Retailers and tech vendors look for co-development opportunities
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
Recently we’ve received a fair number of inquiries from both retailers and technology vendors on the value of co-development. In plain English, co-development is a retailer and tech vendor working together to create a new version of a product, or even an entirely new product. Both have the understanding and expectation that the technology will ultimately be available to all retailers, while the co-developer retail partner gets first crack at specifications, roll-out and early value in exchange for reduced costs.
Co-development may not always make sense, but there are times when it works to both parties’ advantage.
Focusing just on retailers, here are some questions to ask:
- Are you lagging in the market partly due to a big gap in your technology portfolio? Do you realize that while filling that gap may help you leapfrog your competition, it won’t be the magic bullet that solves your problems? If the answer to both these questions is yes, you may start the journey.
- Are you short of capital but long on big ideas? If so, the opportunity for cost reduction in exchange for your participation will have a lot of value.
- Have you been approached by a vendor with a similar vision and resources to back them up along the way? Do you trust the people involved? Many people and companies with spectacular vision fail miserably at execution.
- What’s the opportunity cost of not going ahead with the project? Back when I was CIO of a home furnishing chain, our ERP provider co-developed with us a drop shipping receiving process as part of the application. It became a core part of the product. We got the solution when we needed it and saved a boatload of money.
- Are you contemplating an entirely new technology solution that will give you a competitive advantage? Even an 18-month head start is nothing to sneeze at. Eighteen months hence, you might be looking at the next big thing, while your competitors are absorbing your last big thing.
- Are you married to a suite provider who is missing certain functionality, but willing to implement it with your help? This is the ideal scenario. You have experience with the vendor and know they have market staying power. You also avoid integration costs in bringing in someone else’s platform.
What’s interesting here is that the same retailer may come up with different answers in different situations. In my own career, my rule of thumb was for non-essential, non-differentiating processes, I’d let someone else blaze the trail. But if the ROI was obvious (as was the case for the drop ship PO’s) or the opportunity huge (early price optimization adopters reaped rapid rewards from their efforts), you’ve got to go for it.
When do you think co-development of a new technology makes sense for a retailer and when does it represent a risk? What suggestions would add to those in the article?