Innovation management in fashion industry


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Intellectual Capital Management - alignment of technology hows and customer whats

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Innovation management in fashion industry

  1. 1. Context identification and Intellectual Capital mapping forimplementing ‘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) 0
  2. 2. Team members Contribution Peer Evaluation scoreThangavelu Muthu Kumaar Context identification in customer innovation + space with technologies and House of InnovationWang Yan Lin Case study in customer innovation space with = technologiesXu Chen Yu Exploiting Business - Process Space with StrategiesAo Xiaofeng Research in customer and market trends, Innovative = strategies of branding and manufacturing 1
  3. 3. Abstract:More and more, today‟s competitive and customer centric climate requires the organization todrive the process of innovation in 360 degrees - to embed the seeds of creativity that couldabsolutely transform a business – the way it does. Creativity arises from a blended environmentof learning and sharing where there is always a room for processing permutations andcombinations. The emphasis shift from individual‟s innovative capability to organization‟scapability has brought about revolutionary inventions in the recent decade and the organizationshave realized that human brains and their cognition can be attributed as the best tools to innovatebut they need to be aligned with a unique culture which fosters them to think beyond and contextsensible, to cultivate the spirit and excitement in risking stakes on a well grounded innovationproposition. After identifying the environment and tools for innovation, the challenge clearly liesin identifying the context. This paper attempts to determine the context for innovation andidentifying the gaps and there after exploiting the organization‟s intellectual capital to implementinnovation for bridging the gap. The context is analyzed based on two perspectives – one in thecustomer perspective and the other in the business process perspective. They collectively deriveinnovative business solutions performing across the different functional layers of an enterprise –Strategic and Operational where technology and structural assets support the entire process ofinnovation to lean upon for communication, visualization and interpretation processes. A modelor tool, “House of Innovation” has been developed to suggest action based on the relationshipanalysis between the context factors and hence investigate upon the specificity of innovation gap,innovation portfolio mix, structural changes, creating focus groups with lead users andimplementing the idea with a methodology based on the interrelationships and correlations of thekey innovation context factors (What‟s and How‟s). 2
  4. 4. Table of ContentsContext identification and Intellectual Capital mapping for implementing ‘Innovation’ with House of Innovation model in fashion industry 01 Introduction .............................................................................................................................. 42 Analysing the Innovation Space in Fashion Industry .............................................................. 4 2.1 „Fashion‟ Innovation: - Focal shift from delivery excellence to innovation ................. 53 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 ................................................................................................. 144 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: .............................................. 275 Conclusion: ............................................................................................................................ 286 References: ............................................................................................................................. 29 3
  5. 5. 1 IntroductionAs the famous quote goes - “You can’t connect the dots looking forward; you can only connectthem looking backwards” (Jobs, 2005), one of the successful innovators of all time seems to bethe highly relevant innovation formula today. The dots here symbolize “learning” which canstimulate innovation in X context and Y Time frame. This to some extent makes the solutionpredictable. Continuous learning and context identification for its application can be thesubstitutes in the above formula. Assuming that most organizations have already adopted theculture of continuous learning, the most difficult problem to be solved is to identify theappropriate context for innovation implementation. This paper takes you through a systematicapproach of solving this problem taking fashion industry as the business domain.2 Analysing the Innovation Space in Fashion IndustryFashion industry, in general serves to capture the currently popular style or practices andmanufacture 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 isquite different from many product-manufacturing industries like the ones making an electronicdevice 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 4
  6. 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 innovationThe above analysis on the nature of the industry brings out realization on the focus of fashionindustry that is not centred at delivery excellence or quality, but a different way of thinking itselfin the form of innovation which is any creative, actionable idea that can result in a superiorproduct 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 existingstructure. 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 trendunlike many other manufacturing industries where the prime focus is not on the change, but it isproductivity. However there need to be a strategic business alignment behind every changeexecuted for the customers. 5
  7. 7. 3 Plotting the focal points in the innovation spaceThis part aims at narrowing down the view of the broad space of innovation into distinct focalpoints in the customer world whose implementation needs are to be aligned with the specificstrategic and operational business processes in the organizational space. The overlapping part ofthe two spaces derives the context for innovation.3.1 Exploiting the Customer Innovation Space with technologyBelow are the identified focal points biased towards customers that can be explored upon forimplementing innovation in fashion industry.3.1.1 Customer what’sEmbedded Product Awareness in real world experiencesAs fashion products tend to reflect the trend of people themselves, they ideally should not onlybe targeted for a standalone showroom purchase. Instead the focus should be on reflecting the 6
  8. 8. product in people‟s day to day routine activities and gain attention to the product as well as thebrand. Cross selling and Sponsoring an event or team or person could be common examples.Ability to research wide and fast on productsA fashion product, particularly when that is really expensive needs a significant research by theconsumers 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 productwebsites or social network sites could be some common examples.Superior Product VisualizationA customer when confronted with the fashion product must be stimulated to purchase it. There isan increasing need to satisfy the customers in a short time frame by making them try as muchproducts as possible.Three dimensional views of products in the online stores and digital mirrors in interactivedressing rooms of Prada, New York, Nike ID customization in Nike Stores, London could besome interesting examples.Instantaneous Product PurchaseShopping a product need to be instantaneous with a high degree of synchronization with thepurchasing context and medium of the customer to recommend the highly relevant products atthe right time and make the purchase process easier.Online and on-store shopping with Personal Digital Assistants (PDAs) and Radio FrequencyIdentification (RFID) could be some examples. 7
  9. 9. PersonalizationThe products are no longer designed generic addressing a common audience throughout theworld. Rather they are highly personalized targeting the specific customers to satisfy their needsin terms of socio –demography, geography and psychology.Material Science Engineering, embedded electronics for core product design, Data mining andanalytics, Customer Relationship Management software and socialization in web2.0 for customerfocussed design are the channels for trend realization for consequent purchases of a person or aproduct itself.Nike with Apple has released a sport kit, having an electronic sensor under the inner sole of anew Nike running shoe which talks to a small wireless receiver in Apples iPod nano musicplayer 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" toadd more power to a runners stride and provide superior shock absorption with high-tech elasticfoam. Nike claims that the hollowed-out columns combined with a Pebax dispersion plate givessuch 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 nextgeneration model of fashion product shopping.Virtual Theatres, Fashion Shows, Games, TV showsMost of these features do not have a predominant form as of now. But they need to take lead inconsideration with the ongoing trends of computing and information technology today. 8
  10. 10. They can be attributed mostly to Augmented Reality, a technique to simulate the object basedreal world environment with computer generated sensory input such as sound, graphics, videoand so on (Lu & Smith, 2008), Wireless Communication advancements and partly due toartificial Intelligence methods for intelligent interaction, simulation and synchronization of thedifferent environments or parties (Yang et al, 2009).Virtual Theatres and games can be online projection of a movie/ TV show or a gaming theatre toattract customers by a fun filled experience enabling a virtual hang out with friends and play withinstant chats and video packets and also create product and brand awareness and initiate productpurchase with the sequences of the movie, TV show or game being streamed in the fashionproduct‟s website or in a restricted box of any social networking sites like Facebook or GooglePlus 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 thebrand in the existing customers and iconic models by easy accessible virtual participation or tocreate awareness among the prospective customers who can act as virtual audience where in hightech motion capturing cameras and Augmented Reality based streaming can help in making aperfect real world simulation (Yang et al, 2009).All these virtual experiences in a highly computed environment aim at pausing or saving thefashion product during the course of experience and initiate product purchase immediately or at alater point.Real time Value Co-creation in Web2.0The information view on internet is shifting from an open to closed space model where there isincreased usefulness and reliability of content. This is carried out by increasingly popular actionslike reading, subscribing, and rating, tagging, commenting, linking, recommending, moderatingand owning such closed group or communities where there can be real time purchase storieswhich has a locality or relationship network boundary . Fashion products have most of the timescarried exciting stories spun in a social network. This information shared is critical for bothcustomers to base their purchase decisions and product designers to base their subsequentproducts. 9
  11. 11. Personal context and real world object based product recommendationCustomer profiles as captured by CRM software, Data mining tools predict reliable patterns ofrecommendation or to an extent attempts to personalize the customer with a specific productcircle (Mu, Zheng, Cao & Cao, 2011).Innovation part lies in connecting the common personalization patterns with intelligent personalcontext matching algorithms which tries to derive a recommendation pattern by acting upon hisprevious patterns, profile information, GPS data and specific events happening in hisenvironment which directly or indirectly be related to fashion products (Schwartz, 2011). Theaugmented reality, Artificial Intelligence capabilities, programmable sensors and microelectronics - all together can attempt to recognize real world objects in three dimensions andaccurate surface level details can be transmitted over network and matched with similar patternsof real world object, in our case, fashion products for intelligent recommendation (Medina,García-Cervigón, Carazo & Costas, 2010) .Virtual trial rooms and Interactive digital mirrorsThis is the most fruitful innovation in the fashion industry where most people would like to try asmuch items as possible before deciding one. This invention is already in an advanced stagewhich can be extended with more capabilities based on a cost effective process design. Thisshould allow the customers to visualize and try the products virtually across all geographies andchoose the best fit. This effort from the product seller will definitely satisfy customers three foldwith its emotional touch on a person who actually gets what he wanted after extensive try, nomatter where he is (Mu et al, 2011). Significant employee reduction in the retail shops byautomating the process of suggesting products with few facilitators in place. The customer cantry a variety of products and its absolute fitting in all angles with just a click and indeed saves alot of time and manual effort in product selection.Shopping process synchronization with PDAs and RFIDsIn recent years, typical Personal Digital Assistants(PDAs) manufactured by Apple, Blackberry,Amazon, Samsung and others have been evolving as smart Ubiquitous Computing devices with 10
  12. 12. advanced information processing and transmitting capabilities. They can aid in instantaneous realworld transactions. Taking advantage of the little Personal Digital Assistants, Zara becomes oneof the outstanding clothes giant in fashion industry in a short time. In each Zara‟s store aroundthe world, the sellers have worked with a PDA that can help them collect and capture the originaldata from customers. For instance, when a customer walks into the store, the seller is willing tochat with the customers by a series of questions such as what colour he/she likes, V-neck orround neck, and long pattern or short and so on. Then according to the description of thecustomer, recommendation could be given. Most importantly, at the same time, the data andfeedback 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 andutilized by those who need. Therefore, the designers could arrange a heated discussion about thetrend-spotting as soon as possible. And finally they were able to conclude that which style ispopular 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 lastedstyles based on the feedback rather than hunches and guesswork (Gallaugher, 2008).RFIDs are Radio Frequency Identification devices which use radio waves to transmit data froman electronic tag on the products over a certain range of operating distance. They are used ininventories of retail stores to track the inflow and outflow of products. Similar popular productidentification principles are bar codes and QR codes both which are restricted to its staticlocation. In Prada‟s retail stores, each item for sale is spot with a unique RFID tag. When thecustomers try on the garments, the dressing room will automatically recognize the items andtransmit the item information with wireless connectivity and then show the availability of thesimilar patterns, colours from the RFID display screens. Moreover, the RFID cards which canstore customers‟ personal information and history preferences are provided. When the clientswith these cards enter the shops, the salesperson are able to give them tailor-made service orpromotions immediately based on the data in the cards (Moon & Ngai, 2008).Domestic PDAs facilitate online product research through browsing websites and socialnetworks. If a software installed in the PDA can capture the interests or skimmed results of hisonline product research and when the customer walks down to the shop again he can be directedto his preferences with an in house retail store map as well as notify the unavailable products and 11
  13. 13. suggest alternatives based on his online search pattern or previous transactions using the productRFIDs. RFIDs/ Bar/QC codes interpreted by PDAs can give way to instant semantic analysisover the internet or retailer data house for specific instant functions like comparisons,descriptions, promotions and next stock availability in the near future (Gallaugher, 2008). Thussynchronizing the online and on-shop experience can give way to the customers in selecting thedesired products faster with minimal effort and enhances control of purchase of a specificproduct with details – what, when, where and how.3.2 Exploiting Business Process Space with StrategyBelow are the identified focal points aligned towards business processes that can be exploredupon for implementing innovation in fashion industry.3.2.1 Customer what’sBrand for revealing personalityCurrently customers of younger generation are demanding not only style and quality but also theproducts to reveal the personalities and characters of their own. That is why more and morecustomers want to know about the brand culture and connotation (Rowley, 2009).Demand for CustomizationResult 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 customizedand personalized apparel products.Shopping experienceMore and more customers are concerned about the experience of shopping (Rowley, 2009). Storedesign and service become important factors of facilitating shopping behaviours. Some of thecustomers considered that the creative and unusual design will keep them staying longer in thestore (Lin & Liang, 2011). On the other hand some other customers want to have different waysof shopping, for the reason of lack of time for shopping in stores (Kim, Kim & Lennon, 2011). 12
  14. 14. They not only want to have their apparel products bought through online retails and delivered totheir 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, itshows that the sales of products are good. However, it is quite annoying for customer who comesto the stores and find out what they want to buy is unavailable and this wrecks the relationshipbetween customers and corporations (Michon et al, 2007).Demand for Cost-PerformanceIn the fashion industry, if the product does not reveal its differentiation, it makes no differencewith other general merchandise. “This trend is driven by the growing importance of providingcustomer choice in competitive settings (Da Silveira, 1998)”. Currently, the customers not onlyrequire the good quality of product, but also demand the new function and performance. And thecustomers are not just staying in the basic demand level, along with the improvement of theliving 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 isconstantly changing. Companies should readjust their marketing model to face more customerbase, more media and more distribution channels. With the development of the network, networkmarketing is more and more popular. Companies can use media, advertisement, and promotionalevents effectively to market their new products.Work environment for employeesIn the fashion industry, +innovation is very important, while innovation comes from newinspiration, good atmosphere can arouse more inspiration. “The lack of sufficient leadership andcoordination can stymie successful innovation” (Pitta, 2008).The team with great vitality and 13
  15. 15. creative power can encourage employees to research new product, design various styles to meettheir customers changing demands.3.2.2 Strategic How’sDifferentiate from Competitors--Design and Material of Product“Product innovation is the development and introduction of a new product to the market or themodification of existing products in terms of function, quality consistency, or appearance” (Liaoet 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 newelements in comparison to previous products (Alexander, 2007). It is said that a new fashion isan innovation. The factors of the product innovation include design, appearance, function andmaterial to gain competitive advantage.Such as in the Nike Company, they pay attention to the innovation of design and material. Somedesign inspiration of the designer comes from the animals. Air Jordan XIX, one style of the Nikeshoes, 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 thematerial 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 NikeShox are both air-cushion sports shoes and their design is advanced all over the world. Productwith high quality and high performance will attract more customers and provide more choices.Achieve cost leadership – Global outsourcingIt 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 theapparel manufacturer supply chain can be huge. Outsourcing is not a solution to short-termmarket 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 NorthAmerica, have moved their operations to different countries. It is rather obvious that the mainfinancial reasons behind this include attractive tax policies and cheap labour costs. 14
  16. 16. One of the key to success in fashion industry is: having the right product in the right place at theright time at the right price (Pang, 2004). While applying outsourcing strategies in fashionindustry, several factors are essentially needed to be considered: Logistics, IT infrastructure,Long-term relationships and Use of simulation for assessment (Kumar & Arbi, 2006). Forinstance, the UPS – Supply Chain Solution (UPS-SCS), which is one of the third party logisticservices, is well known for its flexibility, small time and money consuming. The UPS–SCS isbuilt 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 toprovide a faster transporting and disseminating of products, which insures a better inventorymanagement for both suppliers and retailers, in a lower expense.Establishing firm and highly collaborative relationships with shipping corporations are asessential as with the outsourcing partners.Creating demand-driven Supply Chain - Alignment of retail and deliveryIn 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, inpurpose of better control over the sales network (Brun & Castelli, 2008). Numbers of fashioncorporations try to get in direct contact with customers through downstream integration (Ferdowset al, 2004).However, the current market competition requires alignment of every roles in SC processestowards 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 aconfirmation of a brand‟s reliability (Pedraza & Bonabeu, 2006). To ensure availability requirestime compression and flexibility throughout the SC, which means the retail and deliveryalignment need to be “end-user focus”Accordingly, it is essential to create coordinating and collaborating relationship betweensuppliers and retailers, in order to ensure effective and efficient inventory management,flexibility and responsiveness (Fernie, Fernie & Moore, 2003). 15
  17. 17. In recent year years, increasingly shorter product lifecycles and greater product variety are themost significant features of fashion products. And the consequences are high demand volatility,low predictability, and frequent impulse purchase (Fernie, Moore & Lawrie, 1998). In order tobalance supply and demand, ensure product availability and control logistic costs, retailers andmanufacturers should join efforts as regards the related operations, for incidence, coordination oforder 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 administrativeprocesses, such as the recruitment of personnel, the allocation of resources, and the structuring oftasks, authority, and rewards (Damanpour, 1992; Gopalakrishnan & Damanpour, 1997)”.Drucker (1999) said that “Every organization of today has to build into its very structure themanagement of change”, such as Nike who continues to encourage designers to look for creativeinspiration from all industries and arranges holiday for designers. Therefore, develop a corporateculture and start living it with openness which can stimulate the innovative minds and thuspromote the development of new products.Establish strategic alliance and collaboration in the fashion industryA corporation establishing co-operational relationships with rivals is a new strategy in fashionindustry. For instance, Giorgio Armani and Emaar Properties creating “Armani Hotels”; LG andPrada co-operated and produced mobile phones; and Swatch and Tiffany&Co., creating a rangeof watches (Wigley & Provelengiou, 2010). Alliance and Collaboration facilitates the utilizationof resources from corporate partners, and the collaboration on design, engineering,manufacturing, marketing, distribution and service” (Deeny, 2007). Additionally, this kind ofcollaboration is not related to any financial capital transaction.Motivations for strategic alliance and collaboration in fashion industry, generally, are similar toother industry or business. Specifically, strategic motivations like corporations‟ desire to achieveproduct or market diversification. For instance, one is with a current product within a newmarket and another is with a new product within a current market and when both corporations 16
  18. 18. desire to acquire considerable profits from certain market, and also derive advantages fromcompeting corporations. Two corporations desire for lower financial risk in establishing newoperations and saving on market. Technical motivations are also important when severalcorporations or brands want to derive technologies or techniques from each other. Minimizationsof supplier base, building economies of scale, and reduction of supply chain costs are also theconsiderable motivations in finding strategic alliance.In purpose of establishing a firm and long term alliance or collaboration, comprehensive partnerselection is an essential issue. Brouthers and Wilkinson (1995) illustrate four benchmarks inselecting partners: complementary skills, cooperative cultures, compatible goals, andcommensurate levels of risk. However, these are not fixed and will be change according tomarket 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 newcustomers. Armstrong and Kotler, (2003) noted that marketing strategy is designed to guide acompany to use its limited resources to meet the requirements of target customers and achievemarketing goals more efficiently. H&M is regarded as high-street brands, but it alwayscollaborates with famous designers who design luxury goods such as Karl Lagerfeld, Lanvin andViktor. The target consumers of H&M are young man who have the sensitivity with fashiongoods but have not enough purchasing power. Through this viral marketing online, H&M attractsmore young consumers‟ attention and its limited production is again strategic which createscrazy brand fever among customers.Innovative branding strategies:Branding is about how to create value by producing product or service with excellent capabilityand quality, supported by satisfactory customer experience which leads to customer loyalty andrepetitive buying (Rowley, 2009). In purpose of getting more attention from customer, fashioncorporations need to conduct variety of branding strategies. Innovative strategies make these 17
  19. 19. fashion brands more outstanding and unique form their competitors, and more competent in thefashion market.Online branding:Fashion Corporations‟ branding activities are facilitators of curiosity and desire for deeper brandunderstanding and evaluating. With better understanding, trust relationships between customersand brands are easier and firmer (Xie & Boggs, 2006). Customers are more likely to accept thebrands‟ claims about their products. Internet, as the known forth media, is providing a cheaperand wider platform for branding (Rowley, 2009). Using website for branding is easier tocommunicate with potential customers in different way, such as music, broadcasting, video andgames. Nike and Adidas, the famous sports fashion brands with a big number of worldwideyoung customers, are using homepage as one of the most important branding platform. All thenew 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 fashionbrand, is using their homepage not only for sales and providing information, but also fororganizing the online promotional activities. Customers participate in the activities throughbuying apparel products. These activities not just facilitate the sales but also display the brandculture effectively.Brand communication and market evaluation by temporary stores:Temporary store was first found in Britain but quickly spread out around the world, especially inthe metropolis like Milan and New York. Limited time frame is the common feature of thesestores. Durations of temporary stores are currently between a week and a month. Customers tendto be curious about these temporary stores because they appear to be stylish and unique. Anotherkey factor is the location. Temporary stores often locate in the urban shopping area because thenumber of potential customers is relatively high and it is easier to attract attention (MicaelaSurchi, 2010). Temporary stores include different forms. It can be in a camp or a van or even anonline store (webpage or website). In Surchi‟s research (2010), it illustrated that temporary storefulfils two functions: promotional and investigative. Fashion brands, such as Levi Strauss, byopening a series of temporary stores in certain period, highlighted their brand values and culture 18
  20. 20. and strengthened the corporate images. The sales figures of temporary store are not important tomost fashion brands because the objectives are to conduct brand communications directly andclosely with both current and potential customers. The promotion function of temporary store ismore valuable for every established brand, such as Zara and Nike. They have already possessedenough information and evaluation about certain religion market and their customer. On theother hand, for the emerging brands, which is not widely accepted by the market and thecustomers, this can serve to be investigative to evaluate that if it is worth enormous investmenton the certain locality with certain conditions. The temporary stores can gather information aboutthe reaction from the customer and study the impact of the promotion activities and theseinsights 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 toenhance customer satisfaction, including after-sale services, warranty policy, maintenanceroutines, and order placement systems (Gopalakrishnan & Damanpour, 1997)”. It is a strategythat supports a company to meet more complex customer needs and set up a good corporateimage. Some companies have found service innovations to be a very effective way to get thefuture business opportunities (Wise & Baumgartner, 1999). Mathieu (2001) said that customerservice captures all services that can enhance the quality within the customer relationship andsupport companies to increase their product offering. In the fashion industry, good service canwin the trust of customers and make customers as their brands followers.Vancle, a fashion brand in China depends on online sales, using experience service to createmore value. Customers can try on the clothes when they get it from courier and there is 90 daysunconditional return policy for an exchange or service. It is said that customers in the servicedevelopment process are positively associated with the extension of the service business(Gebauer, Fleisch & Friedli, 2005). 19
  21. 21. 4 House of Innovation:The house of quality originated in 1972 at Mitsubishi‟s Kobe shipyard site and this managementapproach was called as „Quality Function Deployment‟ where the quality gaps are identified bymapping 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 theexisting capability is measured in terms of WHAT‟S rather than HOW‟S. This is because of thesimple fact that quality measures a mechanism and it need to be measured in terms of HOW‟Swhere 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‟smeans (HOW‟S) into a matrix format to get deep insights on the interrelationships andcorrelations and hence determine the strength of existing context and action steps fororganization to fit in or implement innovation. This model can thus attempt to measure thespecificity 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 orimplementing innovation management based on correlation of what‟s and correlation of how‟srespectively.The interrelationship measures the existing capability of innovation. The difference betweenthe existing capability and the maximum innovation scale can measure the innovation gap interms of the hops required to bridge the gap. This provides useful knowledge to act upon the firstfew stages of innovation implementation in gap analysis, creation of innovation strategies and todecide on the innovation portfolio mix.The correlation measures the degree of importance and relative alignment with the othercontext parameters. This provides knowledge to act upon the structural changes and create focusgroups, operating idea banks, exploiting technology and assigning lead users.The direction of innovation and performance measures can help in accurately visualizing ormeasuring the properties of the innovation gap in specific performance measures. 20
  22. 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 capability4.2 Nike’s House of InnovationThe House of innovation has been applied to the identified context framework of innovation infashion industry in the first part of the paper.The interrelationship and correlation plotted in the above model is a synthesis of informationfrom 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‟sproduct website ( , Nike‟s official website ( ),official on-store 21
  23. 23. and process videos in YouTube from trusted channels of Nike, case studies and publications onanalysis of the strategies of Nike from its different departments.Fig 2: House of Innovation for Nike‟s customer space with technologiesFor 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 focusgroups in terms of context and existing capability in real time application whereas here in the 22
  24. 24. model shown, we have synthesized relationships with various sources of information availableonline about the organization and its present day‟s capabilityFig 3: House of Innovation for mapping Nike‟s business process gap with strategies4.3 Acting upon information for insights - innovation implementation:With the model of interrelationship and correlations of what‟s of customers and how‟s oforganization or trends, a strong sense of the context to start with and the desired positions to landwith is derived, based on the realization of market trends and self performance with respect tothe innovation context. 23
  25. 25. 4.3.1 Kick off or Gap Analysis:This gap or context helps in creating an innovation portfolio with mapping of existing projects inrelation to their strategic fit, degree of innovativeness, estimated costs, expected returns andcalculated risks in the business processes involved. Also with the analyzed market trend based onthe current reach of context in customers, decide the time for marketing to gain competitiveadvantage.Propagate the context and innovation portfolios with brain storms, contests, exhibitions and talksinside the company to spread the thought as well as to determine the matching talents, skills andcompetence 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. Theorganization just has a least detected gap which can be bridged upon further innovation with amaximum of one hop and that can possibly be pushed by an incremental innovation strategy tokeep in pace with the emerging technologies in material science , interactive marketing andbranding.Customization can be rated with medium strength as Nike still can focus more on collaboratingwith partners for customizing designs rather than just outsourcing the design, the quality ofcustomer service, work style for employees and there need to be something more whichcollectively 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 byexploiting the power of web 2.0 in its product website and other social media sites andcommunities like Facebook, Google Plus where there will be new product details, latest purchasereviews, expert answers for doubts raised by customers, video posts on designs, service orproduct complaints. There can be just a maximum of one hop possible. 24
  26. 26. Interestingly a much bigger innovation gap could be detected in its instantaneous productpurchase capability where they have not utilized advanced software or augmented reality tomake your laptops and movie theatres as a virtual shop that enables purchase on the moveinstantaneously. Nike needs to capitalize on these trends and make changes soon to sustain itsglobal leadership. There need to be around 8 hops (may be a huge leap!) to bridge this gap aspredicted by the model.Product awareness, product visualization and personalization could be the trends where Nike isperforming well in traditional media like TV and advertisements through social media sites, butit still needs to capitalize on the potential of software systems and internet media where artificialintelligence can be exploited for personalization, augmented reality software for virtual trials andalso 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 andcomparisons which would bring down the customer‟s purchase effort and decision timedrastically 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 businessprocesses which gives a definite direction or flow for the execution of activities with specificstrategic interpretations, either customer, technology or employee driven. A dominant orbalancing proposition of one of these innovation strategies can be considered based on thestrength of interrelationship and the predominant cause for the relationship.In our case, for Nike, Instantaneous product purchase through online virtual shops implementingaugmented reality and artificial intelligence techniques can be a project which can be mapped toa technology driven innovation strategy based on their low interrelationship and high correlationbetween 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 aclassification for the mix based on the innovation gap – incremental, major revisions or a break 25
  27. 27. through. Add operational strategies and timelines. Allocate resources based on the mapping ofcorrelation to interrelationship or degree of importance of individual context to the existingorganizational capability.In our case, the above project of Nike can be considered a portfolio mix, „major revision‟ as ithas to implement new technologies and invest on software and expert handlers to design anddevelop the project for Nike. They also need to utilize their previous technology of onlineshopping with these virtual shops with virtual trials and real object based recommendationswhich requires more integration efforts to digitize all real world objects on store in alldimensions and sell online. This has been decided based on their average interrelationships orexisting capability with software systems and internet media for product purchase as well as ahigh correlation between software systems and internet media.4.3.4 Structural Changes:This process can be well substantiated by correlation of individual organizational means toachieve the context and the importance of each factor to structure the change or innovationscenario to tap the internal and external resources effectively. They aid in developing focusgroups or competence centres and managing alliance portfolio based on the identified strength ofcontext factors and the innovation gap.In our case, Nike‟s project when implemented can radically impact the previous IT resources andinfrastructure setup inside the company which need changes in their structure. It also impacts thesales 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 rightculture 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 ideaorienting towards the maximum hops possible to bridge the innovation gap identified with themodel. 26
  28. 28. In our case, COPs, conferences, brain storms may be conducted on the subjects related to thisproject to bring more awareness and context for thinking among the team responsible for projectimplementation. The subjects are identified based on low interrelationships and high correlationbetween the affected entities.4.3.6 Implementing Lead User Method:After analyzing the correlation of individual context parameters that is in scope of innovationand the existing focus groups are clustered into highly representative subunits or functionclusters are chosen and lead users are assigned for its key project planning, expert consulting andconceptualization.In our case, this is purely based on departments or entities correlation. Highly representativeunits can be assigned lead users based on their competence and expertise in the specific projectdomains related to software systems, artificial intelligence, augmented reality, and wirelesscommunications 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 ourmovement relative to our competitors and anticipate future moves by exploiting past patenttrends, technology road map in the future to plan incremental innovation and patents to blockcompetitors or kill innovation projects or obtain license based on the current trend and value ofthe idea.In our case, exploit the intellectual property of the present day‟s Nike IT team, R&D team or itspartners. Pick out the unused patents, publications and value them by mapping into the trendsthat Nike expects to bring into customer world. If the patents don‟t worth its competitiveadvantage as identified by the future trends, they can be licensed or donated to bring up theirimage. The areas for IP exploitation can also be identified from the correlation of individualwhat‟s and how‟s to select highly representative elements for research operations. 27
  29. 29. 5 Conclusion:A detailed analysis on innovation management layer of the Intellectual Capital framework wasmade in the first part of the paper by defining innovation, researching on the nature of thefashion industry, identifying the context for innovation in the customer and business processspace. After having identified the connectors enabling innovation or the context, these aretranslated into the house of innovation, a model which is a transpose of the house of qualitywhich can be used to measure the innovation gap in the fashion industry by listing down theidentified context parameters in both the axis of the matrix and evaluating the interrelationshipsbetween them and correlation within them. This was discussed in brief by considering Nike as anexample and how the identified gaps and relationships can help in innovation implementationthrough different layers. Thus this holistic approach starting from context identification toinnovation implementation takes us through a series of events to realize the importance ofspotting the relevant context at appropriate time and aligning them with organizationalintellectual capital based on existing and required capability and this effective restructuring fromtime to time makes an organization in any industry truly competitive as well as innovative. 28
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