Retailers need the right structures to ensure innovation drives growth, says Ian Cheshire

In the current economic climate, it goes without saying that value, costs and efficiency are crucial.

But while the temptation may be to reach for the tin hats and wait for the storm to pass, it is essential to keep investing for future growth where opportunities exist.

This is where innovation is so important. Retailers that offer genuine innovation to customers, whether in new products and services, new ways of shopping or new in-store experiences, will always be rewarded.

They will succeed in differentiating themselves from their competitors and drive sales and profits. Those that fail will find themselves selling commoditised products at ever diminishing margins.

Examples of game-changing innovation are all around us. Think Apple with its iPhone and its Apple store, Nintendo with the Wii, BSkyB with Sky+, or Virgin with its new ideas in airlines.

In consumer goods Reckitt Benckiser, the company behind Cillit Bang and Vanish, achieves 40% of net revenue from products that did not exist three years ago.

In retailing, the supermarkets have moved into services such as banking, estate agency and home delivery. And specialist retailers have expanded horizontally, such as HMV moving into live music and cinema, and Best Buy growing into services with the expansion of the Geek Squad.

At Kingfisher, we are looking to drive innovation as we seek to broaden our business. In the UK, B&Q is testing eco-shops in its stores, as well as eco-audits where customer’s homes are evaluated for their energy use and how it could be reduced.

In France, our Castorama business has launched a “Casto app” on the iPhone that enables customers to check where the product they need is located in store, with other features including a spirit level and a surface area calculator to determine how much wallpaper or flooring tiles would be required for a job. New product ideas include “robot” vacuum cleaners and space-saving loos, which have a small sink on top of the cistern.

Of course, companies need to have the right structures and processes in place to really drive newness and change. Manufacturers and pharmaceutical companies have their research and development departments. But retailers, which are typically selling other people’s products, tend not to be set up in this way.

It is something that is changing.

At Kingfisher, for example, we appointed our first group innovation director last year to establish processes that will help our businesses drive innovation and make it easier for a geographically diverse group such as ours to share their ideas. A combination of profound consumer insight and the desire to find real newness is essential to create a stream of relevant innovation.

In a world where most markets are looking low growth, innovation is the one sure-fire way to drive the top line on a self-help basis, and the absolute key to creating a sustainable point of difference.

Ian Cheshire is chief executive of Kingfisher