Analysis of Tesco's Innovation Requirements and Capabilities in Retail

This report provides a detailed analysis of Tesco's innovation strategies within the context of the evolving retail industry. It begins with an executive summary and introduction, followed by an examination of the future of the retail industry in 2020 and beyond, highlighting trends such as SmartShop, fibre-based packaging, and the increasing role of Artificial Intelligence. The report then delves into Tesco's specific innovation requirements, emphasizing the potential of Virtual Reality (VR) and Augmented Reality (AR), Robotics and Automation Systems, Cognitive Computing, and AI-driven customer insights. Finally, it addresses how Tesco can build its future innovation capabilities, outlining strategies for implementation and integration of these technologies to maintain its competitive edge in the market. The report underscores the importance of adapting to technological advancements and customer-centric approaches to ensure sustained growth and success in the retail sector.

MANAGING
INNOVATION IN
BUSINESS

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Future of Retail Industry in 2020 and Beyond............................................................................1
Tesco's Innovation Requirements in 2020 and Beyond..............................................................3
Building Future Innovation Capabilities for Tesco.....................................................................5
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

EXECUTIVE SUMMARY
Innovation is a process of implementing changes within the existing products and
services of a company which is concerned with effective and unique solutions for problems. It is
one of the most effective and necessary elements required to drive business towards success and
fulfil the customers' demand in an appropriate manner. This report is based on Tesco Plc, which
is one of the biggest retail organisations in the UK. It is an extension to Course Work 1 which
provides insight on industrial overview, innovation history of Tesco and Retail industry in 2018.
The purpose of this report is to effectively analyse the future of retail industry in 2020
and beyond. To achieve this, analysis have been made on the major leading companies and their
anticipated future innovations which would effectively fulfil the future market demands of the
customers within the country.
Another agenda of this report was to analyse the innovation requirements of Tesco in
2020 and beyond. It was determined that Augmented and Virtual Reality, AI and customer
insight, Robotics and Automation Systems and Cognitive Computing are few major innovations
which could effectively fulfil the future requirements of Tesco in 2020 and beyond.
This report also effectively analyse and evaluate the future capabilities of Tesco. It was
analysed that the firm could build the same by using road map as an effective strategy. The
report evaluates each stage of this map to determine the most appropriate way in which Robotics
and Automation Systems could be implemented in Tesco as its future innovation.

INTRODUCTION
Innovation refers to practices and procedures that are related with modifying existing
offerings of an organisation in order enhance their importance and value among customers
(Acemoglu and et. al., 2018). This aspect relates with resolving unique and new requirements by
implementing better solutions. The report below is based on Tesco Plc, which is one of the
biggest merchandise and grocery retailers in the United Kingdom. The firm is widely recognised
in the country and is one of the best performers with consistent improvements in their sales
figure. According to in-depth analysis, the company is subjected to almost 2.2% increase in
quarterly sales year-on-year (Tesco is best performing big supermarket in latest sales figures,
2018), The firm is continuing to strengthen its customer base domestically as well as
internationally to retain its industrial position in retail industry of the UK. The purpose of this
report is to perform in-depth analysis of the the future of retail industry in 2020 and beyond. The
assignment will also evaluate Tesco's innovation requirements in the year 2020 and beyond.
Along with this, an explanation and insight on the future innovation capabilities of Tesco will
also be analysed.
MAIN BODY
Future of Retail Industry in 2020 and Beyond
The UK's retail industry has been subjected to a lot of innovations lately. Be it products
or processes, the industry is witnessing major advancements in terms of technology. With easy
and effective access to various advanced engineering equipments, this industry has been very
contributing in relation to introducing innovations (Frow and et. al., 2015).
The retail sector in the UK is gearing up for a post-Brexit scenario to cope up with
drastically changing customer behaviour. For 2020 and beyond, the industry has various trends
which would further shape the technological facet of this industry. With ongoing digitalisation
and enhancements in Information Technology, these trends include advancements in Robotics,
Artificial Intelligence as well as Automations. The Future of this industry in 2020 and beyond is
well indicated by various innovations which are mentioned below:
SmartShop and Scanning:
With digitalisation on the rise and further anticipated inclination of customers in Social
Media and Smartphones, the retail sector is also shifting its operations online. There are various
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mobile applications like “SmartShop App” which allow customers to execute online retailing.
For 2020 and beyond, Sainsbury's, which is one of the biggest market leaders in this sector, is
planning to continue this trend. Along with this SmartShop, the company is planning to develop
a technology which would completely eradicate the checkout procedure for customers. This new
technology would allow customers to further use their smartphones to conduct their payment
procedures for the products which they buy. However, currently this application under usage of
many Sainsbury's customers, yet, the new technology would further up the game in terms of
convenience for these buyers. The firm is relying on this effectively and with predictions of the
firm regarding contactless payments reaching almost $2 trillion by 2020, Sainsbury's will be
implementing this technology to enhance the convenience of its customers (Sainsbury's rolls out
scan and pay tech, 2019).
Fibre-based Packaging:
With ongoing concerns of environment, the trend is likely to be followed by the masses
in the year 2020 and beyond. The retail industry of the UK is focusing on implementing effective
waste management technologies and further eco-friendly ways to preserve the natural resources.
Innovative efforts are being made to effectively mitigate ways which degrade the environment.
One such effort is being made by Waitrose. The organisation is planning to modify its products
and packaging and ensuring glitter-free alternatives by 2020 (Waitrose targets glitter phase-out
by 2020, 2018). The vision of firm for future beyond 2020 is to ensure completely environmental
friendly practices. To achieve this, the firm is adopting fibre-based packaging across the
company's Italian ready meals range. This is a sustainable innovation which ensures
biodegradable materials to package the products. It is an opportunity for the industry in 2020 and
beyond to preserve environment and attract more customers by such healthy manner and
ensuring the safety of their well-being.
Artificial Intelligence:
The future of UK's retail industry is completely dependant upon advanced technology as
a medium to enhance the business processes and to attract customers effectively. Within the
industry, this technology has already started to penetrate deeper and more retailers are paving
way for this technology to enhance their effectiveness. According to various estimates, more
than 70% of retailers within the UK market are investing in AI for their future business practices
beyond 2020. The agenda for companies to use AI is to enhance their productivity and ensure
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better customer management in their retail stores and supermarkets. In addition to this, customers
are demanding more speed in their buying procedures and to effectively accomplish this, it is
imperative that advanced technology be used by UK retailers in this market (AI in retail: Survey
finds most UK retailers investing in AI customer service, 2019). This could serve as one of the
biggest opportunity for the retail industry in the future beyond 2020 in relation to speed, service
and safety. It would also be utilised to attract more customers by ensuring better management
and effectiveness in their shopping processes.
Tesco's Innovation Requirements in 2020 and Beyond
The future of retail industry holds a wide scope for companies to stay ahead in the game
of technology and improve the way they manage their businesses and ensure better customer
acquisition and retention. Tesco is one of the biggest names in retail and with such effective
performance through the years, it is imperative that the company ensures effective innovation in
the future to retail its market position. It is required for the firm to implement processes and
products that are technologically advanced in order to fulfil the market needs. Following are
various innovation requirements for Tesco in 2020 and beyond:
Virtual Reality (VR) and Augmented Reality (AR):
Two of the most technologically advanced and recognised innovations in recent times are
Virtual and Augmented Reality. These phenomena have been widely utilised by various retail
organisation and in a way is shaping up retail industry as well. There are various retail
companies which are relying heavily on usage of VR and AR concepts to attract their customers
and effectively manage to provide more effective services to them in future. This trend is
effective and will be growing in 2020 and beyond. Tesco could implement the same in their
stores to allow customers to hand-pick their products without physically be available at the store,
and make payments for the same later. This would provide convenience to buyers and Tesco
could offer them an access to all of its wide-range products to its distant customers as well.
Robotics and Automation Systems:
One of the major innovations which could enhance further contribute in Tesco's success
in the future is robotics. The firm has access to this technology and has been utilised on trial
basis in 2017 when the firm made its first delivery by robot. It was witnessed for the first time in
the UK market and made a mark of Tesco's capabilities (ROBOSHOP: Tesco makes UK’s first
delivery by ROBOT in trial that could change shopping forever, 2018). The era after 2020 would
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completely be inclined towards fine use of technology and Robotics and Automation Systems
could be used by the firm in their business processes which would increase its competence. The
company could employ Robots within their online stores with preset functioning which would
allow them to eradicate the possibility of human errors and training and development. This
would also allow them to attract customers by ensuring spontaneous assistance and accurate
information about the store and its products. In addition, robotics could also be used in parking
facilities as well in terms of parking slips and on security checking and billing counters.
Implementation of such innovation in business processes would allow the company to earn more
customer and profit in 2020 and beyond.
Cognitive Computing:
One of the major future innovations that could be adopted by companies of retail
industries in the UK is cognitive computing. This technology has the potential for Tesco to
ensure customer's privacy protection and revenue enhancements. It could effectively use this
advanced level of technology to reduce the complexity of their daily business processes
(Cognitive Computing Opportunities that can Make E-commerce Better, 2018). By effectively
implementing the same, the response of technological inputs within the company will be at par
with humans. This is a future requirement that is needed by Tesco to achieve its future
capabilities.
AI and customer insight:
Customer Management resources enable a company to manage each of their buyers and
their buying patterns in a way which effectively ensure retail companies in gaining a better
insight and provide aspects which lead to attraction of more customers. Beyond 2020, the retail
market will be completely customer-centric and companies will be expected to function in a way
in which they could fulfil diverse demands of these individuals. Customer management
technologies could be a game changer for Tesco in relation to offering products according to
their buying patterns. Within the UK market, customers prefer companies which uses Artificial
Intelligence to better manage their buyers (How Tesco is using AI to gain customer insight,
2018). AI could aid the firm in several ways in building effective customer management in the
future. It could be utilised by Tesco to track customer data which is essential to analyse the
products which are favoured by them. AI could also allow them to develop strategies to give
personalised services to these customers. In this manner, Tesco will be able to effectively
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manage each customers and build effective communication channels with each buyer to address
their personal queries. This would also satisfy the innovation requirement of Tesco beyond 2020.
Building Future Innovation Capabilities for Tesco
It is essential for a company to give insight to various future requirements to develop
strategies and modify its offerings in order to serve customers in a better way. Within the retail
organisation, there are various customers with varied and diversified demands. It will be
essential to fulfil these demands to effectively expand customer base and increase profitability.
Innovation has always been the key for organisations to achieve sustainable growth in terms of
products and processes. Tesco, within the UK retail industry has been a market leader for several
years and is consistent with terms of innovation and performance. The company, in order to fulfil
their future requirements must analyse their innovation capabilities and work on those to sustain
and grow in the market. Innovations would also aid the firm's struggle to stay ahead of the
competition with various other market leaders like Sainsbury's and Morrisons (Top 9 Tesco
Competitors, 2019). To achieve this and effectively build the firm's innovation capabilities,
Tesco is planning to use a road map. This strategy is used by companies to determine stages
which are required to be fulfilled in order to implement innovation within their organisation.
This strategy would provide an in-depth structure for Tesco to work upon and introduce various
new innovations in their organisation. The road map for organisation to implement
innovations is briefly discussed below:
Suggestion:
The prime step of every road map is to determine the most appropriate type of innovation
which could serve the firm for a foreseeable future. Beyond 2020, the UK retail sector is likely to
incline more towards the use of technology and it is imperative that Tesco uses the very
innovation that could aid it in building its capabilities and fulfil the innovation requirements of
the market. For this, the most apt innovation for Tesco could be Robotics and Automation
Systems.
Reason:
After deciding the innovation and producing effective suggestions, it is imperative to
back it up with strong and effective reasoning. It is a crucial step that decides whether the
innovation is fulfilling the requirements or not. For Robotics and Automation Systems, there is a
heavy reliance of the industry and market upon advanced technology and use of Artificial
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Intelligence to further enhance the outcome of their business processes and better customer
management. This further enhances the demand for Tesco to adopt advanced technology to be
implemented in their business processes and remove the possibility of ineffectiveness.
Impact of Change:
Modifications and changes are inevitable. These are required for a company to effectively
survive within the market, especially in retail where there are high customer demand and fierce
competition. There are various aspects which experience the impact of this change and are
required to be effectively managed to ensure smooth implementation of innovation. For Robotics
and Automation Systems, there are various areas within Tesco where the impact of this change
would be the most. These areas are described below: Research & Development: Major impacts of innovation are witnessed on a company's
R&D department. Since Tesco is already affiliated with Robotics, its Research &
Development sector will not be effected in a quite drastic way, however, the impact will
be evident (Biemans, 2018). This is because this department will be required to research
the ways in which Robotics and Automation Systems could be built, i.e., the resources
that would be required as well as the individuals and organisations that would fulfil the
skill gap require to develop and implement this system within the company. In addition, it
also requires to analyse further modifications within the infrastructure of the company to
support the manufacturing and distribution of these companies. Resources: Implementation of innovations are linked with necessary resources that are
required to be available with the firm to support the development of innovated offerings.
For Tesco, the firm requires various different types of resources as existing resources
might not fulfil the requirements seeing the advancements in technology from the time
when the organisation first used robots for delivery. The required resources would be
human resources, financial resources, AI software, mechanical equipments and
automation technology as well as Robotic Locomotion Systems to assist the company in
building Robotics and Automation Systems for the company (Exploring Robot
Locomotion Systems, 2018). Technical Skills: Another sector where the impact of change is witnessed is in the
required technical skills. It is essential that a certain level of competence, skill and
knowledge is possessed by the human resources to appropriately address each
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requirement needed to be in the innovation. For Robotics and Automation Systems, the
company is required to be equipped with individuals who are affiliated with AI and
Robotics and have effective knowledge about programming languages, mechanical tool
maintenance, arithmetic principles, physics and advanced automation systems (Robotics
Technician Career, 2018). Legal Aspects: Another impact of change for any company on its verge to introduce
innovation are compliance with the legal laws. These legal requirements are very crucial
for any company to abide by effectively in order to ensure government support in their
project. For Robotics and Automation Systems, the firm requires the company to
effectively comply with Employment and Labour Law, 2018 stating various norms
regarding the management of human resources within the company (Intellectual
Property, 2018). The firm requires this to effectively manage their employees in the most
productive manner. Another type of legal aspect which would be experiencing the impact
of change are the intellectual properties which are required be protected by the firm to
ensure effective proper and appropriate safety of the unique efforts of firm's employees
(Employment & Labour Law 2018, 2018). Cost of Change: For any change, it is essential for a firm to effectively analyse the
financial requirement for innovation which could be a contributing factor in deciding its
performance. It requires a company to gain an effective insight on each aspect associated
with the innovation to determine the cost of its development and implementation. For
Robotics and Automation Systems, The financial requirements and overall cost for Tesco
are mentioned below:
Expenses Amount (in £)
Research and Development 14500
Materials 291050
Human Resources 18400
Marketing 13600
Advertising 12500
TOTAL 350050
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Feasibility:
After determination of impact, the next stage requires them determine the feasibility of
the project. It is very important to anticipate the future of the process and its contribution to
satisfy the motive of introducing innovation in the first place. The future requires the company to
develop processes which ease the complexity of processes and appropriate customer
management. In addition to this, it would further mitigate the unnecessary cost additions for the
firm in future in regards with training and development of new employees. Hence, Robotics and
Automation Systems would be very much feasible for Tesco to be implemented in future.
Approval Process:
Perhaps the most crucial stage of the road map, it is imperative for managers at Tesco to
get approval of this innovation for further development. For this, the company is required to
schedule formal meetings with the Board of Directors, further proposing the innovation of
Robotics and Automation Systems describing all the aspects required to develop these systems
and possible impact it would have on the company and its profitability in the future.
Application of Change:
After acquiring the necessary approval from the Board members, companies are required
to effectively apply the change. This means, after the approval process, Tesco is required to
develop Robotics and Automation Systems by channelising their resources towards structural
and functional development of the same. It would require all the departments within the firm to
effectively integrate each department into implementation of innovation within the firm into
action.
Review of Change:
The final step of the road map requires companies to review the impact induced by their
innovations to determine the usefulness and necessary alterations to further remove the
limitations of the same and ensure maximum performance (Harhoff and Lakhani, 2016). Thus, it
is necessary for Tesco to review Robotics and Automation Systems to determine the areas that
needs further attention and working. Necessary alterations and modifications might be required
to make these systems fully functional and operating at maximum efficiency for a long period of
time without failing.
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CONCLUSION
Thus, it is concluded that innovation is required within a company and in industry to
effectively ensure accomplishment of current and anticipated future demands of the market. It is
determined that businesses in retail industry are very much ahead and ready to implement future
innovations. SmartShop and Scanning, Fibre-based Packaging and Artificial Intelligence are few
of the most promising innovations that would further shape up the retail industry in the year 2020
and beyond. In addition to this, Virtual Reality (VR) and Augmented Reality, Robotics and
Automation Systems, Cognitive Computing and AI and customer insight are various innovation
requirements for businesses in retail industry. Lastly, a road map is effective to determine
various stages which effectively assist businesses in implementation of innovation within
organisations.
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REFERENCES
Books and Journals
Acemoglu, D., and et. al., 2018. Innovation, reallocation, and growth. American Economic
Review. 108(11). pp.3450-91.
Biemans, W., 2018. Managing innovation within networks. Routledge.
Frow, P., and et. al., 2015. Managing co‐creation design: A strategic approach to
innovation. British Journal of Management. 26(3). pp.463-483.
Harhoff, D. and Lakhani, K.R. Eds., 2016. Revolutionizing innovation: Users, communities, and
open innovation. MIT Press.
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