Report: Retailers Struggle to Source Business-boosting Innovative Partners

6/18/2014
The vast majority of consumer products and retail executives (66 percent) say that collaboration with smaller entrepreneurial firms has become increasingly important to drive innovation and achieve their strategic goals.

Yet only one in 10 deem their companies very effective at both sourcing potential collaborators and aligning incentives between the two partners. This is the topline finding of a survey of 267 consumer products and retail senior executives globally, featured in a new EY paper, "Delivering Agile Innovation."

Nearly one in five (19 percent) respondents say they are very effective at achieving revenue increases, 16 percent are very effective at achieving margin increases and only 10 percent are very effective at generating intellectual property from these partnerships.

Andrew Cosgrove, EY's global consumer products lead analyst, says: "Traditional approaches to innovation are no longer fit for purpose. Consumer products companies and retailers must innovate both their products and their business models. Growth is challenging, margins are stressed and the rapid evolution of technology and data has fundamentally changed consumer behavior."

David Jensen, EY's global innovation and digital strategy leader, adds, "Succeeding in the age of innovation requires companies to rethink their approach to new product and process development. Companies must collaborate with external partners, particularly smaller entrepreneurs, to identify, develop and scale up promising new product and process ideas. Additionally, companies need to look at innovation opportunities beyond just products and processes, and consider business models, consumer experiences and brand engagement as part of an overall innovation portfolio.

"It is smaller entrepreneurial firms that can offer the agility and creative thinking that larger organizations need to unplug innovation bottlenecks," Jensen continues. "Overcoming the difficulties of collaborating with entrepreneurs will be critical if companies in the sector are to thrive in the long term."

The paper, which also features the insights of 45 in-depth interviews with senior industry figures, outlines nine key principles that larger consumer products and retail companies should follow to create value from collaborating with smaller entrepreneurial firms and deliver agile innovation.

These are:
  • Make the case for being agile
  • Cultivate an agile culture of experimentation
  • Think simple, act fast
  • Identify the right team
  • Determine the appropriate framework for each collaboration
  • Maintain open and frequent communication
  • Adapt processes and break the rules as necessary
  • Define and measure success
  • Iterate and work incrementally
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