Innovative technology

Innovative technology utilisation

Applying technology intelligently to target a customer need

Technology evolves all the time and changes the way we behave and consume products. Technology has the power to reshape industries, and it has done it before.

Innovative technology utilisation

Where electronic information handling and automation changed processes and solutions in the 1960’s and 1970’s the Internet changed the competition during the 1980’s and 1990’s with the ability to bridge physical distances with a click of a mouse.

Today, a wide array of connected products, also known as “Internet of Things”, puts new demand on physical products manufacturers: The product itself used to be the key differentiator while it is now only a fraction of the customer experience as the physical product and all the embedded smart services are melting together in a combined value proposition. You not only buy a running shoe, you also buy into a running community with health stats that combine heart rate monitoring, geolocation, training programmes and, of course, the option to share on social media with your friends. It is often not enough just to produce a good product, you will also need to navigate a “system of things”, which includes associated services and even other physical products and their services.

This may lead to the conclusion that businesses need to adopt the latest technologies to stay ahead of the game. However, one of the pitfalls is exploring new technologies with the mindset “how can it be used”. As an example, biometric payment has for years been trialled but still not widely adopted, either because processes were not good enough or because the technology is still immature. In a retail example, a biometric payment pilot was discontinued based on the perceived process of the payment. Even if the actual payment processing time was shorter, the perceived process was negatively impacted by idle waiting time that with a credit card payment is broken up in shorter stretches of idle time by typing a PIN.

Innovative technology utilisation
 

Technology provides a number of options, but what makes the difference is how the technology is used and applied to support the customer journey. We believe that the right question to ask is “how can we improve our customers’ journeys” with the options that technology may provide – technology being the potential means, but never the cause.

And it is not easy. Especially when companies have perfected their technologies over years; it requires quite a push to break the inertia of being good at what you are doing. Porsche has been perfecting every detail of the gasolinedriven cars for years and years and, thus, it may not be surprising that a Tesla with no legacy and a completely different starting point today probably is the best electric production car in the world.

In our view, innovative technology utilisation is about having a deep understanding of the customer demands and of available technologies and the creativity to bridge the two to generate value.

Understanding customer needs will sometimes require following the customers’ footsteps, observing their behaviour going beyond their own sense-making in order to identify articulated and, in particular, unarticulated demand. Understanding available technologies is not only about which technologies that have the most impressive technical specifications, but for example also how the user experience, the price point, distribution and maintenance network and peripheral products and services add up to a combined evaluation of the technology.

Esben Kristensen Lønborg
Esben Kristensen Lønborg
+45 3085 8086

Tesco Home Plus Case

To prove the case, let us turn our attention to Tesco’s Home Plus virtual store in the South Korean metro. It has become a well-known retail case that has become a classic case of innovation. Interestingly, the technology put into play is well-known and by no means new or groundbreaking. Innovation is about how the solution taps into an unmet demand.

How it works

  • Large posters are put up in central locations in the Seoul Metro with lifesized pictures of standard groceries
  • Below each grocery, there is a price and a QR code
  • By scanning the QR code, items are put into an online shopping basket in the Home Plus smartphone app, where the basket can be reviewed and items can be paid for
  • Goods ordered before 13:00 are delivered within a one-hour range during the evening    

Technology in use

  • The Home Plus virtual store utilises QR codes that can be read by most smartphones using the build-in camera
  • QR codes were developed back in 1994 by Denso-Wave originally intended to use for automotive production enabling robots to recognise parts
  • QR codes are further development of barcodes that when read are able to provide a text string (e.g. URL)
  • QR codes are relatively robust against errors in reading and can be read even if the full QR code cannot be read correct

 A new retail format

  • Even if smartphone apps and QR codes are anything new, they have not previously been utilised in this format
  • The combination of online and physical channels has been seen numerous times within many industries, e.g. showrooms and pick-up stations, but it is not that commonly used within grocery retailing
  • The solution is technologically simple, but perfectly caters for the busy urban life demand for convenient shopping where and when consumers have the spare time
  • One could argue that traditional online grocery stores also would satisfy that demand, but the combination of large visual displays of store shelves provides the overview, recognition and familiarity with traditional shopping, decreasing the resistance for using an online channel for grocery shopping

Results

  • Home Plus increased online subscribers by 76 % during a two-year period
  • Online sales increased by 130 % during the two years
  • Home Plus has become the secondlargest offline grocery retailer and the biggest online grocery player on the South Korean market
  • Key solution attributes combining:
  • Shopping that mimics traditional (and known) shopping experiences with life-sized displays for overview
  • Convenient access to shopping where and when customers have time

Meeting a demand

Why did Tesco make Home Plus in South Korea – a coincidence? Probably not. Bringing grocery shopping closer to customers is relevant in many places, but especially in Seoul, the solution may fit well. Not just physically well-allocated, Home Plus is also relevantly positioned towards some of the key behavioural trends in urban South Korea. The exact same solution may never be successful in e.g. Copenhagen, but as several of the key behavioural drivers catered for in the Home Plus solution are amplified in Seoul, it becomes highly relevant for that specific market. Looking at the following behavioural parameters, it makes sense that Home Plus was kicked off in Seoul.

Traffic volume

Approximately 10 million people pass through the Seoul metro every working day, which makes the Home Plus metro shopping option the most visited retailer outlet in the country. For comparison, only approximately 180,000 people pass through the Copenhagen Metro each day. Volume alone represents a proxy for market size that makes Seoul more attractive compared to Copenhagen.

Mobile penetration

South Korea is one of six countries, including Denmark, that has a mobile broadband penetration of over 100 %, i.e. there is more than one broadband subscription per inhabitant. South Korea is also a global leader in smartphone penetration with an 80 % penetration rate. The metro in Seoul provides connectivity at all times, and both stations as well as trains are equipped with WIFI and 4G coverage. Mobile shopping barriers are low when people generally are used to being online and have access to smartphones.

Working hard

South Koreans are some of the hardest working people with an average of 2,136 annual working hours. Comparably, Danes on average work 1,431 hours. Busy South Korean consumers often have to do their grocery shopping on weekends where physical stores are crowded, and, it is, by many, perceived as a hassle and time-consuming. The busy lifestyle is driving a higher price tag on leisure time and, thus, makes alternative time-saving shopping options even more relevant.

Low importance

In developed countries, relatively less of the income is spent on food. Looking at South Koreans, they spent an average of 33 % of their income on food in 1975, whereas it has fallen to approx. 12 % today. In combination with limited time, this drives focus on getting physical shopping done as fast and convenient as possible, thus, lowering the need for assurance of the physical purchase as you might have for a car or a mortgage.

Urban lifestyles

Singlelization and the busy urban lifestyle drive “on the go” culture and, in combination with numerous stimuli, it becomes increasingly difficult to cater to potential customers’ attention. It becomes increasingly more important to be present where consumers are.

Home Plus turns waiting time at the metro station into shopping time and is present exactly where consumers have idle time.

Limited space

Urbanisation drives higher density in cities, which drives prices up for brick and mortar retail space. In the Seoul/Incheon area, the total population of 17,500,000 is allocated on 1,049 square kilometres, which is equal to a population density of 16,700 people per square kilometre. In comparison, Copenhagen has a population density of 1,850 people per square kilometre. A combination of either very expensive store space or consumers needing to spend travel time to get to grocery shopping strengthens the relevance of utilising the already available metro space.

Future perspectives

Turning back time a decade, the Home Plus shopping experience may have looked like something from a science fiction movie. It is a question whether it may serve a need, but looking at cheaply available technologies today, the Home Plus retail experience could be the starting point for transforming the retail experience. Just imagine …

Pattern recognition

The Vivino wine app utilises pattern recognition to enable users to take photos of the label on a wine bottle with their smartphone and based on the photo the app recognises the specific wine in a repository and provides ratings, prices and availability near you. Pattern recognition could be used for identifying goods independent of location and, thus, easy shopping of physical goods anywhere and anytime. Take a photo of your empty milk carton to order a new, or put the marmalade you liked at your friend’s place in the shopping basket.

Near field communication (NFC)

Casino Group has used NFC to give customers in-store access to customised offers, product information and mobile payment. NFC carries more information and can communicate bilaterally. NFC provides option to trigger a string of actions and to recognise the specific user and adjust a specific action accordingly. Put goods in your shopping basket and get informed if the goods contain something that you are allergic to, get offered a special deal tailored to you based on you preferences analysed based on your loyalty programme or get suggested recipes based on your shopping basket.

Augmented reality

Airwalk shoe manufacturer made a virtual pop-up store to sell a limited edition pair of shoes in an augmented reality popup store. Via a smartphone app and geolocation, people were only able to buy the shoe at specific places within a given time frame by viewing the store on the smartphone mixed into the physical surroundings. It became a happening where the virtual shop was hyped on social media, and the most passionate product ambassadors gathered at a specific location to further strengthen the cult status of the brand. Augmented reality provides options to get a unique buyer experience with a relatively limited investment. It is not required to go to a specific store, and the shop can move around very flexibly and, most important of all, the store can be at any place anytime.

Conclusion

Innovative technology utilisation is, in our definition, when technology is put into play to cater for a given demand in a new and value-creating way. Demand may be articulated or unarticulated, technology utilised may be groundbreaking and wellknown technology applied in a new way. So oftentimes, innovation is a matter of applying or re-applying what is already out there. As an example, the computer mouse was invented two decades before Apple with their Macintosh applied it innovatively by integrating it into an operating system that was built around clicking your way through a graphical user interface.