When writing about innovation, we sometimes find ourselves operating solely in the hypothetical realm. In my previous article Squat Effect Innovation – Full Speed Ahead, I used the examples of the Titanic and the Oasis of the Seas to postulate the benefits from accelerating even harder to take on a challenge rather than following our instincts to slow down or to turn in a different direction.
My challenge to innovation practitioners was to think of scenarios in innovation “increasing our speed can give us more margin for error than would be the case if we slowed down and inched our way towards an objective.” In a recent article in the Wall Street Journal, I noticed a scenario where a major company has achieved an innovative result using the full speed ahead mindset.
With the increasing prevalence of mobile phones and online shopping, the traditional brick-and-mortar retailers have been panicked by the scenario of web-savvy customers browsing in a store to get an appreciation for the look and feel of a particular item then using his or her mobile phone to search the web for a better price and make the ultimate purchase online.
The brick and mortar store gets hit with the fixed costs of maintaining a physical presence (utilities, lease, taxes) and has to pay employees to help the customer review or compare products, only to see the customer walk out the door without making a purchase. Such a scenario could lead and, in some cases, has led to the demise of some brick and mortar stores.
The initial responses of some retailers included trying to level the playing field with online retailers through political lobbying to remove the sales tax exemption online, as well as working on innovative technical solutions in the store (location awareness) to try to convince an online browsing shopper the benefits of purchasing the item in the store (better returns policy, expert help with setups, etc.).
The electronics retailer Best Buy could be seen as the poster child of showrooming to the extent that it relies heavily on sales of electronic devices. The company has struggled mightily in recent years but is continuing to fight for its survival. In the article titled “Fear of ‘Showrooming’ Fades,” Drew FitzGerald notes that Best Buy’s latest strategy is to take on showrooming directly, launching an advertising campaign that even refers to its stores as “the ultimate holiday showroom.”
At its nadir, Best Buy was concerned that its future entailed “becoming little more than a testing ground” for Amazon customers.
Indeed, an April poll by Harris Interactive reported that 40% of shoppers in the U.S. tested a product in a store before making their ultimate purchase online.
To counter this phenomenon, Best Buy CEO Hubert Joly has implemented a strategy that consists of price-matching and customer service improvements to counter the web retailers who had been eroding his business. As a result of their head-on embrace of showrooming, Best Buy and other retailers may be experiencing what some refer to as “reverse showrooming,” in which customers search for products online then go into a brick and mortar store to make their actual purchase.
In the case of the latter, Target Merchandising Executive Casey Carl comments that “[w]e love showrooming when Target gets to book the sale.” The increasing application of sales taxes to online orders may also be leveling the playing field for online versus brick and mortar.
Although the sales erosion continues, FitzGerald reports that profits at Best Buy are up in the past year. The final story of online versus brick and mortar is yet to be written and sales are continuing a migration to the web, but the case of Best Buy in 2013 shows us how innovation (exhibited by the phenomenon of reverse showrooming) can result from a “full speed ahead” strategy.
image credit: dpha.net
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Scott Bowden works on Innovation Programs for IBM Global Services.