Innovation Labs: Innovate or Die

Are retail innovation labs here to stay or are they just a fad passing through the industry? The largest internet-based retailer in the United States, Amazon.com, serves as an enduring example of what retailers should be doing to maintain longevity. Amazon's relentless pursuit of disruptive innovation has resulted in some of the more intriguing retail technology products, including augmented reality and the Fire Phone, in addition to securing Amazon's longstanding success. Beyond that, innovation labs invest in a company's culture, processes, supply chain and noncustomer aspects of the business. 


Retail executives understand the need for innovation all too well. Formats like shopping malls and big-box stores were at one point innovations in response to the introduction of automobiles and resulting suburbs. Today's connected consumer is the new automobile. As they become increasingly digital-oriented, retailers must keep up, identifying new ways to find, engage and support consumers along their path to purchase.

Until recently, only a select few retail heavy hitters have been able to successfully grow with technological changes and gain strategic advantage. In order to stay relevant, major retailers today are investing in labs and other research-and-development (R&D) efforts to help them predict the shape of their markets. For retailers, as Jeff Roster of Gartner Research says, "the era of intentional innovation and agility has arrived."

Cost of an Innovation Lab
One of the major roadblocks for many retailers is the cost of an in-house innovation lab. Amazon spent $9.5 billion on R&D in 2014, up from $6.5 billion in 2013, significantly beyond what most other retailers apply to new technologies. Amazon understands where the long-term advantage will come from. It's constantly coming up with creative ways to introduce new items and ideas into the market and finds out quickly if they matter to consumers. While this is clearly a large amount of money to apply toward innovation, it's been proven to differentiate the digital giants from the rest.