Intellectual Capital Management - alignment of technology hows and customer whats

1. Context identification and Intellectual Capital mapping for
implementing ‘Innovation’ with House of Innovation model in
fashion industry
K6223 - Intellectual Capital Management
Term Paper
Instructor: Ravishankar Sharma
Submitted By
AO XIAOFENG (G1101735L)
THANGAVELU MUTHU KUMAAR (G1101765E)
WANG YANLIN (G1101329D)
XU CHENYU (G1101769D)
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2. Team members Contribution Peer Evaluation score
Thangavelu Muthu Kumaar Context identification in
customer innovation
+
space with technologies
and House of Innovation
Wang Yan Lin Case study in customer
innovation space with
=
technologies
Xu Chen Yu Exploiting Business
-
Process Space with
Strategies
Ao Xiaofeng Research in customer and
market trends, Innovative
=
strategies of branding and
manufacturing
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3. Abstract:
More and more, today‟s competitive and customer centric climate requires the organization to
drive the process of innovation in 360 degrees - to embed the seeds of creativity that could
absolutely transform a business – the way it does. Creativity arises from a blended environment
of learning and sharing where there is always a room for processing permutations and
combinations. The emphasis shift from individual‟s innovative capability to organization‟s
capability has brought about revolutionary inventions in the recent decade and the organizations
have realized that human brains and their cognition can be attributed as the best tools to innovate
but they need to be aligned with a unique culture which fosters them to think beyond and context
sensible, to cultivate the spirit and excitement in risking stakes on a well grounded innovation
proposition. After identifying the environment and tools for innovation, the challenge clearly lies
in identifying the context. This paper attempts to determine the context for innovation and
identifying the gaps and there after exploiting the organization‟s intellectual capital to implement
innovation for bridging the gap. The context is analyzed based on two perspectives – one in the
customer perspective and the other in the business process perspective. They collectively derive
innovative business solutions performing across the different functional layers of an enterprise –
Strategic and Operational where technology and structural assets support the entire process of
innovation to lean upon for communication, visualization and interpretation processes. A model
or tool, “House of Innovation” has been developed to suggest action based on the relationship
analysis between the context factors and hence investigate upon the specificity of innovation gap,
innovation portfolio mix, structural changes, creating focus groups with lead users and
implementing the idea with a methodology based on the interrelationships and correlations of the
key innovation context factors (What‟s and How‟s).
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4. Table of Contents
Context identification and Intellectual Capital mapping for implementing
‘Innovation’ with House of Innovation model in fashion industry 0
1 Introduction .............................................................................................................................. 4
2 Analysing the Innovation Space in Fashion Industry .............................................................. 4
2.1 „Fashion‟ Innovation: - Focal shift from delivery excellence to innovation ................. 5
3 Plotting the focal points in the innovation space ..................................................................... 6
3.1 Exploiting the Customer Innovation Space with technology ........................................... 6
3.1.1 Customer what‟s ................................................................................................. 6
3.1.2 Technological How‟s .......................................................................................... 8
3.2 Exploiting Business Process Space with Strategy ....................................................... 12
3.2.1 Customer what‟s ............................................................................................... 12
3.2.2 Strategic How‟s ................................................................................................. 14
4 House of Innovation:.............................................................................................................. 20
4.1 Steps in building the House of Innovation: ................................................................. 21
4.2 Nike‟s House of Innovation ........................................................................................ 21
4.3 Acting upon information for insights - innovation implementation: .......................... 23
4.3.1 Kick off or gap analysis .................................................................................... 24
4.3.2 Creating innovation strategies........................................................................... 25
4.3.3 Innovation portfolio mix ................................................................................... 25
4.3.4 Structural Changes ............................................................................................ 26
4.3.5 Operating with ideas – setting idea banks and right culture ............................. 26
4.3.6 Implementing Lead User Method: .................................................................... 27
4.3.7 Exploiting technology and intellectual property: .............................................. 27
5 Conclusion: ............................................................................................................................ 28
6 References: ............................................................................................................................. 29
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5. 1 Introduction
As the famous quote goes - “You can’t connect the dots looking forward; you can only connect
them looking backwards” (Jobs, 2005), one of the successful innovators of all time seems to be
the highly relevant innovation formula today. The dots here symbolize “learning” which can
stimulate innovation in X context and Y Time frame. This to some extent makes the solution
predictable. Continuous learning and context identification for its application can be the
substitutes in the above formula. Assuming that most organizations have already adopted the
culture of continuous learning, the most difficult problem to be solved is to identify the
appropriate context for innovation implementation. This paper takes you through a systematic
approach of solving this problem taking fashion industry as the business domain.
2 Analysing the Innovation Space in Fashion Industry
Fashion industry, in general serves to capture the currently popular style or practices and
manufacture or invent products based on it, especially in clothing, foot wear or accessories (bags,
sun glasses, wrist watches, wrist/hair bands, tattoos and so on). The nature of this industry is
quite different from many product-manufacturing industries like the ones making an electronic
device or an automobile. This can be attributed to the factors below:
Short life-cycles – A fashion product is often ephemeral, designed to capture the mood
of the moment, event or place. As a consequence, the sales period tend to be very short
and seasonal, normally measured in months or even weeks.
High volatility – Demand for these products is rarely stable or linear. It can be
influenced by the vagaries of weather, films, or even pop stars and footballers.
Low predictability – The highly volatile nature of the product makes it extremely
difficult to forecast the market‟s demand with any accuracy over a time frame.
High impulse purchasing –Most purchase decisions of consumers for these products are
made at the point of display with its first impression unless the product is extraordinarily
costly. In other words, the shopper when confronted with the product is stimulated to buy
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6. it and hence there is a critical need for “Superior Product Visualization both online and
on-shop” which allows the consumers to research and try out as much as products as
possible in a short time frame at his comfort. Promotions should be well tailored to
capture the consumer‟s attention and good will.
‘Seize the moment’ shopping style - Shopping is no longer an intensive activity which
takes a day out in a shop, but it is and it will be more of an experience that is embedded
in your routine activities where you will have the ability to shop on the fly, on the
moment you see, may it be a movie or a fashion show or a soccer match.
Attention to detail – The changing consumer trend need to be analyzed and predicted at
the right moment to avoid intensive losses. More and more significance is vested upon
unveiling the minute details of the consumer environment in terms of geography,
heritage, changing needs and preferences, reasons behind, local culture focus, shift and so
on.
2.1 ‘Fashion’ Innovation: - Focal shift from delivery excellence to
innovation
The above analysis on the nature of the industry brings out realization on the focus of fashion
industry that is not centred at delivery excellence or quality, but a different way of thinking itself
in the form of innovation which is any creative, actionable idea that can result in a superior
product or service and can enhance the revenues to the company and good will of the customers.
The ideas to start with, can be entirely from roots or an optimized hybrid form of existing
structure. Both have a significant role to play in fashion industry due to its hard to exploit,
versatile innovation space.
This space need to have more bias on customer‟s comfort and good will as they decide the trend
unlike many other manufacturing industries where the prime focus is not on the change, but it is
productivity. However there need to be a strategic business alignment behind every change
executed for the customers.
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7. 3 Plotting the focal points in the innovation space
This part aims at narrowing down the view of the broad space of innovation into distinct focal
points in the customer world whose implementation needs are to be aligned with the specific
strategic and operational business processes in the organizational space. The overlapping part of
the two spaces derives the context for innovation.
3.1 Exploiting the Customer Innovation Space with technology
Below are the identified focal points biased towards customers that can be explored upon for
implementing innovation in fashion industry.
3.1.1 Customer what’s
Embedded Product Awareness in real world experiences
As fashion products tend to reflect the trend of people themselves, they ideally should not only
be targeted for a standalone showroom purchase. Instead the focus should be on reflecting the
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8. product in people‟s day to day routine activities and gain attention to the product as well as the
brand. Cross selling and Sponsoring an event or team or person could be common examples.
Ability to research wide and fast on products
A fashion product, particularly when that is really expensive needs a significant research by the
consumers before buying. The traditional mode of research is either online or on-shop.
Reading reviews, tweets about the product, comparing one or more products in the product
websites or social network sites could be some common examples.
Superior Product Visualization
A customer when confronted with the fashion product must be stimulated to purchase it. There is
an increasing need to satisfy the customers in a short time frame by making them try as much
products as possible.
Three dimensional views of products in the online stores and digital mirrors in interactive
dressing rooms of Prada, New York, Nike ID customization in Nike Stores, London could be
some interesting examples.
Instantaneous Product Purchase
Shopping a product need to be instantaneous with a high degree of synchronization with the
purchasing context and medium of the customer to recommend the highly relevant products at
the right time and make the purchase process easier.
Online and on-store shopping with Personal Digital Assistants (PDAs) and Radio Frequency
Identification (RFID) could be some examples.
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9. Personalization
The products are no longer designed generic addressing a common audience throughout the
world. Rather they are highly personalized targeting the specific customers to satisfy their needs
in terms of socio –demography, geography and psychology.
Material Science Engineering, embedded electronics for core product design, Data mining and
analytics, Customer Relationship Management software and socialization in web2.0 for customer
focussed design are the channels for trend realization for consequent purchases of a person or a
product itself.
Nike with Apple has released a sport kit, having an electronic sensor under the inner sole of a
new Nike running shoe which talks to a small wireless receiver in Apple's iPod nano music
player and the running data can be transferred to mac book or I phone and can be analyzed.
Nike+, Shox series can absorb impact from heel strike while running and cause "spring back" to
add more power to a runner's stride and provide superior shock absorption with high-tech elastic
foam. Nike claims that the hollowed-out columns combined with a Pebax dispersion plate gives
such a ride. These are some examples of personalization.
3.1.2 Technological How’s
· Media (Online and television media)
· Software (Instantaneous Communication, Customer Intelligence, Artificial Intelligence)
· Augmented Reality (Interactive media - online or on shop)
· Electronics and Information processing devices (PDAs, RFIDs )
Exploiting the value and technological constructs of these how‟s has given rise to a next
generation model of fashion product shopping.
Virtual Theatres, Fashion Shows, Games, TV shows
Most of these features do not have a predominant form as of now. But they need to take lead in
consideration with the ongoing trends of computing and information technology today.
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10. They can be attributed mostly to Augmented Reality, a technique to simulate the object based
real world environment with computer generated sensory input such as sound, graphics, video
and so on (Lu & Smith, 2008), Wireless Communication advancements and partly due to
artificial Intelligence methods for intelligent interaction, simulation and synchronization of the
different environments or parties (Yang et al, 2009).
Virtual Theatres and games can be online projection of a movie/ TV show or a gaming theatre to
attract customers by a fun filled experience enabling a virtual hang out with friends and play with
instant chats and video packets and also create product and brand awareness and initiate product
purchase with the sequences of the movie, TV show or game being streamed in the fashion
product‟s website or in a restricted box of any social networking sites like Facebook or Google
Plus by partnering and sharing profits with the real world and online media corporations.
Online Fashion shows to save large sum of time and efforts and stimulate the passion for the
brand in the existing customers and iconic models by easy accessible virtual participation or to
create awareness among the prospective customers who can act as virtual audience where in high
tech motion capturing cameras and Augmented Reality based streaming can help in making a
perfect real world simulation (Yang et al, 2009).
All these virtual experiences in a highly computed environment aim at pausing or saving the
fashion product during the course of experience and initiate product purchase immediately or at a
later point.
Real time Value Co-creation in Web2.0
The information view on internet is shifting from an open to closed space model where there is
increased usefulness and reliability of content. This is carried out by increasingly popular actions
like reading, subscribing, and rating, tagging, commenting, linking, recommending, moderating
and owning such closed group or communities where there can be real time purchase stories
which has a locality or relationship network boundary . Fashion products have most of the times
carried exciting stories spun in a social network. This information shared is critical for both
customers to base their purchase decisions and product designers to base their subsequent
products.
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11. Personal context and real world object based product recommendation
Customer profiles as captured by CRM software, Data mining tools predict reliable patterns of
recommendation or to an extent attempts to personalize the customer with a specific product
circle (Mu, Zheng, Cao & Cao, 2011).
Innovation part lies in connecting the common personalization patterns with intelligent personal
context matching algorithms which tries to derive a recommendation pattern by acting upon his
previous patterns, profile information, GPS data and specific events happening in his
environment which directly or indirectly be related to fashion products (Schwartz, 2011). The
augmented reality, Artificial Intelligence capabilities, programmable sensors and micro
electronics - all together can attempt to recognize real world objects in three dimensions and
accurate surface level details can be transmitted over network and matched with similar patterns
of real world object, in our case, fashion products for intelligent recommendation (Medina,
García-Cervigón, Carazo & Costas, 2010) .
Virtual trial rooms and Interactive digital mirrors
This is the most fruitful innovation in the fashion industry where most people would like to try as
much items as possible before deciding one. This invention is already in an advanced stage
which can be extended with more capabilities based on a cost effective process design. This
should allow the customers to visualize and try the products virtually across all geographies and
choose the best fit. This effort from the product seller will definitely satisfy customers three fold
with its emotional touch on a person who actually gets what he wanted after extensive try, no
matter where he is (Mu et al, 2011). Significant employee reduction in the retail shops by
automating the process of suggesting products with few facilitators in place. The customer can
try a variety of products and its absolute fitting in all angles with just a click and indeed saves a
lot of time and manual effort in product selection.
Shopping process synchronization with PDAs and RFIDs
In recent years, typical Personal Digital Assistants(PDAs) manufactured by Apple, Blackberry,
Amazon, Samsung and others have been evolving as smart Ubiquitous Computing devices with
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12. advanced information processing and transmitting capabilities. They can aid in instantaneous real
world transactions. Taking advantage of the little Personal Digital Assistants, Zara becomes one
of the outstanding clothes giant in fashion industry in a short time. In each Zara‟s store around
the world, the sellers have worked with a PDA that can help them collect and capture the original
data from customers. For instance, when a customer walks into the store, the seller is willing to
chat with the customers by a series of questions such as what colour he/she likes, V-neck or
round neck, and long pattern or short and so on. Then according to the description of the
customer, recommendation could be given. Most importantly, at the same time, the data and
feedback is input to the PDA that links to the POS (Point of Sale) system (Moon & Ngai, 2008).
That is to say, the data is transmitted immediately to the corporation that can be accessed and
utilized by those who need. Therefore, the designers could arrange a heated discussion about the
trend-spotting as soon as possible. And finally they were able to conclude that which style is
popular currently, why the sort of style unsold and what kind of pattern can satisfy customers?
These data gathering stimulate idea creation and help the designers make plans of the lasted
styles based on the feedback rather than hunches and guesswork (Gallaugher, 2008).
RFIDs are Radio Frequency Identification devices which use radio waves to transmit data from
an electronic tag on the products over a certain range of operating distance. They are used in
inventories of retail stores to track the inflow and outflow of products. Similar popular product
identification principles are bar codes and QR codes both which are restricted to its static
location. In Prada‟s retail stores, each item for sale is spot with a unique RFID tag. When the
customers try on the garments, the dressing room will automatically recognize the items and
transmit the item information with wireless connectivity and then show the availability of the
similar patterns, colours from the RFID display screens. Moreover, the RFID cards which can
store customers‟ personal information and history preferences are provided. When the clients
with these cards enter the shops, the salesperson are able to give them tailor-made service or
promotions immediately based on the data in the cards (Moon & Ngai, 2008).
Domestic PDAs facilitate online product research through browsing websites and social
networks. If a software installed in the PDA can capture the interests or skimmed results of his
online product research and when the customer walks down to the shop again he can be directed
to his preferences with an in house retail store map as well as notify the unavailable products and
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13. suggest alternatives based on his online search pattern or previous transactions using the product
RFIDs. RFIDs/ Bar/QC codes interpreted by PDAs can give way to instant semantic analysis
over the internet or retailer data house for specific instant functions like comparisons,
descriptions, promotions and next stock availability in the near future (Gallaugher, 2008). Thus
synchronizing the online and on-shop experience can give way to the customers in selecting the
desired products faster with minimal effort and enhances control of purchase of a specific
product with details – what, when, where and how.
3.2 Exploiting Business Process Space with Strategy
Below are the identified focal points aligned towards business processes that can be explored
upon for implementing innovation in fashion industry.
3.2.1 Customer what’s
Brand for revealing personality
Currently customers of younger generation are demanding not only style and quality but also the
products to reveal the personalities and characters of their own. That is why more and more
customers want to know about the brand culture and connotation (Rowley, 2009).
Demand for Customization
Result from mass production, homogenization is making part of the fashion market less colourful
(Michon, Yu, Smith, & Chebat, 2007).Younger generation has a higher demand on customized
and personalized apparel products.
Shopping experience
More and more customers are concerned about the experience of shopping (Rowley, 2009). Store
design and service become important factors of facilitating shopping behaviours. Some of the
customers considered that the creative and unusual design will keep them staying longer in the
store (Lin & Liang, 2011). On the other hand some other customers want to have different ways
of shopping, for the reason of lack of time for shopping in stores (Kim, Kim & Lennon, 2011).
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14. They not only want to have their apparel products bought through online retails and delivered to
their house, but also want to have similar service as shopping in the real stores.
When discussing shopping experience, “out-of-stock” is a controversial issue. Obviously, it
shows that the sales of products are good. However, it is quite annoying for customer who comes
to the stores and find out what they want to buy is unavailable and this wrecks the relationship
between customers and corporations (Michon et al, 2007).
Demand for Cost-Performance
In the fashion industry, if the product does not reveal its differentiation, it makes no difference
with other general merchandise. “This trend is driven by the growing importance of providing
customer choice in competitive settings (Da Silveira, 1998)”. Currently, the customers not only
require the good quality of product, but also demand the new function and performance. And the
customers are not just staying in the basic demand level, along with the improvement of the
living standards; customers also pay more and more attention to the material of the products,
whether it is healthy or environmental protection.
Marketing for socialization
“If marketing strategy is to be implemented effectively, it must be thought of in a total-
organization, systemic way” (McTavish, 1989). Customer behaviour and market environment is
constantly changing. Companies should readjust their marketing model to face more customer
base, more media and more distribution channels. With the development of the network, network
marketing is more and more popular. Companies can use media, advertisement, and promotional
events effectively to market their new products.
Work environment for employees
In the fashion industry, +innovation is very important, while innovation comes from new
inspiration, good atmosphere can arouse more inspiration. “The lack of sufficient leadership and
coordination can stymie successful innovation” (Pitta, 2008).The team with great vitality and
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15. creative power can encourage employees to research new product, design various styles to meet
their customers changing demands.
3.2.2 Strategic How’s
Differentiate from Competitors--Design and Material of Product
“Product innovation is the development and introduction of a new product to the market or the
modification of existing products in terms of function, quality consistency, or appearance” (Liao
et al, 2007). They can create more value for the company and gain more market share.
The most of new items because of seasonal changes are characterized by a great deal of new
elements in comparison to previous products (Alexander, 2007). It is said that a new fashion is
an innovation. The factors of the product innovation include design, appearance, function and
material to gain competitive advantage.
Such as in the Nike Company, they pay attention to the innovation of design and material. Some
design inspiration of the designer comes from the animals. Air Jordan XIX, one style of the Nike
shoes, the concept is said to have been inspired by one of the most poisonous snake in Africa.
The shoes can protect instep from abrasion because of the deformation of its surface. In the
material aspect, Nike emphasizes sustainable development process and tries to avoid using glue,
adhesives, plastic and other toxic chemicals during the whole design process. Nike Air and Nike
Shox are both air-cushion sports shoes and their design is advanced all over the world. Product
with high quality and high performance will attract more customers and provide more choices.
Achieve cost leadership – Global outsourcing
It has been proved that the cost savings through outsourcing could be enormous (Kumar & Arbi,
2006). The cost savings through outsourcing in the low-cost labour countries in Asia for the
apparel manufacturer supply chain can be huge. Outsourcing is not a solution to short-term
market demands problems, but might be an enormous cost-saver for any large quantity orders.
In the past decades, many apparel manufacturers, especially those based in Europe and North
America, have moved their operations to different countries. It is rather obvious that the main
financial reasons behind this include attractive tax policies and cheap labour costs.
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16. One of the key to success in fashion industry is: having the right product in the right place at the
right time at the right price (Pang, 2004). While applying outsourcing strategies in fashion
industry, several factors are essentially needed to be considered: Logistics, IT infrastructure,
Long-term relationships and Use of simulation for assessment (Kumar & Arbi, 2006). For
instance, the UPS – Supply Chain Solution (UPS-SCS), which is one of the third party logistic
services, is well known for its flexibility, small time and money consuming. The UPS–SCS is
built especially for the products from different manufacturers and intended for the same retailer,
which is one of the consequences of global outsourcing (Pang, 2004). UPS-SCS is able to
provide a faster transporting and disseminating of products, which insures a better inventory
management for both suppliers and retailers, in a lower expense.
Establishing firm and highly collaborative relationships with shipping corporations are as
essential as with the outsourcing partners.
Creating demand-driven Supply Chain - Alignment of retail and delivery
In fashion industry, the retailer is generally considered as the only contact point with consumer.
This is the reason why corporations concentrate efforts on the downstream side of the SC, in
purpose of better control over the sales network (Brun & Castelli, 2008). Numbers of fashion
corporations try to get in direct contact with customers through downstream integration (Ferdows
et al, 2004).
However, the current market competition requires alignment of every roles in SC processes
towards the brand values and to achieve consumers‟ preferences and loyalty, and gain benefits.
For instance, product availability is one of the relevant sources of value for the customer and a
confirmation of a brand‟s reliability (Pedraza & Bonabeu, 2006). To ensure availability requires
time compression and flexibility throughout the SC, which means the retail and delivery
alignment need to be “end-user focus”
Accordingly, it is essential to create coordinating and collaborating relationship between
suppliers and retailers, in order to ensure effective and efficient inventory management,
flexibility and responsiveness (Fernie, Fernie & Moore, 2003).
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17. In recent year years, increasingly shorter product lifecycles and greater product variety are the
most significant features of fashion products. And the consequences are high demand volatility,
low predictability, and frequent impulse purchase (Fernie, Moore & Lawrie, 1998). In order to
balance supply and demand, ensure product availability and control logistic costs, retailers and
manufacturers should join efforts as regards the related operations, for incidence, coordination of
order policies, use of expediting and committing for supplier‟s capacity.
Creating a Free Work Environment – allow maximum interaction of minds
“Administrative innovation refers to changes in organizational structure or administrative
processes, such as the recruitment of personnel, the allocation of resources, and the structuring of
tasks, authority, and rewards (Damanpour, 1992; Gopalakrishnan & Damanpour, 1997)”.
Drucker (1999) said that “Every organization of today has to build into its very structure the
management of change”, such as Nike who continues to encourage designers to look for creative
inspiration from all industries and arranges holiday for designers. Therefore, develop a corporate
culture and start living it with openness which can stimulate the innovative minds and thus
promote the development of new products.
Establish strategic alliance and collaboration in the fashion industry
A corporation establishing co-operational relationships with rivals is a new strategy in fashion
industry. For instance, Giorgio Armani and Emaar Properties creating “Armani Hotels”; LG and
Prada co-operated and produced mobile phones; and Swatch and Tiffany&Co., creating a range
of watches (Wigley & Provelengiou, 2010). Alliance and Collaboration facilitates the utilization
of resources from corporate partners, and the collaboration on design, engineering,
manufacturing, marketing, distribution and service” (Deeny, 2007). Additionally, this kind of
collaboration is not related to any financial capital transaction.
Motivations for strategic alliance and collaboration in fashion industry, generally, are similar to
other industry or business. Specifically, strategic motivations like corporations‟ desire to achieve
product or market diversification. For instance, one is with a current product within a new
market and another is with a new product within a current market and when both corporations
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18. desire to acquire considerable profits from certain market, and also derive advantages from
competing corporations. Two corporations desire for lower financial risk in establishing new
operations and saving on market. Technical motivations are also important when several
corporations or brands want to derive technologies or techniques from each other. Minimizations
of supplier base, building economies of scale, and reduction of supply chain costs are also the
considerable motivations in finding strategic alliance.
In purpose of establishing a firm and long term alliance or collaboration, comprehensive partner
selection is an essential issue. Brouthers and Wilkinson (1995) illustrate four benchmarks in
selecting partners: complementary skills, cooperative cultures, compatible goals, and
commensurate levels of risk. However, these are not fixed and will be change according to
market demands, needs, goals or objectives of the alliance and the predictable risks.
Attract more customers – Decide your way of marketing:
“Marketing innovation refers to market research, price-setting strategy, market segmentation,
advertising promotions and marketing information systems (Vorhies & Harker, 2000;
Weerawardena, 2003)”. The innovation helps to retain old customers and to attract more new
customers. Armstrong and Kotler, (2003) noted that marketing strategy is designed to guide a
company to use its limited resources to meet the requirements of target customers and achieve
marketing goals more efficiently. H&M is regarded as high-street brands, but it always
collaborates with famous designers who design luxury goods such as Karl Lagerfeld, Lanvin and
Viktor. The target consumers of H&M are young man who have the sensitivity with fashion
goods but have not enough purchasing power. Through this viral marketing online, H&M attracts
more young consumers‟ attention and its limited production is again strategic which creates
crazy brand fever among customers.
Innovative branding strategies:
Branding is about how to create value by producing product or service with excellent capability
and quality, supported by satisfactory customer experience which leads to customer loyalty and
repetitive buying (Rowley, 2009). In purpose of getting more attention from customer, fashion
corporations need to conduct variety of branding strategies. Innovative strategies make these
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19. fashion brands more outstanding and unique form their competitors, and more competent in the
fashion market.
Online branding:
Fashion Corporations‟ branding activities are facilitators of curiosity and desire for deeper brand
understanding and evaluating. With better understanding, trust relationships between customers
and brands are easier and firmer (Xie & Boggs, 2006). Customers are more likely to accept the
brands‟ claims about their products. Internet, as the known forth media, is providing a cheaper
and wider platform for branding (Rowley, 2009). Using website for branding is easier to
communicate with potential customers in different way, such as music, broadcasting, video and
games. Nike and Adidas, the famous sports fashion brands with a big number of worldwide
young customers, are using homepage as one of the most important branding platform. All the
new product concepts and information, promotion activities like road shows or temporary stores,
and latest commercial videos are provided in the their homepage. With a clicking mouse,
customers can get to know the latest information about the brand. UNIQLO, a Japanese fashion
brand, is using their homepage not only for sales and providing information, but also for
organizing the online promotional activities. Customers participate in the activities through
buying apparel products. These activities not just facilitate the sales but also display the brand
culture effectively.
Brand communication and market evaluation by temporary stores:
Temporary store was first found in Britain but quickly spread out around the world, especially in
the metropolis like Milan and New York. Limited time frame is the common feature of these
stores. Durations of temporary stores are currently between a week and a month. Customers tend
to be curious about these temporary stores because they appear to be stylish and unique. Another
key factor is the location. Temporary stores often locate in the urban shopping area because the
number of potential customers is relatively high and it is easier to attract attention (Micaela
Surchi, 2010). Temporary stores include different forms. It can be in a camp or a van or even an
online store (webpage or website). In Surchi‟s research (2010), it illustrated that temporary store
fulfils two functions: promotional and investigative. Fashion brands, such as Levi Strauss, by
opening a series of temporary stores in certain period, highlighted their brand values and culture
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20. and strengthened the corporate images. The sales figures of temporary store are not important to
most fashion brands because the objectives are to conduct brand communications directly and
closely with both current and potential customers. The promotion function of temporary store is
more valuable for every established brand, such as Zara and Nike. They have already possessed
enough information and evaluation about certain religion market and their customer. On the
other hand, for the emerging brands, which is not widely accepted by the market and the
customers, this can serve to be investigative to evaluate that if it is worth enormous investment
on the certain locality with certain conditions. The temporary stores can gather information about
the reaction from the customer and study the impact of the promotion activities and these
insights need to be effectively used to better position themselves and plan their investments.
Gain the Trust of Customers - Good Customer Service
“Service innovation refers to manufacturers' engagement in various innovation activities to
enhance customer satisfaction, including after-sale services, warranty policy, maintenance
routines, and order placement systems (Gopalakrishnan & Damanpour, 1997)”. It is a strategy
that supports a company to meet more complex customer needs and set up a good corporate
image. Some companies have found service innovations to be a very effective way to get the
future business opportunities (Wise & Baumgartner, 1999). Mathieu (2001) said that customer
service captures all services that can enhance the quality within the customer relationship and
support companies to increase their product offering. In the fashion industry, good service can
win the trust of customers and make customers as their brand's followers.
Vancle, a fashion brand in China depends on online sales, using experience service to create
more value. Customers can try on the clothes when they get it from courier and there is 90 days
unconditional return policy for an exchange or service. It is said that customers in the service
development process are positively associated with the extension of the service business
(Gebauer, Fleisch & Friedli, 2005).
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21. 4 House of Innovation:
The house of quality originated in 1972 at Mitsubishi‟s Kobe shipyard site and this management
approach was called as „Quality Function Deployment‟ where the quality gaps are identified by
mapping the relationships of the WHATS (customer voice) and HOWS (technical descriptors)
and the capability is measured in terms of HOWS.
The house of innovation proposed in this paper is „the transpose of house of quality‟ where the
existing capability is measured in terms of WHAT‟S rather than HOW‟S. This is because of the
simple fact that quality measures a mechanism and it need to be measured in terms of HOW‟S
where as innovation primarily depends on the context and learning from the environment.
However both represent the translation of the customer‟s voice (WHAT‟S) and the company‟s
means (HOW‟S) into a matrix format to get deep insights on the interrelationships and
correlations and hence determine the strength of existing context and action steps for
organization to fit in or implement innovation. This model can thus attempt to measure the
specificity of innovation gap by analyzing the inter relationship between what‟s and how‟s
(context parameters) and also the structural changes required for bridging the innovation gap or
implementing innovation management based on correlation of what‟s and correlation of how‟s
respectively.
The interrelationship measures the existing capability of innovation. The difference between
the existing capability and the maximum innovation scale can measure the innovation gap in
terms of the hops required to bridge the gap. This provides useful knowledge to act upon the first
few stages of innovation implementation in gap analysis, creation of innovation strategies and to
decide on the innovation portfolio mix.
The correlation measures the degree of importance and relative alignment with the other
context parameters. This provides knowledge to act upon the structural changes and create focus
groups, operating idea banks, exploiting technology and assigning lead users.
The direction of innovation and performance measures can help in accurately visualizing or
measuring the properties of the innovation gap in specific performance measures.
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22. 4.1 Steps in building the House of Innovation:
1. Collect the innovation context parameters which are a combination of what the customer
wants and how can it be fit into organization‟s strategies and advanced technologies.
2. List how‟s in rows and what‟s in columns.
3. Draw a matrix to connect every how to a what.
4. Identify and plot the direction of innovation with respect to the key performance
measures of what‟s in subsequent rows below it.
5. Identify the relationship between them through questionnaires, interviews or brainstorms
and code it in as the matrix elements with a scale of measurement, may be strong, weak,
medium connecting what‟s and how‟s. When the elements are not related relevantly, the
block can be skipped.
6. Sum and derive the existing innovation capability with the interrelationships under
what‟s.
7. Draw a triangular matrix on the top of what‟s and how‟s separately to represent the
relationship between what‟s and what‟s, how‟s and how‟s.
8. Code in the triangular matrix elements by analyzing and interpreting the correlation in
what‟s and how‟s independently
9. Calculate the innovation hops possible by using the cumulative existing innovation
capability
Innovation hops possible = Maximum innovation capability (10) – Existing capability
4.2 Nike’s House of Innovation
The House of innovation has been applied to the identified context framework of innovation in
fashion industry in the first part of the paper.
The interrelationship and correlation plotted in the above model is a synthesis of information
from various sources in various forms as company‟s internal product and process reports,
employee‟s speech and publications in conferences, press meets and social gatherings , Nike‟s
product website (www.nike.com) , Nike‟s official website (www.nikebiz.com ),official on-store
21

23. and process videos in YouTube from trusted channels of Nike, case studies and publications on
analysis of the strategies of Nike from its different departments.
Fig 2: House of Innovation for Nike‟s customer space with technologies
For calculating existing capability, we can use the mid value of the ranges.
These relationships are to be identified with questionnaires, interviews or brain storms in focus
groups in terms of context and existing capability in real time application whereas here in the
22

24. model shown, we have synthesized relationships with various sources of information available
online about the organization and its present day‟s capability
Fig 3: House of Innovation for mapping Nike‟s business process gap with strategies
4.3 Acting upon information for insights - innovation
implementation:
With the model of interrelationship and correlations of what‟s of customers and how‟s of
organization or trends, a strong sense of the context to start with and the desired positions to land
with is derived, based on the realization of market trends and self performance with respect to
the innovation context.
23

25. 4.3.1 Kick off or Gap Analysis:
This gap or context helps in creating an innovation portfolio with mapping of existing projects in
relation to their strategic fit, degree of innovativeness, estimated costs, expected returns and
calculated risks in the business processes involved. Also with the analyzed market trend based on
the current reach of context in customers, decide the time for marketing to gain competitive
advantage.
Propagate the context and innovation portfolios with brain storms, contests, exhibitions and talks
inside the company to spread the thought as well as to determine the matching talents, skills and
competence in people to form right teams for managing innovation.
Nike’s Business process space innovation gap analysis:
According to the above model, Brand Personalization context is the biggest strength of Nike. The
organization just has a least detected gap which can be bridged upon further innovation with a
maximum of one hop and that can possibly be pushed by an incremental innovation strategy to
keep in pace with the emerging technologies in material science , interactive marketing and
branding.
Customization can be rated with medium strength as Nike still can focus more on collaborating
with partners for customizing designs rather than just outsourcing the design, the quality of
customer service, work style for employees and there need to be something more which
collectively demands some form of innovation with 4 hops to bridge this gap.
Nike’s customer space innovation gap analysis:
According to the model, Nike‟s biggest strength is the ability to research on its products by
exploiting the power of web 2.0 in its product website and other social media sites and
communities like Facebook, Google Plus where there will be new product details, latest purchase
reviews, expert answers for doubts raised by customers, video posts on designs, service or
product complaints. There can be just a maximum of one hop possible.
24

26. Interestingly a much bigger innovation gap could be detected in its instantaneous product
purchase capability where they have not utilized advanced software or augmented reality to
make your laptops and movie theatres as a virtual shop that enables purchase on the move
instantaneously. Nike needs to capitalize on these trends and make changes soon to sustain its
global leadership. There need to be around 8 hops (may be a huge leap!) to bridge this gap as
predicted by the model.
Product awareness, product visualization and personalization could be the trends where Nike is
performing well in traditional media like TV and advertisements through social media sites, but
it still needs to capitalize on the potential of software systems and internet media where artificial
intelligence can be exploited for personalization, augmented reality software for virtual trials and
also in synchronizing the online shopping using PDAs and on-store shopping through RFIDs,
QC and barcodes and semantic web concepts can be applied for instant searches and
comparisons which would bring down the customer‟s purchase effort and decision time
drastically down. There can be a maximum of 4 hops possible to bridge this gap.
4.3.2 Creating innovation strategies:
Apply the innovation portfolio to the customer and technology trends, internal business
processes which gives a definite direction or flow for the execution of activities with specific
strategic interpretations, either customer, technology or employee driven. A dominant or
balancing proposition of one of these innovation strategies can be considered based on the
strength of interrelationship and the predominant cause for the relationship.
In our case, for Nike, Instantaneous product purchase through online virtual shops implementing
augmented reality and artificial intelligence techniques can be a project which can be mapped to
a technology driven innovation strategy based on their low interrelationship and high correlation
between product visualization and instant purchase .
4.3.3 Innovation portfolio mix:
Categorize the projects with innovation portfolio to reflect the levels of risks involved. Identify a
classification for the mix based on the innovation gap – incremental, major revisions or a break
25

27. through. Add operational strategies and timelines. Allocate resources based on the mapping of
correlation to interrelationship or degree of importance of individual context to the existing
organizational capability.
In our case, the above project of Nike can be considered a portfolio mix, „major revision‟ as it
has to implement new technologies and invest on software and expert handlers to design and
develop the project for Nike. They also need to utilize their previous technology of online
shopping with these virtual shops with virtual trials and real object based recommendations
which requires more integration efforts to digitize all real world objects on store in all
dimensions and sell online. This has been decided based on their average interrelationships or
existing capability with software systems and internet media for product purchase as well as a
high correlation between software systems and internet media.
4.3.4 Structural Changes:
This process can be well substantiated by correlation of individual organizational means to
achieve the context and the importance of each factor to structure the change or innovation
scenario to tap the internal and external resources effectively. They aid in developing focus
groups or competence centres and managing alliance portfolio based on the identified strength of
context factors and the innovation gap.
In our case, Nike‟s project when implemented can radically impact the previous IT resources and
infrastructure setup inside the company which need changes in their structure. It also impacts the
sales in the traditional stores which require planning in allocating resources and supply chain.
The correlation between the entities in the model explains it.
4.3.5 Operating with ideas – setting idea banks and right culture:
After incorporating the structural changes, it is now the stage to build upon ideas. Set the right
culture in the team to build upon ideas conceptually and strategically, publish targets, rewards,
assessments, revisions and iteratively act upon improving the quality and shape of the idea
orienting towards the maximum hops possible to bridge the innovation gap identified with the
model.
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28. In our case, COPs, conferences, brain storms may be conducted on the subjects related to this
project to bring more awareness and context for thinking among the team responsible for project
implementation. The subjects are identified based on low interrelationships and high correlation
between the affected entities.
4.3.6 Implementing Lead User Method:
After analyzing the correlation of individual context parameters that is in scope of innovation
and the existing focus groups are clustered into highly representative subunits or function
clusters are chosen and lead users are assigned for its key project planning, expert consulting and
conceptualization.
In our case, this is purely based on departments or entities correlation. Highly representative
units can be assigned lead users based on their competence and expertise in the specific project
domains related to software systems, artificial intelligence, augmented reality, and wireless
communications and so on.
4.3.7 Exploiting technology and intellectual property:
After identifying the context and assessing the existing capability, there is a need to compare our
movement relative to our competitors and anticipate future moves by exploiting past patent
trends, technology road map in the future to plan incremental innovation and patents to block
competitors or kill innovation projects or obtain license based on the current trend and value of
the idea.
In our case, exploit the intellectual property of the present day‟s Nike IT team, R&D team or its
partners. Pick out the unused patents, publications and value them by mapping into the trends
that Nike expects to bring into customer world. If the patents don‟t worth its competitive
advantage as identified by the future trends, they can be licensed or donated to bring up their
image. The areas for IP exploitation can also be identified from the correlation of individual
what‟s and how‟s to select highly representative elements for research operations.
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29. 5 Conclusion:
A detailed analysis on innovation management layer of the Intellectual Capital framework was
made in the first part of the paper by defining innovation, researching on the nature of the
fashion industry, identifying the context for innovation in the customer and business process
space. After having identified the connectors enabling innovation or the context, these are
translated into the house of innovation, a model which is a transpose of the house of quality
which can be used to measure the innovation gap in the fashion industry by listing down the
identified context parameters in both the axis of the matrix and evaluating the interrelationships
between them and correlation within them. This was discussed in brief by considering Nike as an
example and how the identified gaps and relationships can help in innovation implementation
through different layers. Thus this holistic approach starting from context identification to
innovation implementation takes us through a series of events to realize the importance of
spotting the relevant context at appropriate time and aligning them with organizational
intellectual capital based on existing and required capability and this effective restructuring from
time to time makes an organization in any industry truly competitive as well as innovative.
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