TechBytes: Three Reasons Retailer Innovation Labs are a Good Idea

With the recent announcement that it will build a new digital innovation lab in Boston, CVS Health has joined the ranks of retailers, including Wal-Mart Stores and Target Corp, who have also launched similar facilities. Not every retailer is in the position to build its own proprietary innovation hot house, but there are many advantages for those with the resources to do so. Following are three key reasons that retail innovation labs are a good idea.

1. Automatic Customization. No matter how flexible and industry-centric a third-party solution is, it inevitably requires customization to meet the specific needs and requirements of an individual retailer’s IT network, business processes and internal best practices. Developing IT applications in-house ensures that they come “out of the gate” fully customized, avoiding what can be considerable time and expense in custom-fitting off-the-shelf technology.

2. Extreme Customer-Centricity. While any reputable provider of retail IT solutions is well-versed in meeting the needs of the modern customer, they still do not have the same ground-level insight into customer expectations that retailers do. Retail technology vendors design solutions to meet the needs of their customers, who are retailers. But by taking the development of solutions in-house, retailers can design them to meet the needs of their own customers, the general public.

Retailers can include marketing, merchandising and customer service personnel in the earliest stages of their innovation lab efforts. This helps ensure that all resulting applications are not just tailored to the needs of customers, but tailored to the precise needs of their own specific customer base. In-house innovation labs can also easily perform beta testing with representative samples of the retailer’s customer base, allowing the fine-tuning of solutions to the needs of customers before they are even officially released.

3. Cloud Convenience. The relative convenience and simplicity of cloud-based technology development has greatly democratized the process of IT innovation, to the benefit of retailers. No longer does a technology development lab need to be supported by robust and expensive hardware, since most or all of the activity now occurs in a virtual environment. Even if a retailer chooses to host its own cloud platform, the necessary physical infrastructure is still a fraction of what was once required for a traditional IT infrastructure. This also cuts down the amount of real estate that needs to be devoted to servers, mainframes, etc.

In addition, the democratizing effects of cloud-based technology development mean that much smaller development teams can accomplish much greater results, with reduced need for high-priced (and scarce) expert IT resources. The significant reduction in the cost and complexity of supporting resources needed for advanced IT development makes the ROI on launching and running an innovation lab, which is still a proposition only a Tier I retailer can realistically undertake at this time, that much easier to obtain. Innovation labs are not for everyone, but any large retail chain should seriously investigate their potential.