Fashion Product Innovation Platform: From Adoption to

Fashion Product Innovation Platform: From Adoption to Transformation

Leslie Hand

November 2014

Objectives

Today’s Customer Experience

Defining Innovation

Understanding How to Benchmark and Progress

along the Product Innovation Maturity

Framework

Guidance

© IDC Visit us at IDC.com and follow us on Twitter: @IDC 2

Consumer Behaviors

Connected lifestyle – always on, relationship based; personal control

Now – Why Not Now? - Instant gratification, intelligent store & personalized fulfillment

Value(s) based economy – hyper-personalized, hyper-personal, personal accountability

Participatory - Social influence and the art of rating everything; social responsibility

3

Connected lifestyle

Now – Why Not Now?

Value(s) based

Participatory

Technology is Enabling Experience-Driven Commerce The 3rd Platform creates the underpinnings for

business process transformation…and

increasingly, business model transformation.

Businesses are changing:

How they engage with customers

The speed at which they deliver products and services

How they innovate

The reliability of their operations

Their overall resiliency

With such high stakes, the business is increasingly

driving technology initiatives.

4

Retailers Believe They Need to Transform


In the next five years, robotics, wearable

technology and cognitive computing will

start to be commonplace in retail,

according to Tesco. Speaking at the IGD Convention, Mike McNamara, chief

information officer at Tesco, said disruptive technologies

would become a part of the way that retailers operate, not

within 20 years, but in the next five.

People, Process and Technology Change

New Processes

Intelligent interactive “store”

Personalized fulfillment

Hyper-personalized

Hyper-personal

Contextualized

Participatory

Transparent

Automated

Technology Enablers

IoT – intelligence at the edge

Social graph

Cognitive contextual insight driven helpers

Wearables

Gestural, visual, voice interactions

Mobile & Digital

Cloud


7

IDC FutureScape Executive Summary

DRIVERS

Exponential Increase in Number of Connected IT Devices and Interfaces

Organized Retail Crime Exploitation of Social. Mobile, and Cloud Cyber Weaknesses

Digital Natives , 3rd Platform Persona, and B.Y.O. SMAC

Increasing Concern for Privacy and Security

21st Century Omni-Channel Anytime-Anywhere Commerce Expectations Conflict with 20th Century Border Mentality

Media Spending and Consumption Shift to Digital and Mobile

Intensification of Competition and Cooperation from All Quarters

Rapid Emergence of Cloud-Based Provisioning and Services

Shift to Predictive and Prescriptive Analytics on Big Data from Descriptive Reporting

Ever-Increasing Constraints of Legacy Complexity and Cost on Innovation

Source: IDC Retail Insights Worldwide 2015 FutureScape, November 2014

8

By 2016, even as private brand growth flattens in the U.S., consumer driven private brand product innovation will drive a 10% improvement in customer visit frequency.

10

IT Impact PLM implementations are at all time highs, as processes built for product innovation, speed and quality become absolute necessities.

Retailers need a broader lens across private label and manufacturer branded goods assortments to balance overall assortments.

Tools to optimize quality, cost and price become necessary to assess revenue, margin and customer satisfaction impacts of product development decisions.

Brands are Customer Centric and

Product is More Important Than Ever

33.6

36.2

30.3

We are primarily a cost-focused organization

We are primarily aservice-focusedorganization

We are primarily aproduct quality-focusedorganization

PRODUCT

SERVICE

COST


Source: SCM Survey, IDC, May, 2014

N=152

Up 4.8%

Down 1.7%

Down 1%

Retail Supply Chain 2014 vs. 2012 Results

Brands Are Improving Product

Innovation Maturity

Siloed single function; near-term small and easily measurable but limited ROI

Transform key business processes; reap early stage benefits and increase constituent buy-in

Improve the cost-benefit performance of integrated PLM processes from design to "shelf

Drive real Competitive differentiation with widespread well adopted collaborative PLM-enabled business processes

Sustain competitive advantage with continuous product innovation and lifecycle management

Tactical

Managed

Optimized

Adhoc

Strategic

Source: IDC Retail Insights, May 2014

Defining Innovation

in·no·va·tion inəˈvāSH(ə)n/

noun

noun: innovation

the action or process of innovating.

synonyms:change, alteration, revolution, upheaval, transformation, metamorphosis, breakthrough; More new measures, new methods, modernization, novelty, newness;

creativity, originality, ingenuity, inspiration, inventiveness;

informala shake up

"no appliance manufacturer can survive without an ongoing commitment to innovation"

a new method, idea, product, etc.

plural noun: innovations

"technological innovations designed to save energy"


24% of Department Stores and

18% of Fashion Apparel

Brands Report that

Innovation Management is a

Top 3 Priority

https://www.google.com/search?biw=1303&bih=682&q=define+change&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CB8Q_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+alteration&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCAQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+revolution&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCEQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+upheaval&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCIQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+transformation&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCMQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+metamorphosis&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCQQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+breakthrough&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCUQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+novelty&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCcQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+creativity&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCgQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+originality&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCkQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+ingenuity&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCoQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+inspiration&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCsQ_SowAA

https://www.google.com/search?biw=1303&bih=682&q=define+inventiveness&sa=X&ei=NNtfVIOUO5bfoAT0goKwBw&sqi=2&ved=0CCwQ_SowAA

Sometimes Innovation is about Materials

& Material Science


Source: Patagonia website, November 2014

Sometimes it is about Innovation and

Efficient and / or Faster Process


Given the pace of change and mobility in our society, we

will never be “finished” with My Macy’s. - Macy’s 2013 Annual

Report

Balance CX Innovation and

Supply Chain Efficiency

My Macy’s localization

Omnichannel integration

Magic selling customer engagement

Innovation is Not Just about Products


Source: Kroger – Smart Shelf Technology

Neiman Marcus – Last Call Digital Signage

It is about the Experience!

It is also about the Sell and Fulfill

Anywhere Consumer Journey


Photo: containerstore.com

Photos: sephora.com

Innovation is about Everything We Do

Example: John Lewis Lloyd Page, speaking at the IAB

Engage Conference in London said "convergence of digital and in-store experience is what we are all trying to get right now".London:

Sampling of Initiatives:

RFID

3D Printing

Click and collect

Same day delivery

Amy Sofa Any Fabric #D visualization


Plan

Capture & Prioritize New

Ideas

Design

Detail Specifications

Test

Source Produce

QA and Compliance

Move

Sell

Analyze Performance


Align Brand Strategy and Product Execution

Voice of the

Customer Product

Innovation

Collaborative

Design

&Sourcing

Fulfillment

Excellence

Source: IDC Retail Insights, May 2014

Product Innovation –

Assortment Revenue

Collaborative Sourcing –

Cost of Goods

Fulfillment Excellence –

Customer Satisfaction and

Lifetime Value

Voice of the Customer –

Experience Quality

(Products and Service) /

Brand Reputation

The Value of Aligning

Brand Strategy and

Product Execution

Innovation Challenges

Global growth • Balancing product standardization and customization

Market Acceptance

Compliance & Traceability

• Serving all potential customers

Change behavior to create need

Change the way products are made and delivered

• Innovating how value is captured1

Price setting mechanism, payer. carrier, segment, timing


1 Source: Capture More Value by Stefan Michel, Harvard Business Review, October 2014

Fashion Brand Product Innovation Maturity Framework Key

Characteristics Ad Hoc Tactical Managed Strategic Optimized

Product Innovation Strategy

Undefined product lifecycle processes and strategy

Uncoordinated product lifecycle processes and strategy

Documented processes and strategy

Extended collaborative PLM process and strategy; Widely adopted cohesive product innovation strategy

Continuous and coordinated product innovation and value realization

Scope Limited scope Multiple functional processes impacted

Integrated PLM process and broad objectives

Integrated brand innovation processes

Optimized and sustained leverage of extended product innovation assets

Performance Measurement

Limited reporting Limited adhoc analytics & reporting

Analytics and reporting Integrated into all processes

Analytics driven project, process, and program performance measurement and execution

Machine learning improves ability to execute on data and analytics

Budget Minimal budget Functional area budgeted funding

Budgeted and funded product development and sourcing program management

Enterprise budget for brand – product innovation & technology investment

Budget for iterative test and improve / innovation projects

Resources Minimal resources (siloed); No PLM internal expertise

Inefficient functional project management and resource allocation

Stakeholder buy-in; product development team in place

Stakeholder buy-in; product innovation LOB & IT team aligned and in place

Seamless product innovation engine (people) in place

Brand Business and Technology Innovation Alignment

Independent Separate, Tactical Evolving coordination of product lifecycle management

Enterprise-wide brand alignment; Brand center of excellence (tightly integrated line-of-business (LOB) and IT team

Agile product innovation alignment


How to Move Up – To Adhoc

1. • Look for support from functional areas that have the most to gain. Do not spend significant time and

effort to trying to gain executive support before you have established initial project proof points.

2.

• Launch a proof-of-concept or pilot project leveraging vendor support. Deploy a cloud-based or SaaS-based system to minimize risk and cost. Focus on industry specific or enterprise-wide capabilities that will have immediate impact and appeal

3. • Identify colleagues and employees with process change willingness/openness and who can get

buy-in from others. Utilize technology partner supplied resources until staff skills mature.

4. • Minimize effort to define processes, develop and deploy the capability by staying as "vanilla" as

possible. Manage scope to achieve desired project outcome.


Outcome: Single function PLM capability

How to Move Up – To Opportunistic

1.

• Establish a multi-function PLM strategy. Although still disconnected from the rest of the organization and PLM processes it will guide the next round of initiatives. Budget for functional area projects that have mid-management support.

2. • Deploy new technology that enables higher levels of productivity and faster product cycle times.

3. • Establish a PLM team with skills in existing and newly deployed technologies that coordinates work

with colleagues throughout the business. Some or all tech skills may be contract or outsourced.

4. • Establish metrics and methodology for PLM program governance and metrics by which PLM

processes, staff, and outcomes are measured.


Outcome: Multi-function PLM capability

How to Move Up – To Managed

1. • Develop integrated cross-departmental PLM strategies. Budget for integrated product development

needs. Perform cost and benefit analysis for PLM.

2. • Deploy integrated traditional PLM.

3. • Create cross-functional project teams. Assign, train, and hire staff based on the PLM strategy.

Augment existing skills with specialized external service providers.

4.

• Begin to monitor and document PLM project decision processes and decision outcomes. Implement formalized governance, policy and compliance practices. Assess and begin to automate project portfolio management.


Outcome: Integrated traditional PLM capabilities

How to Move Up – To Managed

1. • Develop integrated cross-departmental PLM strategies. Budget for integrated product development

needs. Perform cost and benefit analysis for PLM.

2. • Deploy integrated traditional PLM.

3. • Create cross-functional project teams. Assign, train, and hire staff based on the PLM strategy.

Augment existing skills with specialized external service providers.

4.

• Begin to monitor and document PLM project decision processes and decision outcomes. Implement formalized governance, policy and compliance practices. Assess and begin to automate project portfolio management.


Outcome: Integrated traditional PLM capabilities

How to Move Up – To Strategic

1. • Assign an executive-level leader to coordinate the development of a cross-business unit PLM and

product innovation strategy.

2. • Deploy highly reliable and scaled infrastructure. Deploy highly functional time saving capabilities to

further enable broader PLM adoption.

3. • Establish executive support and develop plans for a centralized product planning team or product

center of excellence.

4.

• Enable broad performance measurement for product performance . Perform analysis against established KPIs and enforce strict adherence to policies and governance structures. Perform robust tracking and monitoring of business performance changes.


Outcome: Extended PLM

How to Move Up – To Optimized

1.

•Develop an enterprise-wide product innovation strategy that is championed by a C-level executive. Create pre-defined and ad hoc budget for product and brand innovation. Automate project decision management and development, leveraging available project and portfolio management tools and methodology for business case development, performance, and outcomes measurement.

2. •Continue to innovate and adopt PLM solutions, leveraging agile development design and development processes and automation. Connect the dots between ideas, content, brand and performance.

3.

•Provide regular training to all product innovation and development technology, support, and business staff. Maximize staff centralization for functions such as business analysis, application development, software quality, change management, deployment, process and systems management, and support.

4.

•Ensure that both performance management and experimentation and discovery processes are supported with appropriate staffing, technology, and funding. Employ decision management techniques to enable continues process improvement and integration of mobility into business processes.


Outcome: Product innovation platform

In Conclusion

26

Time frame Recommendations

By Now

• Inventory potential opportunities. Assess business and IT needs staff / skills match. Engage peers and vendors. Apply industry best practices to speed deployment and get quick wins. Use early wins to demonstrate potential, define new business processes and create ROI models.

Short Term (1 – 2 years)

• Expand projects, begin to define and start to deploy foundational product innovation architecture. Process automation and governance policies/administration take precedence. Align LOB and IT and establish a product innovation COE and program lead. Establish budget.

Mid-Term (3 – 5 years)

• Adapt strategy to continuing innovation opportunity evolution. Tighten integration. Actively manage KPI’s, strictly adhere to governance structures and policies. Create best in class organization. Budget for planned and opportunistic product innovation.


Guidance

1

• Invest in systems that enable product innovation management, not just product development or sourcing (as important as they are!).

2 • Leverage analytics to determine optimal product assortments and placements.

3

• Use data visualization tools where possible to improve productivity, consistency and performance.

4

• Listen to the customer, and leverage what they say to improve private label conversion , and reduce costs / improve sales and profit at the same time.

5. • Innovation is not just about product – create engaging experiences!


Documents

Fashion Product Innovation Platform: From Adoption to