In contrast to industrial and high-tech sectors, which have been extensively studied regarding innovation management, the retail sector has not received similar attention for organizing and leading radical innovation. Our study, initiated in 2016 with key players in Swedish retail and daily goods trade, highlighted that "innovation" was often seen as vague and unfamiliar. While concepts like "entrepreneurship" and "continuous improvement" were more familiar, the distinction between continuous improvements and more strategic, radical innovation has gained recognition. Yet, effectively leading and organizing for radical innovation remains a challenge. So, what can be done?

Take Command

Historically, retail's approach to innovation has been incremental and loosely structured. Although various components of innovation, such as environmental analysis, idea generation, and selection processes, are not lacking, our research suggests a lack of overall responsibility for more strategic and systematic innovation management compared to other industries. To ensure long-term competitiveness, top management must take a more active role, moving beyond supporting select individuals within the company.

Separate and Integrate

Efforts are underway to find optimal organizational structures for innovation, ranging from separate innovation hubs to integrated teams and temporary projects. Balancing exploratory work with day-to-day operations continues to challenge the retail sector. The solution lies in allowing separation within the organization and mandate while concurrently creating conditions for integration from the outset to avoid resistance to new ideas. Achieving this balance requires leadership that recognizes and creates synergies between ongoing and future operations.

Challenge the Key Figures

Short-term profitability requirements pose a significant challenge. Governance through goals, planning, financial key figures, and efficiency measures is central in retail, but new templates and key figures are needed for entirely new services, products, and business models. The challenge lies in finding alternative ways and non-financial measures that create conditions for innovation, such as a creative climate, learning, cross-functional projects, competence, the number of ideas, criteria for selection, and time for implementation.

Dare to Risk

Retail companies often exhibit an entrepreneurial and creative climate but lack risk-taking and long-termism, especially concerning radical innovation. Challenging traditional key figures is essential, and risk-taking is a central ingredient in fostering innovation conditions. While not advocating for complete abandonment of caution, a measured level of risk-taking is required. Radical innovations lack current evidence, but the industry's response to the COVID-19 pandemic demonstrates that rapid changes need not hinder ongoing innovation projects. The pandemic has highlighted that radical innovation might become an integral part of the retail industry's operations, showcasing the ability to act swiftly, launch, or accelerate projects even under unprecedented circumstances.

Original text by Malin Olander Roese, Centre for Retail Research.
Translation by Carys Egan-Wyer