Dr Frank Danzinger is Head of the Department for Innovation and Transformation at the Fraunhofer Center for Applied Research on Supply Chain Services SCS in Nuremberg. As an expert in customer integration in the innovation process, he has also helped shape the Josephs open innovation lab in Nuremberg. From this perspective, Danzinger also monitors certain aspects of the future of retail.
Dr Danzinger, after an initial shock-induced paralysis, is the coronavirus pandemic giving retailers more courage to use digital business models?
Dr Frank Danzinger: The coronavirus crisis sits like a magnifying glass over developments that we were already able to observe beforehand. For a number of years, we have already been seeing a stark increase in online sales, while footfall in physical retail stores has been declining at the same time. The coronavirus has accelerated and intensified both of these trends. Initial observations suggest that at least the courage already invested by individual retailers is paying off in the way of increased digital visibility and online sales that are compensating them at least partially for their efforts.
You carry out research more on the technical side of process innovations. Nevertheless, are you able to say why retail is lagging behind digital business models?
F. D.: Firstly, there has been a business model in retail which has functioned really well for a long time and which continues to provide for good revenues even today. Secondly, new technologies sometimes promise too much in the beginning or are not yet quite capable of coping with operational business. We have been able to observe these reservations in the Josephs test and innovation lab in Nuremberg as well. I believe retail is a little wary of new technologies because they have been able to get by well without them so far. On the other hand, innovations in bricks and mortar retail often encounter tough conditions.
Would it maybe be better to start off with experimental steps such as mobile till systems or a smaller version of big data?
F. D.: In established businesses with employees, it is not possible to change everything in one go. However, you have to develop and also experiment. It's a matter of testing out new technologies and opportunities in a systematic way. This is how you can identify whether something suits a retailer’s business model or whether they would be better off abandoning it. You can see steps like this in other sectors of industry with their partially standardised business development or innovation management. For retail, it’s about digitalising successful things so that they operate even better for the retailer and for the customer.
We know about the employee bottleneck from industry. Which experiences there can retail benefit from?
F. D.: There are a good deal of positive and negative experiences. Employees are increasingly being involved in such processes, including as sources of inspiration. In some cases, employees even have special knowledge that the business owner can tap into. However, engagement processes like this clearly depend on the whole employee culture. Employees with mini-jobs tend to put less thought into it and are also more reticent in response to an offer of trust and integration. People in a very standardised environment, where there are clear rules about what happens, find it more difficult to take part in shaking the foundations of their trusted working processes. Trial and experimentation are competencies that employees need to learn too. Likewise, managers must learn to recognise technological potential. When they collaborate with employees to create new processes, services and products, managers have to cope with the loss of control that goes along with it.
In the future – after the coronavirus – should town centre retailers now be involved in shaping cities as spaces for experience and living?
F. D.: The notion of future is relative for retailers. I was once invited to be a speaker at a conference, for the segment looking at the future. In this slot, another speaker captivated the participants with the future of the next window display. The spectrum ranged from the next season through to the deployment of robots in retail. It’s not about one or the other, but instead about both, i.e. it's also about the work to be done after the coronavirus. In the future, town centres need to be seen as areas for experimentation. Retailers need to design town centres as diverse meeting places, which will allow them to develop their own added value and identities again. Less uniformity but, instead, diversity through retail and service offerings. That has always accounted for the appeal of towns and that will remain the case in the future too.
About the author
Thomas Tjiang is business and local journalist and communication consultant. Since the start of the 1990s, he has worked for all types of media, such as daily and monthly press, the radio, TV, news agencies and on-line editorial offices. The freelance expert for literature and communication science has lived in Nuremberg for 30 years.