‘Open innovation’ is on the rise as retailers look outside their businesses for ideas on how they can innovate.

Large retailers are increasingly aware that the only way to innovate at the pace today’s customer demands is to look outside their organisations.

They are accepting that they must partner with or acquire start-ups, rather than trying to innovate internally or rely on their preferred supplier list.

Several large retailers around the world have embraced open innovation: WalmartLabs has acquired 15 start-ups since 2011, and John Lewis’s JLabs invested in 10 start-ups last year alone.

Successful retailers are those that adopt a structured approach to scouting for innovation.

Continuous scouting

It is necessary to define the areas of focus for a business and its customers before starting, scope the market thoroughly for those start-ups that will solve business and customer problems, and once is never enough: retailers must ensure that they scout continuously.

The retailers that are doing this well are not just looking beyond their own organisations for start-ups that would positively impact their bottom line; they are looking outside their own country.

Many make the mistake of limiting their search to London or Silicon Valley, but there are other major cities across the world that are now attracting start-up ecosystems as more talent, funding and support for innovation and entrepreneurship becomes available.

‘The rate of technology change will always be faster than businesses can keep up with. Most companies cannot out-innovate the market, so why try?’

Brian Kalms, Elixirr

In the Global Start-up Ecosystem Ranking, Tel Aviv was named the fifth major city to support start-ups and is the only city outside of North America in the top five.

Singapore also deserves a mention as the only Asian city in the top 10. In recent years it has grown into a diverse and popular hub for well-established businesses, so the tech start-ups have followed.  

Once potential partners are identified, the big challenge is execution. How does this partnership get off the ground when cultures are worlds apart?

Start-ups struggle with the slow pace of partnering with and integrating into large companies - they risk running out of funding before the partnership is agreed.

UK retailers can learn lessons from Silicon Valley: the mantra of ‘trial fast, fail fast and learn fast’ is a culture shift that must be made to reap the benefits of working with a start-up, and deliver the innovation that customers are crying out for.

Don’t get left behind

As the start-up landscape continues to change, and change at pace, UK retailers must not get left behind.

They need to look outside company and country walls and scout globally for the best start-ups with the best solutions for the business.

And it is vital to make sure that partnerships don’t fall foul of corporate inertia – move fast or risk losing out.

Retailers should consider developing streamlined procurement processes to get start-ups on board, rather than do it the way they would usually integrate a third-party supplier. 

The rate of technology change will always be faster than businesses can keep up with. Most companies cannot out-innovate the market, so why try?

Retailers must look around the world to discover what is possible, to find the very best technology solutions.

And once found, companies need to move quickly to make change happen. It’s the only way large retailers can deliver what customers want.

  • Brian Kalms is partner and retail lead at Elixirr