobs, Ray Goodman, and Larry Mortimer. Here, the ideas and insights that surfaced converge on answers to four important questions about how and when retailers adopt new technology.
- Why do most retailers follow rather than lead when it comes to new technology?
- What triggers a decision to act?
- How will the changing retail landscape affect this behavior?
- When can we expect better outcomes?
Note: Early in the conversation it became clear that this question did not apply to all retailer responses to shopper needs, but that it did apply to the area of technology. In contrast, it doesn’t apply to merchandising where innovation is a way of life; innovative merchandising carries less risk and is relatively easy to jettison when it doesn’t work out.
Why do most retailers follow rather than lead when it comes to new technology?
The discussion surfaced four big reasons why retailers are not in a position to be first movers when it comes to most technology.
The sheer complexity of the business. ”Retail is detail” the saying goes, and when it comes to adopting new technology, the complexity of the business, much of which isn’t well documented, makes it difficult and more risky to make big changes in business processes.
The importance of maintaining smooth operations. This means that retailers have a low tolerance for the inevitable problems that come along with any introduction of new technology.
Lean retail organizations don’t have the bandwidth to drive new technology. Retailers are busy and their staffs are thin; there’s very little buffer capacity available to handle the additional workload that inevitably comes along with the introduction of new technology.
There is a shortage of senior leaders with the energy and the willingness to take on the risks of implementing new technology. Also, there’s a high burnout rate for this work within retail organizations, and often successful change managers are offered opportunities to move to the vendor side of the business.
What triggers a decision to act?
The reasons outlined above illuminate why it’s unlikely that most retailers will ever be first to implement a new technology. So what drives the fast followers?
Far and away, the number one reason to implement new technology is to respond to a direct competitor who has or may soon be able to win customers with it.
Two other triggers also drive action: success stories from peer companies, and readily available turnkey solutions that require little extra effort and can be expected to perform reliably.
How will the changing retail landscape affect this behavior?
While most retailers are currently slow to adopt new technology, the world is changing and more retailers are beginning to see the importance of moving rapidly into some new technologies even before they experience the usual triggers. There’s a strong feeling that many of the external trends impacting retailing – the rapid growth of consumer mobile, the pervasive impact of social media, and the increased discipline with which suppliers go to market – are all signs that the “genie’s out of the bottle.” The world is changing rapidly and retailers who don’t move quickly are likely to be left behind. Evidence of this can be seen in two areas:
- The increasing willingness of retailers to take responsibility for investing in the development of their own shopper insights rather than always looking to suppliers; and
- In retailers hiring senior executives with capabilities in shopper engagement, CRM, and other areas not typically found in retail. Expect this behavior to become more common.
When can we expect better outcomes?
Three retailer actions are beginning to produce improved outcomes.
- Adopting a rapid development “test and learn” approach to evaluating and fine-tuning new technologies. This works well in high tech, and there’s no reason why it shouldn’t serve retailers well in this fast-changing environment.
- Taking greater control of the type and form of information about new technologies by requiring vendor presentations to be more retailer-friendly. Also looking for ways to more closely align the cost of the new technology with the flow of benefits. Speed of adoption will accelerate as more retailers have information about technology that they can trust and easily interpret.
- Demonstrating greater willingness to work with technology partners who can provide both the expertise and the additional organizational capacity needed to successfully introduce new technology into an organization. Qualified partners help reduce risk and smooth the transition.
Retailers will use technology more aggresively to win business when it becomes clear that their new competitors are doing it. Do you see retailers who are catching this wave? Who? How?