Retailers are some of the most efficient and effective organisations in existence today.

This isn’t an accountant’s statement of return on capital employed or labour productivity. It’s certainly not a management consultant’s fact-based breakdown of process maps and organisation charts.

Rather, it’s an observation based on over 30 years working with many of the country’s most impressive retailers.

Retailers love a traditional ‘roll up your sleeves’ approach to getting stuff done quickly and cheaply. Compared to some of my non-retail clients, it’s clear there’s an industry-wide pride about this operational earthiness.

“The industry’s fastest growers have a relentless focus on innovation in their DNA”

Where does this come from? Perhaps it’s the reality of tight margins, the in-the-moment delivery of in-store customer requests or the uncertainty that comes from waking up to a new day with no ‘order book’. Whatever drives it, it’s a defining feature and where retailers retreat to when faced with a business challenge.

Seismic strategy shift

Historically, in what I’ll call the ‘retail 1.0’ era, success came from the blend of range, price, location, service and innovation (the latest fashions, new product introductions). At different times and in different markets, retailers flexed each of these and maybe emphasised one or more.

But underlying success was the same thread, that having chosen which of these levers to slide one way or another, brilliant execution was the route to success.

We are now living in ‘retail 2.0’ and it’s all about digital (online, mobile, omnichannel, platform). Of course, this required a seismic strategic shift, not merely an effectiveness play.

Those retailers who maintained the old-school range, price or location approach, in an era where all products are readily available from anywhere in the world at the lowest price, have had to reinvent themselves or disappear.

The worst place to be was selling someone else’s stale products more expensively, in less convenient locations and with poorer service than the online competition. RIP Comet, Toys R Us, Maplin.

Of course, most retailers were jolted into action and have become impressive omnichannel organisations. From early transactional websites through to today’s fully integrated digital offers and organisational structures, the best retailers have held on to pole position.

How? By acquiring new skills and showing the adaptability and practicality to face this new world with the same focus on cost-effective operations.

‘Outside-in’ thinking

But is this enough? Or worse, is it a dangerous mindset?

A glance at some of the industry’s fastest growers (Asos, Farfetch, Ocado) shows a different mentality. Certainly, these are not cost-careless, navel-gazing organisations. They exhibit a determined execution streak but they also have a relentless focus on innovation in their DNA.

“Innovation is way more than an executive immersion trip to Silicon Valley and setting up an in-house innovation lab”

They have an open-mindedness about where new ideas originate, willingness to embrace them quickly and have made changing what they do every bit as important as doing the day to day well.

They still understand the traditional range, price and service levers but this is not about the effectiveness of operations, it’s about an openness to ‘outside-in’ thinking and fast learning experiences.

It’s way more than an executive immersion trip to Silicon Valley and setting up an in-house innovation lab. While these are necessary, alone, they’re not enough.

Talking a good innovation game does not make you innovative by default. Some of the recent retail strugglers had done the essentials. But by continuing to emphasise back-to-basics operational effectiveness above all else, it turned out to be little more than corporate innovation theatre.

Who knows what disruptions ‘retail 3.0’ might bring beyond a bunch of buzzwords – augmented reality, 3D printing, machine learning – but I’d bet that squeezing the pips out of the current operation won’t be the winning answer.