Institutionalising innovation: How Australian retailers can make transformation business as usual

It’s official – the Australian economy is back in the black.

In early June, we learned that the nation’s GDP had bounced back to its pre-pandemic proportions, and then some. It’s a fantastic outcome for the whole economy, but particularly for the retail sector, with the recovery of the past 12 months largely driven by the boom in household spending.   

While the Federal Government’s stimulus measures have certainly played a part here, we should also thank the ingenuity of retailers for this result.

In a time of crisis, they evolved rapidly to keep connecting with their customers. The scale and speed of innovation has been awe-inspiring and, as the latest spending figures show, incredibly successful. But it’s also come at a significant cost.

The need for speed

When COVID-19 lockdowns came into effect last year, many retailers accelerated their digitalisation strategies and re-invented their business models almost overnight to adapt to changing circumstances.

Brick-and-mortar stores had to offer contactless payment, click and collect, and home delivery services. Retailers of all stripes needed to use digital channels to reach their customers in entirely new ways, while harnessing data to keep up with the unpredictable swings in demand and rapidly changing preferences.

What’s more, they had to do all of this at unprecedented speed.

This meant that they didn’t always have time to shop around for the most cost-effective solutions. Even those retailers with soaring revenues have taken massive hits to their margins over the past 12 months, owing to the cost of developing so many new capabilities.

It also meant that, in many cases, innovations were put together with bubble gum and sticky tape. Working around legacy technologies and business processes. A retailer’s new last mile delivery function might have seen it through 2020, but it may not scale efficiently enough to meet that retailer’s needs in a post-pandemic future.  

Correction course

So, how do retailers make currently inefficient systems more cost-effective? How do they then ensure these systems are ripe to scale? How, in short, do they make these innovations sustainable, to not only recover the margins they’ve lost, but set themselves up for future success as well?

That’s where this idea of ‘institutionalising innovation’ comes in.

Institutionalising innovation is something we’ve heard a lot about in 2021, starting at the National Retail Federation’s Retail’s Big Show event back in January. It refers to the process of hardwiring innovation into a business’s DNA so that it develops the flexibility and capability to go on innovating not just for a month, but for the next decade or longer. It’s a long-term strategy that sees retailers focus on the innovations that will work at scale, not just for five stores, but for thousands of stores.

Ultimately, it’s about developing digital capabilities in the most cost-effective and scalable way possible – whether that’s through acquiring in-house solutions and fostering internal talent or partnering with a provider who already has those capabilities.

Scaling a new form of intelligence

So, what does institutionalising innovation look like in practice?

Well, one area that many retailers have innovated in over the past 18 months is fulfilment.

With e-commerce booming during the initial lockdowns and beyond, retailers have had to figure out how to deliver all the products that people would have normally picked up in-store.

While many have risen to the challenge, fulfilment logistics is an enormously complex task – especially in an age where shoppers expect boundless choice and near-instant delivery times. And it’s not something that most brick-and-mortar retailers have the tools to execute in a sustainable, efficient and scalable way. This is why more and more are turning to technology provider partnerships to move at speed and scale.

At least, that’s what I heard from Brenton Gill, who joined me for a panel on innovation at the Australian Retailers Association’s Leaders Forum earlier this year. And Gill, Co-Founder and Managing Director of Radaro, knows what he’s talking about. His Melbourne-born, cloud native logistics platform partners with retailers like The Good Guys, IKEA and JB Hi-Fi.

The Radaro platform incorporates cutting-edge technology like artificial intelligence (AI) to help retailers streamline and optimise their logistics tasks. It enables stores to give shoppers the fast and transparent delivery experience they now expect, without compromising on efficiency.

Home appliances retailer Electrolux reports that failed deliveries have decreased 25 per cent since it adopted the Radaro platform. Miele, another Radaro customer, has reported a 500 per cent increase in customer feedback, resulting in a radical improvement in driver performance across its fleet.

It’s possible these retailers could have achieved similar results if they acted alone. But it’s unlikely they could have done it as quickly or as cost-effectively. And, because platforms like Radaro are constantly evolving, they enable retailers to stay on the leading edge of innovation without having to invest in new technology themselves.

A sustainable way to speed up logistics

While customers were demanding faster delivery times long before COVID-19, lockdowns increased the need for speed. But while retailers know that on-demand delivery is the future, the resources it requires aren’t always sustainable for a business’s bottom line.

Which is why smart retailers are enlisting AI solutions to speed up the last mile. By automating fulfilment and logistics tasks, these organisations are innovating to meet customer demands in the most efficient way possible.

Microsoft’s partner Geek+ is one provider of autonomous mobile robots that enable retailers to optimise the fulfilment process. The robots use QR code navigation to complete tasks in warehouses and dark stores, with AI enabling them to make their own decisions about the most efficient way to do this. By deploying more than 200 of these robots in its Japanese warehouse last year, Nike was able to maximise the efficiency of its picking system, make up for the labour shortfall posed by COVID-19 and efficiently deliver products to customers in lockdown.

Organisations like Nike, which use AI to automate fulfilment and logistics tasks, are speeding up the last mile while reducing labour costs and minimising the possibility of human error. It’s innovation that’s efficient, sustainable and scalable – in short, it’s innovation that’s institutionalised.

A future-proof recipe for retail success

The economy might be returning to its pre-COVID proportions, but the era of rapid change isn’t over. As customer demands continue to evolve and emerging technologies like AI become more widespread, the imperative to innovate will only grow.

As Gareth Jude, author of the 2021 book Retail Innovation Reframed, puts it, “The biggest challenge facing the retail industry isn’t the economy, the so-called new consumer, technology or COVID-19, but rather how equipped they are to tackle innovation.”

So, it’s time for retailers to ask: how are you going to institutionalise innovation, so that transformation becomes business as usual?

Visit Microsoft’s Retail Innovation Club to learn more about how our scale-up partners like RADARO and Geek+ are helping Australian retailers institutionalise innovation in their businesses.