The Invisible Innovations

Jan 18, 2006

By Bill Bittner, President, BWH Consulting

Many of the innovations at this year’s NRF are difficult to understand. These “invisible” innovations include applications ranging from forecasting for merchandise planning and
workforce management to security applications for protecting your wireless network from hackers.

As far as the forecasting applications go, the vendors include the big and the small. Among the “statistical giants” are SAS, long known by technology users for the premiere
data sampling and reporting tool for tuning IT infrastructure capabilities. They acquired MarketMax a few years ago and are now supporting retail businesses directly. Among the
small, are companies like Island Pacific who serve the specialty retail channel.

Utilizing the forecasts involves converting forecast requirements into purchases and deliveries for merchandise and into tasks and employee schedules for labor management. The
conversion process can be even more challenging than the forecast and the results need to be continually tuned against the actual outcomes.

Security applications are a whole different issue. We have heard the horror stories and probably all live with the concern that someday our CEO will be reading his own headline
in the retail loss prevention press. On the one hand, we don’t want to put our information “behind bars” where accessing it is so difficult that employees prefer to make guesses
on their own rather than use the systems. Oh the other hand, we have an obligation to protect the corporate assets that are on the network and not allow just anyone access. This
is compounded when you consider allowing others, such as DSD vendors, to use the network to improve their store service.

Moderator’s Comment: The question with all these “invisible” innovations is – how do you know what is best? Which new forecasting algorithm will give
your organization the best results? How much security is enough?

I think these particular examples are two extremes of the types of invisible innovations that must be evaluated by retailers. In the case of the forecasting
algorithms, they are all probably good enough. This is the perfect example of where an 80 percent solution utilized 100 percent of the time is better than a 100 percent solution
that does not get utilized because it is too complicated or poorly understood. Forecasting systems have to be easily maintained and intuitively understood by the people using
them in order to be effective. Although a “standard test” that would benchmark the actual recommendations is possible, I would be very surprised if any of the systems were so
far superior that they could make up for poor usability with better analytics.

The security applications are a whole different situation. You can’t afford to be wrong in these decisions. The best answer is to have layers of security
that prevent full exposure of corporate assets by anyone at store level. Remote users must be validated and their data exchanges encrypted. This all requires the review of an
expert and cannot be merely an 80 percent solution. Store managers lose jobs over inventory losses; technology managers lose jobs over security breeches.

Bill Bittner – Moderator

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5 Comments on "The Invisible Innovations"

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Mark Lilien
15 years 1 month ago

Great executives find others in similar positions and compare notes. They learn what other companies with similar issues gained and what they struggled with. Great executives are focused on other businesses, not just their business. Spending 15 minutes having coffee or talking on the phone with a peer from another retailer can save you millions. Retail executives in isolated towns can reach out by getting supplier referrals or using the NRF staff for referrals. It’s certainly clear that an 80% solution delivered in 90 days always beats a 100% solution that takes 18 months.

Bill Bishop
Bill Bishop
15 years 1 month ago

Bill raises a great point about how to find the “true north” when you’re evaluating invisible innovations in technology. One way we’ve found that has worked well with computer-assisted ordering is to benchmark against the best human performers, i.e., a little bit like John Henry and the steam hammer.

On the surface, this doesn’t sound very sophisticated, and it may penalize some brilliant counter-intuitive thinking, but it does provide useful direction that will at least guarantee solid incremental improvements, which should be more than enough to justify the investment and may even create competitive advantage.

James Tenser
15 years 1 month ago

“Invisible” technology frequently supports visible service values. A good forecasting application, for example, may ensure that a customer finds her desired style, color and size in stock on the day she shops. A solid information security system should ensure that a front-line employee is never put in the position of apologizing for or correcting a breech of customer privacy.

Technology is never the end – merely a means toward providing a great customer experience. When its application requires changes in internal or customer-facing practices it should be closely questioned. Solutions that allow a company to optimize one performance metric at the expense of the customer experience should be rejected.

Camille P. Schuster, PhD.
15 years 1 month ago

Innovations need to help your company achieve its goals to be successful. Adopting an innovation just because other companies are using it is not a good reason and probably won’t bring the payoff you expect. The technology needs to assist movement toward accomplishing specific business goals.

Don Delzell
Don Delzell
15 years 1 month ago
Best practices in evaluating technological innovations always start with an objective and focused evaluation of your needs. These “needs” come from the business, not from the IT department, but are then scrutinized. The filter that must be applied to business-supplied needs is often skipped….after all, who has the expertise to challenge when a merchant or a store operations person says they “need” a specific capability? The questions to ask are “What will you do with this information?”, and “How does this support, enhance or streamline mission critical decision making?” Demand specifics. I’ve seen forecasting algorithms that were of extraordinary elegance, but required detailed data that the retailer didn’t have, and even if they could get the data, they weren’t capable of incorporating it into other decisions. Needs requirements drive appropriate evaluation of technological innovation. Scrutiny of needs requirements insures that appropriate thought has been applied, and that appropriate changes in decision making will occur as a result of the innovation. Please, please, please keep in mind…changes in decisions drive results, not technological innovations. Unless those… Read more »

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