Giulio Raffaele
Giulio Raffaele (Research Manager, European Retail Insights)

Collaborating with ecosystems of partners and suppliers has never been so important in retail. In the past, retailers have focused their innovation activities mainly on opportunistically implementing new technology for the internal value chain. In the short term, this approach has had its benefits, generating incremental — yet siloed — efficiencies in disparate business processes.

But there has not been a strategic — long-term — approach to generating new value across the key dimensions of people, process, and technology and from upstream to downstream in the extended value chains of the retail industry. In short, a technology-driven and company-centered innovation approach has prevailed over a business-model and ecosystem-driven innovation approach.

Currently, however, the pace of change in retail is accelerating and we’re seeing some interesting things happening in business model innovation.

What Is the Role of the Digital Ecosystem in Business Model Innovation?

Based on the results of IDC’s Global Retail Innovation Survey 2020 (600 C-level respondents across the U.S., Europe, and Asia/Pacific), we believe that “commerce everywhere” business models, relying on open cross-industry ecosystems, will play a key role in the future of retail. Streamed data will be leveraged to deliver contextual customer and employee experience, and set up more profitable cost structures. At the same time, value chain transparency is the key to sustainable operations, products, and services.

From a broader perspective, in the future individuals — not institutions such as governments and enterprises — will be at the center of our societies. Enterprises and industries on their own will not be able to shape the future. To meet the needs of the individual, crossing industry boundaries and operating in fluid ecosystems will become inevitable.

Regarding the retail industry specifically, the reality is that there is an “Ivy League” of companies that set the standards for business model innovation and can improve innovation processes on a continuous basis by involving the ecosystem of partners and suppliers.

Walmart Investing in Ecosystem Innovation

Over the past few years Walmart has been building Walmart I/0, its platform for ecosystem integration. The platform is aimed at two main audiences — “buyers” and “sellers.”

  • Buyers include Walmart affiliates and partners for which the retailer has developed a set of tools that they can leverage to place relevant links inside their products, whether it’s a website, mobile app, or physical home device.
  • Sellers are Walmart’s active partners that have already collaborated with to provide support for the site with specific services. These partners are warehouse suppliers, drop-ship vendors, marketplace sellers, and content service providers. With this approach, sellers can establish a relationship with Walmart to build custom application programming interfaces (APIs) and obtain direct support for their programs.

This shows how ecosystem-driven business model collaboration will become essential to enable long-term growth and short-term profits. Retailers should collaborate with suppliers and partners from other industries that understand fast-evolving market requirements and industry context, bring the right skills and accelerators, and work collaboratively to generate mutual growth.

We believe retailers should position themselves as promoters of retail digital ecosystems and co-innovation strategies. For retailers, it will be important to co-innovate with CPG companies, logistics service providers, and other B2B partners to build the infrastructures and software to enable real-time data-driven collaboration.

A Glimpse Into the Future of Retail

At a time of accelerating retail digital transformation, companies have to redefine their business strategy to target their investments along the extended value chain to better meet customers’ and consumers’ needs. To do this, retailers are reconsidering the strategies, programs, and use cases they are investing in, enabling them to share success stories, develop new practices, and enhance collaboration and innovation.

IDC’s European Retail Executive Digital Forum 2020, on October 20, will look at retailers’ ability to proactively respond to product, workforce, partner, and operations needs and how they will shape the future of retail.

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