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Innovation Management notes 4

Innovation Management (Technological University Dublin)

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 Ciaran Lowney's Innovation Management notes 4 (13/02/2018)
 Zara Case study.
1. Is the Zara model sustainable? What would you do to preserve their edge
over the next 5–10 years, given that many other players are now looking to
follow their example? If you don’t think it can survive, give your reasons for
why you think the model is unsustainable and will fail?

Ans: Zara model is sustainable. They can preserve their edge in the market over
the next 5-10 years. They face competition from their competitors but due to their
strategies they are using. The Company have become leaders by exploiting
some of the key non-price trends in the industry – for example, variety and
product innovation.
For example, over 10 000 different clothing models are created and sold every
year – this is most certainly not a case of ‘one size fits all’ or of long-lasting
product types! Ortega has taken the entire system for creating clothes and built a
business – and originally did so in an area which did not previously have any
textile tradition.
They are giving better quality and it has also opened up the road to offering
exciting and different fabric designs and textures. Another key aspect of Zara’s
success is the flexibility which comes from having a very different model for
manufacturing.
Highly automated and with extensive in-line quality checking, the process
transfers the incoming pieces into production lots which are then allocated to a
fleet of trucks for fast shipment, mostly by air from the nearby airport at Santiago
de Compo Stella.
Needless to say this places significant demands on a highly flexible and
innovative coordination system which Zara have developed in-house. In this way
they make use of a model which dates back hundreds of years (the idea of
industrial districts and clusters) but use twenty-first-century technologies to make
it work to give them huge flexibility in both the volume and variety of the things
they make. Where competitors such as H&M and Gap have to start planning
and producing their new lines three to five months before goods finally
make it to the stores, Zara manages the whole process in less than three
weeks!
 Their flexibility is also based on rapid response and extensive use of
information and communication technologies. At the end of the day as the
customers leave their 950 stores around the world the sales staff use wireless
handsets to communicate inventory levels to the store manager who then
transmits this intelligence back to Spain as a feed into the design order and
distribution system. This gives an up-to-the- minute idea of what is selling – and
what isn’t, so the stores can be highly responsive to customer preferences –
which colours ‘work’, which themes are popular, which designs aren’t hitting the
spot. But it’s not just following the market – Zara also push the game by making
sure that no model is kept on sale for more than four weeks – no matter how well
it is selling.
This has a strong impact on their brand – they are seen as very original and
design-led – but it puts even more pressure on their ability to be agile in design
and manufacture.
2. You have been hired as a consultant to a small clothing manufacturer who
wants to emulate the success of Zara and Benetton. She wants advice on
an innovation strategy which takes the key lessons from these successful
firms. What would you offer?
Ans: As a consultant I would frame the new type of strategy which takes care of
the requirement:
➢ Innovation strategy
 innovation design
 originality
 efficient communication
 value for money
 Accessibility

Within the entire business a change needs to be made in order to transition into a
more electronically effective business, this can be done:
 By growing Mechanization of operations.
 By introducing technological improvements such as a mobile app a website;
 or possibly integrating online services not previously offered.

Additionally, the business can incorporate international trade which is has a huge
upside since it saves money and allows the business to not only save money but
also to increase its productivity.
Another great way for the manufacturer to emulate the success of Zara and
Benetton is to produce clothes which combine stylish designs with a strong link to
current high- fashion themes with moderate prices.
Zara’s successful growth is not simply a matter of low prizes or of standardization,
but rather of innovation that is complimented by providing their customers with
variety and product innovation. The small clothing Manufacturer must increase its
variety, in addition to providing the consumer with product innovation such as that of
Zara and Benetton.
3. Zara Home has just opened using the same basic business model and
deploying the same innovative approach as the rest of the business but in
the home goods field. Do you think it might succeed and why?
Zara’s successful growth is not simply a matter of low cost or of standardization but
rather of innovation. The company has become the leader by exploiting some of the
key non price trends in the country like variety and product innovation. Applying this
to Zara Homes might prove to be equally successful because they would focus a lot
on creativity and design that comes along with the strong brand name. The theme
doesn’t stop with the shop itself however extends to the presentation of their stores,
window displays, catalogues, internet advertising and so on. Another key aspect of
success comes from the fact that they offer a high degree of flexibility in the
manufacturing process as a whole. Highly automated and with extensive in line
quality checking, the process transfers the incoming production lots. Needless to
discuss Zara uses a model which dates back hundreds of years, the idea of
industrial districts and clusters but uses technology to give them a flexibility in
volume and variety. Creativity and design can be customized and then developed in
house or through outsourcing depending on the competency.

A process model of continuous innovation

• Exploring Innovation Space: Types of Innovation 4Ps
The innovation mix or the 4Ps is a model that was developed by John
Bessant and Joe Tidd. The tool enables you to discover what the innovation
process can improve and bring to your business. The innovation types are
Paradigm, Product, Position and Process.
 1. Product innovation is the first thing that comes to mind when talking about
innovation and conveys the changes in the things (products/services)
which an organisation offers.

2. Process innovation, on the other hand, refers to changes in the way things
are created and delivered.

3. Position innovation is the change in the context in which the

products/services are introduced.

4. Paradigm innovation, in particular, is the change in the underlying mental

models which frame what the organisation does or alternatively how the
company frames what it does.

Each of these 4Ps of innovation can take place along an axis running from
incremental through to radical change; the area indicated by the circle is
the potential innovation space within which an organization can operate

 How do organisations manage innovation strategies?

In order for innovation to be successful it must be properly implemented by
the organisation. A four stage model of managing innovation can be found in
Tidd and Bessant (2005). They propose that this four stage model should
include searching, selecting, implementing and learning from the innovation.
This four stage model of managing innovation is widely accepted and
implemented by organisations.
 Search Phase: Involves monitoring the operating environment
regarding the likelihood for transformational change, including shifts in
market requirements and customer demand, changes in rules,
regulations or legislations, increasing rivalry, and/or new technological
opportunities. It is in this phase that companies take notice of the new
and emerging IT trends that have the potential to be part of future
mainstream work operations.

 Select Phase: Concerns narrowing down the previously identified

opportunities, and making sure they align with the business strategy
and the environment of the enterprise, including identifying which
innovation path will yield the biggest benefits for the enterprise, and
eliminate opportunities with significant risks.

 Implement Phase: Involves enacting the innovation, (re)using

established and scalable project management tools, product lifecycle
management approaches and relevant marketing capabilities.
Irrespective of the industry that the enterprise is operating in, having a
mature, agile ICT infrastructure such can enable scalable innovation
and fast prototyping.

 Capture Phase: Entails evaluating the benefits realized from the

innovation initiative via performance management and measurements,
which can range from new revenue streams, innovative efficiency
gains, to non-monetary benefits such as improved employee morale
and creativity to patents, reputational gains and entire new customer
experiences.
Wider adoption of collaborative technologies enables companies to
operate and establish their presence across physical boundaries
allowing for a more rapid time-to-market. New trends in manufacturing
such as the rise of the ‘maker movement’ and additive manufacturing
such as 3D printing, have lowered the threshold to bring innovative
solutions to market. Social media and mobile technologies have proven
their ability to transform the way people connect with one another.