Gary E. Hawkins, CEO, CART
You read every day about the pace of innovation increasing, but how do you actually quantify or measure it? One way is to look at patent filings. And that activity tells a very clear story.
As of March, 2018, Amazon held 7,717 US patents, obtaining 1,963 of them in 2017 alone. Walmart, the most patent-prolific traditional retailer, has 349 patents. That’s nearly 38 patents per week for Amazon in 2017; and it’s a fair bet that the company has not slowed down in the time since. Compare that to Walmart’s 349 patents, which even if all were issued in one year, would have a pace of less than 7 patents per week. At that rate, Amazon is nearly six times more innovative than Walmart if measured by issued patents.
Amazon’s patent filings cover the spectrum, from AR goggles to make order fulfillment more efficient, to more order-picking robots, a realtime accent translation app, to voice-driven drones. In the company’s 2018 Q3 filings, Amazon released 42 major product or service offerings… in one quarter! How many major product or service announcements does the typical traditional retailer make in a year? A fraction of that.
And patents don’t tell the full story. In 2017 Amazon spent $22.6 billion in research and development (up 41% from the prior year). That was more than any other U.S. company, beating Microsoft, Intel, Facebook, and even Apple.
This is what traditional brick & mortar retailers are up against.
The good news? There are countless solution providers, some established, many of them startups, that are helping arm traditional retailers in this innovation arms race. Here again, though, is a challenge for retailers: How do you keep pace with this explosive rate of tech-fueled new capabilities? And just being aware is not enough. Retailers have to actually test, pilot, and deploy new capabilities to keep up with Amazon and Walmart.
We suggest that retailers follow a five step path to getting - and staying - in the innovation game.
The first is understanding your capability gaps. Historically, retailers would focus on competing retailers and their capabilities to identify what to implement next. Today, that competitive set includes Amazon and other tech companies encroaching on the grocery space. Here’s the problem: If you as a retailer are looking at what the competition is doing and using that to guide their innovation focus, you’re already behind. In a world of ever-increasing change you need to look ahead, you need to skate to where the puck is going to be, not where it is.
Identifying the capability gaps between where you are today and where you need to be creates the foundation for a roadmap and prioritizing what capabilities you need to put in place.
With a roadmap in hand, attention can turn to identifying potential solution providers. This is where we strongly urge retailers to put in place a formal innovation process for gaining awareness of new technologies. CART reviews an estimated 1,000 new solutions flowing into the retail industry each year. CART has partnered with GMDC’s Retail Tomorrow group to create an Innovation Program for larger retailers, wholesalers, and brand manufacturers based around curating new capabilities aligned with the retailer’s needs.
Gaining awareness of new tech though isn’t enough. Retail industry companies need to develop a culture of innovation, usually beginning with the executive team and then flowing across the organization. It is an organization’s resistance to change and to new ways of doing things that is oftentimes a larger impediment than actual resources to test and deploy new capabilities.
And lastly, even an innovation culture is not enough to succeed. Increasingly, the Agile philosophy that is used in software development is being applied across organizations. This methodology breaks large projects down into smaller bites, and uses work ‘sprints’ to get things done along with frequent communication and continuous reassessment. Everyone in the retail industry needs to move faster.
Given the importance to retail, innovation must be managed in a more structured process. For retailers to survive, let alone thrive, understanding of where you’re going and how you are going to get there is no longer optional. Nor is reacting to the competition. Retailers must be proactive in how they view and manage innovation, and there is no time to waste.
About the Author
Gary Hawkins is the founder and CEO of the Center for Advancing Retail & Technology (CART). He can be reached at firstname.lastname@example.org.
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