As new technology continues to transform retail – and everyday life – retailers are becoming increasingly adept at tapping into the opportunities it brings.
While many have bulked up their in-house capabilities or created dedicated innovation hubs, increasing numbers are launching their own bespoke schemes to draw on the expertise and energy of start-ups and help the young companies grow.
Iceland this week became the latest retailer to launch a start-up accelerator programme as it bids to “self-disrupt and embrace digital methods to future-proof business operations and enhance customer experiences”.
“With so much to keep abreast of, it is little wonder that few retailers have the resources to comprehensively monitor all the changes, develop their own solutions and anticipate what customers want”
The trend reflects the extent to which every aspect of business is morphing as a result of the shift to digital technology.
From the supply chain to marketing, from how people buy to melding the online and offline worlds, everything is changing.
With so much to keep abreast of, it is little wonder that few retailers have the resources to comprehensively monitor all the changes, develop their own solutions and anticipate what customers want in future.
That is why so many retailers are opting to work in partnership with start-ups and have developed dedicated innovation programmes, which are becoming ever more sophisticated in how they work.
It is not like the past, when all retailers might have jumped on a particular bandwagon, such as launching an app.
Retailers, typically in partnership with specialist investment and connector businesses such as L Marks and True, are increasingly fine-tuning their schemes to bring fresh thinking to concrete business issues.
But how should programmes be run to best ensure they bring the desired advantages, and how should success be measured?
The foundations of success are laid before the work with start-ups even begins, says Daniel Saunders, chief executive of L Marks, which is running Iceland’s programme.
“What’s important is to tap into new ideas to stay relevant and improve products and services. New technology, new mindsets, will end up affecting the bottom line”
Daniel Saunders, L Marks
Saunders says success is found in the spirit of joint enterprise, rather than viewing the relationship through a conventional return-on-investment lens.
He says he will walk away from potential corporate sponsors of schemes that only really want a beauty parade of interesting start-ups.
Instead, he says, the value – to begin with at least – is in the collaboration: “What’s important is to tap into new ideas to stay relevant and improve products and services. New technology, new mindsets, will end up affecting the bottom line.”
John Lewis Partnership futurologist John Vary, who plays a key role in the department store’s JLab scheme, takes a similar view. One of the biggest benefits of such schemes are the changes the contact with start-ups prompt at the sponsor company.
“It’s not just about equity and capital, it’s about what can we learn that helps change us as a business,” he says.
“The point that’s really important is culture. The biggest success has been with stakeholder involvement. People in the business think differently about doing trials.”
Thinking differently has been encouraged by building buy-in across the business.
That’s been done by seeking answers to specific questions or issues relevant to the retailer and, as fresh ideas are generated and worked on, the appetite to collaborate with young enterprises grows, creating a virtuous circle.
For instance, in the first of its programmes this year, JLab is seeking, on behalf of John Lewis Partnership grocer Waitrose, “customer-facing, digital propositions that provide customers with advice and inspiration that make it easier for them to lead healthy lifestyles and eat more healthily”.
The challenge dovetails with Waitrose’s priorities, and JLab winners will benefit from mentorship from the grocer’s senior staff, work with customers to validate ideas and have access to facilities such as office space.
Saunders believes innovation programmes work well when they are properly aligned to business strategies. “You need to run it for a reason, to see what’s out there or address a problem,” he observes.
On top of that, it can be helpful to run programmes over a set period. “By having a specific time, they have a deadline to hit, making it fast – it’s about accelerating that relationship,” Saunders says.
And then it is back to the fundamental spirit of collaboration: “You have to commit to doing it and using the technology.”
The results may sometimes be unexpected as an original idea is tested and changed.
N Brown, for instance, found that with one start-up it has worked with through its programme.
N Brown director of technology Tim Price says the start-up originally came up with a digital avatar that would allow customers to see how its clothes would look on them.
However, as it went through the process, the idea changed and was adopted in N Brown’s product design process, reducing costs and to-ing and fro-ing between the retailer and manufacturers.
Price says: “You find that start-ups have a perception of what their product will do, but you can get friction. When you embed them, you can learn.
“Accelerator gives us the opportunity to prove [a digital product] or, even if it’s not proved, it gives you a different lens and you can resurface it.”
“A corporate brand can have the will to change and address a problem, but there are so many layers, and the programme helps cut through those layers. It’s almost like a formalised honeymoon”
Entrepreneur Seni Glaister
Entrepreneur Seni Glaister is a big fan of innovation programmes even though, as founder and former chief executive of The Book People, she has lots of experience of building businesses in her own right.
Her latest venture, Wefifo, which stands for We Find Food and connects amateur cooks with consumers through events ranging from dinner at cooks’ homes to supper clubs in Waitrose stores, has participated in two accelerator schemes.
Last year it was a JLab winner, securing £100,000 investment as a result, and this year it is taking part in Intu’s programme.
Glaister says that from a start-up’s perspective, such schemes open doors and enhance focus.
She says: “The programme provides a framework. A corporate brand can have the will to change and address a problem, but there are so many layers, and the programme helps cut through those layers. It’s almost like a formalised honeymoon.
“We went in with John Lewis and Waitrose and had no expectations about what we might achieve or get out of it other than working with two great brands.”
A key benefit is “actually getting a foot in the door as a start-up”, she explains.
“As a start-up you have few credentials other than your enthusiasm. Without that introduction it would be very difficult. I can’t imagine a better way.”
Once part of JLab, Wefifo leaped at the opportunity it represented, which any start-up must do.
“It’s up to you to make your idea stick, problem-solve and befriend the people you need to befriend along the way. It’s not necessarily the CEO, it’s people at other levels.
“We spent a lot of time establishing our product, making sure it was appropriate and there was appetite from consumers and the brand.”
Glaister now hopes to run events in 180 Waitrose stores each month. Having been through JLab, she wanted to take part in Intu’s Accelerate scheme too.
She says: “With Intu we’re applying what we learned at Waitrose, but applying solutions that fit shopping centres rather than supermarkets. We’ve come to it with even more urgency because we have a clearer idea of what we can achieve.”
Glaister also makes an important point about the basics of success, which include mutual respect.
She points out: “For the relationship to work it has to be truly symbiotic. Both need to benefit equally.
“To benefit from a nimble, agile approach a start-up can bring, you have to let them continue to behave in that way. The start-up needs to respect the culture and tradition of the brand. That’s the marriage that works.
“I thought, Waitrose is a 116-year-old brand – work with that.”
“It’s not just an exercise in exchange for equity, it’s about being involved with change-makers”
John Vary, John Lewis Partnership
Over the longer term, the success of accelerator schemes can be judged on their development and longevity.
In the case of JLab, the scheme was extended to Waitrose in addition to John Lewis last year, and this year they will run three programmes rather than one annually, which was the case previously.
Vary says the retailer keeps in touch with all the businesses that have participated, and that meeting the people involved – as well as exposure to new technology – creates some of the greatest value from the programme.
“It’s not just an exercise in exchange for equity, it’s about being involved with change-makers.”
Saunders says that in his experience across all industries, more than half of the start-ups involved with innovation programmes have gone on to work with their sponsors.
“Innovation doesn’t exist in isolation, no organisation has a monopoly on new ideas.”
And, as many retailers struggle to stand up to the winds of change blasting at hurricane force through retail, new ideas are much in demand.
Analysis: How to get the most out of start-up schemes
- Currently reading
Analysis: How to get the most out of start-up schemes