Foundations of Innovation

The following has been re-posted from CStore Decisions. The original post can be found here.

As consumer demand for touchless and frictionless experiences has risen rapidly during the COVID-19 pandemic, convenience retailers — on the average — are encountering greater challenges in meeting these needs than retailers in other verticals.

These outsized challenges facing c-stores are in large part due to technology debt that the convenience vertical still bears and that other verticals have previously tackled:

1. Outdoor EMV upgrades continue to burn substantial resources (people and capital).

2. Many technology changes still require physical site visits (as opposed to remote deployments).

3. Many core technology services leverage proprietary interfaces and data standards, increasing efforts to introduce new services.

For many convenience retailers, these barriers have limited their innovation efforts to small “proofs-of-value” tests — initiatives that, while novel, cannot be deployed at scale across tens, hundreds or thousands of locations.  

On the other hand, leading convenience retailers have worked to minimize (or remove) these tech debt barriers, allowing them to deploy “proofs-of-concept” tests, which these retailers can then scale across hundreds and thousands of convenience stores.  

So, what sets leading retailers apart, and what lessons can retailers struggling with innovation glean from them?  

Although some tactics are the byproduct of unique competitive advantages, there are commonalities across many leading convenience retailers:

1) Build vs. buy decisions driven by strategy instead of tactical forces. New integration, data and infrastructure platforms have empowered retailers to internally develop and operate technology solutions previously left solely to third parties. 

Leaders, however, exercise this capability judiciously: investing in areas that foster competitive advantage (supply, consumer messaging, personalization, offers, etc.) and sourcing in areas commoditized through scale (payment processing, site integrations, and so on).  

This approach enables leading retailers to optimize their capital investments and ensure implementations are completed successfully at scale.

2) Source standards-based solutions from flexible, open solution providers. Both internally and externally, leaders are demanding that current and potential technology solutions adhere to industry standards (i.e. Conexxus and International Forecourt Standards Forum), as standards reduce implementation barriers and improve interchangeability of solutions.  

This interchangeability reinforces innovation, as third parties must continually deliver improved functionality and operations to remain competitive.  

Along with standards, it is equally important that commercial agreements with third parties (vendors and partners) are structured to enable this interchangeability. 

3) Select partners with mutually beneficial interests. As with many retailers, leading retailers often opt not to “go it alone” when venturing into new domains. The leaders differentiate themselves, however, by selecting partners that have strategic objectives aligned to their own.  

While partnering with companies with large digital consumer bases may deliver short-term wins, the leaders recognize that these types of partners can threaten their brand and ownership of the consumer experience.  

Data-Driven Mindset

Leaders evaluate and select their partners carefully, most notably making sure to keep their eyes on the other “oil,” i.e. the data.  

However, leaders realize this trend reaches beyond big data. Leading retailers focus on maintaining ownership of consumer data and collecting, mining and modeling data purposefully.

Positive outcomes from machine learning-based insights are built upon sound data engineering decisions and the operationalization of model outputs — both of which are driven by clear, measurable data objectives across the enterprise.  

Those organizations that are successful in delivering differentiating consumer and store experiences begin by defining clear strategic objectives for data.

Although these ways of operating may not seem accomplishable in the short-term, it is important that convenience store and petroleum retailers recognize that competitors both within and outside of the vertical are taking these important steps and are shifting consumer expectations toward new, innovative experiences.  

By taking these steps themselves, convenience retailers can deliver new experiences that consumers will continue to demand while ensuring the stability of their technology and operations at scale.

Patrick Raycroft is the convenience and energy vertical lead at W. Capra Consulting Group, helping clients across retail and fuel identify and implement technology solutions that minimize risk exposure, enhance consumer experiences and improve operations. He can be reached at ptraycroft@wcapra.com, or visit www.capraplus.com