Innovation Theories Applied: Ocado's Historical and Future Pathways

This report assesses Ocado, a British online supermarket, through the lens of innovation theories. It begins by describing innovation theories such as the Ten Types of Innovation, Incremental Innovation, Disruptive Innovation, and Diffusion of Innovation, and selects the Ten Types of Innovation as the most suitable for Ocado. The report then applies this theory to explain Ocado's historical development, focusing on its profit model, network, structure, processes, and product performance. It highlights Ocado's unique business model, its Ocado Smart Platform (OSP), its warehouse structure using AI-controlled robotics, and its core competence in OSP software. Finally, the report recommends future development pathways for Ocado, emphasizing the importance of introducing new products and services to expand market reach and improve operational efficiency. This analysis aims to provide insights into how Ocado can sustain growth and maintain a competitive edge in the online grocery market.

Ocado - Theories

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Describe the two innovation theories......................................................................................1
2. Apply the suitable innovation theory in context of organization to explain the historical
development.................................................................................................................................5
3. Apply selected theory for the recommendation to improve future pathway of their products
& services....................................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Managing innovation is a phrase which is also a subject of much discussion. Some
understand that in order to create more innovation, it the incremental innovation implies that it
cannot be operated, while others are firm advocates in building processes and procedures
(Albors-Garrigos, Igartua and Peiro, 2018). The truth isn't as clear cut as they would think it.
This assessment based on Ocado which is British based online supermarket that is the world’s
largest online grocery retailer. Unlike its major rivals, the organization has no retail chain and all
home deliveries orders will be done from their warehouses. On 21 July 2010, the firm was listed
on the London Stock Exchange, which is a part of the FTSE 100 Index. This report covers the
several topics such as innovation theories and selects the suitable one which implemented in
context of Ocado. Evaluate historical development and recommend for future improvement
which helps in proving growth in the market.
MAIN BODY
1. Describe the two innovation theories
Innovation is "a fresh concept, imaginative ideas, fresh imaginations in tool or process" in
its current context (Esmaeilpoorarabi, Yigitcanlar and Guaralda, 2018). Innovation is most
frequently seen as implementing innovative approaches that meet new conditions, indefinable
needs or current industry needs. There are several innovation theories which help the
organizations to improve their operational efficiency and further it helps in improving production
as well as performances. Some of theories are as follow:
Ten type of innovation:
Ten Types of Innovation is a guide for determining the different types of technologies the
business is effectively looking for. Based on work carried out by the innovation firm Doblin on
even more than 2000 invention ventures, whatever they discovered was that ultimately there are
ten different kinds a business can evolve which are as follow:
 Profit Model: It find a fresh way to turn deals from a company and other interest streams
into cash. Decent players show a clear knowledge of what consumers and users really
care from and where potential possibilities for sales or pricing may lie (Ljovkina,
Dusseault, Zaharova and Klochkov, 2019). Innovative profit models also contradict the
same old rules of a company about what to sell, whether to tax, or how to raise revenue.
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This is a major part of their authority where dominant income paradigm always goes
undisputed for centuries in most sectors.
 Network: Every organization will or can do anything by itself in today’s modern hyper-
connected business environment. Network inventions provide a means for businesses to
take full advantage of the systems, technology, products, platforms and labels of other
businesses nearly each and every aspect of a market. These developments ensure that a
company can draw on its own resources while utilising other people's skills and
properties (Shi and et.al., 2020). Innovations in the platform also help managers
to manage responsibility in creating new deals and projects. Such alliances can be
fleeting or permanent, and can be established by near friends or even rivals who are
steadfast.
 Structure: The aim of systemic developments is to arrange organization assets such as
physical, human, or intangible in creative ways that generate value. They can contain
anything from outstanding talent acquisition schemes to innovative Large Capital
machinery setups. Fixed costs and organizational functions of an enterprise could also be
enhanced by Framework Advancements like divisions such as R&D, IT and Human
Resources. Ideally, these advances can allow the company to retain talent by developing
extraordinarily competitive working conditions or cultivating a success quality that rivals
cannot equal.
 Process: It includes the activities and operations which generate the primary offers of an
enterprise (Naqshbandi, Tabche and Choudhary, 2019). To evolve here needs a radical
transition from "business as normal" that encourages the organization to leverage new
resources, to work effectively, to respond rapidly and to generate market-leading
margins. Process innovations also form a company's core level of competence and may
involve licensed or patented solutions that offer advantages over decades or centuries.
Ideally they are the "secret sauce" users 're using that rivals can't easily reproduce.
 Product Performance: Innovations in product performance which address the value,
attributes and reliability of a company’s products and services. This form of creativity
includes both brand new products and enhancements and brand extension that add
considerable value. Far too many people confuse the amount of creativity for Product
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Quality. It's added contribution, but it's also worth noting that it is just one of the Ten
Invention Forms and it's often the simplest to replicate for rivals.
 Product Software: Invention in the product system is embedded in the way individual
goods and services link or combine together just to create a stable and flexible network.
This is nurtured by standardization, modularity, convergence and other ways to build
useful links between services previously distinct and distant (Nicholls, 2018). Innovations
in the marketing environment help organizations to create environments that excite and
attract consumers, and safeguard against rivals.
 Service: Innovation in service enhances and improves an offer’s efficiency, output and
evident benefit (Erdogan, Rondi and De Massis, 2020). They make products easy to buy,
use and appreciate otherwise they expose features and capabilities that consumers may
overlook and they repair consumer experience challenges and smooth, hard times.
They turn only boring and mediocre goods into engaging offerings that consumers are
continually coming back for.
 Channel: It includes all the ways to communicate with their clients and users
which offerings to the company. Although e-commerce has risen in recent years as a
major power, traditional channels like retail stores still are important especially when it
comes to developing innovative features. Their purpose is to ensure that consumers with
minimum hassle and expense and full enjoyment will buy what they want, where or how
they really want.
 Brand: Brand advances help ensure that clients and users to understand recall and
recommend their products over rivals or alternatives. Good ones refine a "promise" that
invites customers and transmits a distinct personality (Schoemaker, Heaton and Teece,
2018). Brand inventions will turn goods into valued products and add meaning, purpose,
and importance to the offers and industry.
 Customer Experience: Customer Experience technologies are mostly about knowing
consumers and users' desires and then using those experiences to build concrete
interactions among them and the business. Excellent innovations in customer experience
provide wide opportunities for experimentation and inspire people to discover ways of
making aspects of the experiences more fun, rewarding, enjoyable even fantastic.
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Above discussed innovation theory can be adopted by the Ocado Company which helps them
to introduce new products & services in order to expand their reach in the market for the
customers (Prange and Schlegelmilch, 2018). It also provides the great exposure where
Ocado operational efficiency as well as effectiveness increases.
Incremental innovation:
The most popular method is Incremental Innovation. It takes the current technologies and
improves consumer loyalty through improving in features, changes in architecture, etc. within
their existing products & services. Nearly all businesses are dedicated to incremental
advancement in one way or another. This innovation includes adding new features and even
harmful particles which removed in existing products or services. Even minor updates to
customer experience could even contribute positively or maximize market demand for products
& services. This innovation theory can be followed by the Ocado organizations through
improving their products & services features which offer more benefits or helps in attracting
more customers.
Disruptive innovation:
The theory of disruptive innovation is a strong way to think regarding innovation-driven
development. The theory of disruption is in trouble of being a victim of its own success. Despite
widespread dissemination, the central principles of the concept have also been largely
misunderstood as well as its fundamental tenets have also been misused (Ratten, Ramirez-
Pasillas and Lundberg, 2019). Moreover, the success of the initial formulation seems to have
overwhelmed the important adjustments in the theory throughout the last 20 years. As a
consequence, the hypothesis is often blamed for flaws which have already been resolved.
This innovation theory aims to develop their goods and services with the most demanding
(and typically most profitable) consumers, exceeds the needs of some segments and avoids the
needs of others. Entrants that become disruptive start by effectively targeting certain ignored
segments, gaining a foothold by providing more acceptable usability and frequently at a lower
price. This innovation theory can helps the Ocado Company to focus on their most demanded
products & services which automatically helps in maximising sales or profitability.
Diffusion of innovation:
The diffusion of innovation is the mechanism through which new technologies are (or not)
embraced by their targeted customers. It helps designers and marketers to analyse why certain
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superior products are popular when some superior services are not available. This innovation
theory can helps the Ocado Company to identify popular products and target the audiences for it
to boost their sales. It includes the five decision innovation process such as Knowledge,
persuasion, decision, implementation and confirmation.
2. Apply the suitable innovation theory in context of organization to explain the historical
development
Ten Types of Innovation is selected for Ocado Company to implementation in their
organizations can identify the ways, where they can expand their business. As per Ocado’s
performance, implementation of this theory will be discussed below:
Profit Model: Business model of Ocado is to make money through delivering products
directly to the customers from their warehouses. It is an online supermarket grocery store which
does not have any retail outlet or offline stores where customers can go buy goods.
Network: Ocado Organization connects with their customers through online channel
which create value for them. Ocado’s Smart Platform (OSP) is the top class electronic grocery
business solutions (Radziwon and Bogers, 2019). OSP integrates the patented end to end
software applications of Ocado Group with our physical satisfaction assets, facilitating grocery
retailers to obtain and increase market share in the biggest retail platform in the world.
Structure: Ocado's warehouses are constructed inside with a gigantic 3D grid structure,
where grocery stores are kept in containers. On top of that, robotics (more than 1,000 per
warehouse) organizes swarm-like actions to capture and transfer the cells. The robots pull the
crates up from off the grid into the internal and carry them to collectors so that they can load the
goods inside the crates into deliveries. Afterwards they push the crate back onto the grid. The
robots will work together around 'search' for the crates, pushing the crates out of the way to
collect one hidden in a stack below (Kremer, Villamor and Aguinis, 2019). Using Artificial
Intelligence, the motion of the robotics and the storage position of the crates is controlled and
configured by a centralized 'control network.'
Process: Core competence of the Ocado is OSP software which is very popular among the
retail business. This innovation is something Ocado offers to stores like Marks & Spencer or
Kroger, firms who choose to go online but need a third party to introduce a distribution process
for them. By using this process, Ocado’s competitors can increases their market in the
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supermarket sector or maximise their operational efficiency though implementing this
technology in their business operations.
Product Performance: There are several features which make Ocado’s products different
from their competitors such as OSP software and its technology which is demanded in the
market by large competitors such as Morrison and Mark & Spenser’s. Ocado Software, an Ocado
Group company, develops much of Ocado's in-house technologies, including but not limited
with website and mobile applications, automated logistics and robots which is artificial learning-
based fraud identification and customer service systems and forecasting and routing
systems. They identify themselves as experts in automation and robotics, big data, software,
cloud and app development. Travelling around 31 and 37 mile a day, the robotics mix and match
constantly, guided by an artificial intelligence driven central machine. On average, it takes
around 5 minutes to take a 50-item order and they further hand over to human employees for
packaging in bags. Such technologies help the Ocado to offer distinguished products & services
or improve their performance in the market to get growth or enhance their performances.
Product system: OSP software of Ocado help the organization to offer competitive
services which helps in defend against competitors (Saiz-Alvarez, 2019). This system help the
organization to distinguish their products & services with competitors which attract large number
of customers and force their competitors as well to implement such kind of technology fort the
growth purpose.
Service: In the United Kingdom, the e-tailer has 721,000 active clients around 14 per cent
of the UK online retail market. The portion of same worldwide market dropped to 1%. They will
have to deliver food fast, consistently and at an appealing price point to get consumers to use the
site. Even foodstuffs are difficult to deal with, they may require extra treatment, and they have to
be stored in different temperatures zones and so on. For example: Amazon might stuff booked
vans and not give it another thought, Ocado had to expect that whenever a customer bought a lot
of bananas, they will not get crushed under cartons. The founders of Ocado wanted a modern
program that none developed before it, which is e-tailing groceries service. They tried to come
up with in-house technologies for it: a new company was born, called Ocado Technologies.
Channel: Ocado chose the online channel to deliver their goods and if consumers have any
issues regarding their services, they can contact them through their customer care services. There
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are no physical stores only warehouses available from where they accept customer’s orders and
directly delivered to the customer’s door steps.
Brand: Ocado has made some brand building with a Channel 5 Big Brother partnership
and advertising in OK, and The Express Daily (Tidd and Bessant, 2018). It has already begun to
do some tactical campaigns outside the shops of competitors, but they are low in size and
unlikely to attract the broader public's eye. Ocado would seem happy to just tick along, utilizing
marketing to gain new customers without trying to set the market alight for online groceries. In a
call with journalists early this week Steiner told Marketing Week that his new campaign plan
"will continue" next year. There is no doubt that it succeeds as its market share is rising and its
consumer growth is up 40% annually, while total users have grown to 385,000, up from 355,000
in 2012.
Customer Experience: Ocado offer huge satisfactory customer services which can’t meet
by their competitors. They earlier invested in customer service and accuracy which left rivals in
its wake. It is also observed that, customer’s feedback for the products of Ocado is very positive
and it indicates that people love their products.
Overall performance of the Ocado Company is good and people also like their products
and customers services which they offer them. It is also analysed that, company should change
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their marketing strategy which helps them to attract more people and expand their reach which is
beneficial for company’s growth.
In addition, Ocado Company can also use diffusion of innovation theory and it helps the
organization to understand that how buyers response to the new innovation. For example: Ocado
only offer online facility to shop but, if they open their retail stores then it will maximise their
sales over the period (Hillnera and de Leónb, 2018). For the introduction of new innovative idea
company need to cross such phrases such as innovator, early adopters, early majority, late
majority and laggards. With the use of this model, business is able to identify that how much
marketing material they required in every stage.
3. Apply selected theory for the recommendation to improve future pathway of their products &
services
Ocado deliver grocery items to the customer’s door steps and accepting only online orders
and it does not have any offline stores such as retails outlets which their competitors has such as
Tesco, Aldi, etc. In addition, company not highly focused on their marketing strategy which is a
weak point for them. They need to improve their marketing strategy to attract large number of
people or make their brand aware in the market which will be the greatest opportunity for them.
In order to get high competition in the market, Ocado need to formulate strategy regarding
opening offline store which provide them competitive advantages in the marketplace. Offline
store not only maximise sales volume but also improve the brand image or maximise their
customer base. This innovation idea helps the organization to maximise their production as well
as profitability. In addition, in order to implement this innovation company should adopt
diffusion of innovation model for better results.
In the 2nd quarter of the year, Ocado's revenues grew by 40 percent compared with a 10.3
percent increase in the first quarter to March 1, due to corona virus pandemic. Recent times have
seen the company rapidly change its product to satisfy increasing demand, and scale up capacity.
Ocado announced an improvement in warehouse volume in London, from 80,000 to 110,000
deliveries per week. Likewise, competitor Amazon also reported a rise of more than 60 percent
in its online buying capacity (Wiegmann, 2019). Today more users do their internet shopping to
prevent access to the virus. Lockdown initiatives have also had a variety of businesses being
allowed to shut, allowing the online food service to expand more. Ocado aims to intensify the
long-term move to online food buying, following the wake of the Covid-19 crisis, and will help
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to have its revenues rise. The company posted its fast-growing revenue to its supermarket
customers as well as to third-party retailers licensing their software and fulfilment alternatives to
build their own e-commerce business.
There are several recommendations are suggested to the Ocado Company which helps in
maximising their operational efficiency as well as effectiveness. Those are as follow:
 Digital Marketing: Company should focus on their marketing strategy to increase their
brand awareness. Ocado Company need to be more focused on social media sites,
promotions and advertisement on different platforms. In this pandemic situation, people
are avoiding to go out for grocery shopping due to virus spread, so it is the great
opportunity to increase their revenue and build their brand image among the customers
through providing quality customer services.
 Loyalty programs: They also have to conduct loyalty programs and offer several
discounts to their regular customers which help in making them loyal for this brand. In
addition, Ocado know that how much loyal customers they have or how much it increases
every year, so they formulate their strategies accordingly.
 Focus on expansion strategy: In 2019, Ocado recently sold their half UK supermarket
business to Marks & Spencer (Wyss and Post, 2018). The contract ensures that M&S will
be able to provide an electronic food delivery option, while Ocado consumers will be
able to select from over 6,500 M&S items while buying alongside the store's own
branded and label goods on Ocado.com. In the last two years, the internet store has turned
itself from a domestic food distribution service into a state-of-the-art global retail services
supplier. Ocado’s CEO, Tim Steiner, has safeguarded the company's future by selling its
operating systems and robotic systems to other grocery store chains around the world,
building partnerships with Kroger in U.S and hotel in France.
 Increase demand in the lockdown period: Overall demand of grocery items increases
in the UK, so mangers of Ocado need to formulate strategies that how they can fulfil the
demand of groceries. It is the greatest opportunity for them to make strong their customer
base or maximise it revenue as well.
CONCLUSION
From the above discussion it has been concluded that innovation is very essential for the
organizations to expand their business and make people connected with their products and
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services. There are several innovations techniques which help the organizations to improve their
operational efficiency as well as effectiveness. Innovation can be done in several types where
business can introduce new product in the market or launch existing products & services with
some additional features which create value for the company. Ten types innovation theory help
the management to identify their performance and in which sections they can improve their
performance through formulating strategies or maximise their overall performance. With the help
of effective implementation of such innovation theory, business able to expand their products &
services reach for the customers. It also helps in recommending such improvement which
required addressing for better performance and better results.
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