Innovation management in fashion industry

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Context identification and Intellectual Capital mapping for

implementing ‘Innovation’ with House of Innovation model in

fashion industry

K6223 - Intellectual Capital Management

Term Paper

Instructor: Ravishankar Sharma

Submitted By

AO XIAOFENG (G1101735L)

THANGAVELU MUTHU KUMAAR (G1101765E)

WANG YANLIN (G1101329D)

XU CHENYU (G1101769D)

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Team members Contribution Peer Evaluation score

Thangavelu Muthu Kumaar Context identification in

customer innovation

space with technologies

and House of Innovation

+

Wang Yan Lin

Case study in customer

innovation space with

technologies

=

Xu Chen Yu

Exploiting Business

Process Space with

Strategies

-

Ao Xiaofeng

Research in customer and

market trends, Innovative

strategies of branding and

manufacturing

=

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Abstract:

More and more, today‟s competitive and customer centric climate requires the organization to

drive the process of innovation in 360 degrees - to embed the seeds of creativity that could

absolutely transform a business – the way it does. Creativity arises from a blended environment

of learning and sharing where there is always a room for processing permutations and

combinations. The emphasis shift from individual‟s innovative capability to organization‟s

capability has brought about revolutionary inventions in the recent decade and the organizations

have realized that human brains and their cognition can be attributed as the best tools to innovate

but they need to be aligned with a unique culture which fosters them to think beyond and context

sensible, to cultivate the spirit and excitement in risking stakes on a well grounded innovation

proposition. After identifying the environment and tools for innovation, the challenge clearly lies

in identifying the context. This paper attempts to determine the context for innovation and

identifying the gaps and there after exploiting the organization‟s intellectual capital to implement

innovation for bridging the gap. The context is analyzed based on two perspectives – one in the

customer perspective and the other in the business process perspective. They collectively derive

innovative business solutions performing across the different functional layers of an enterprise –

Strategic and Operational where technology and structural assets support the entire process of

innovation to lean upon for communication, visualization and interpretation processes. A model

or tool, “House of Innovation” has been developed to suggest action based on the relationship

analysis between the context factors and hence investigate upon the specificity of innovation gap,

innovation portfolio mix, structural changes, creating focus groups with lead users and

implementing the idea with a methodology based on the interrelationships and correlations of the

key innovation context factors (What‟s and How‟s).

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Table of Contents

Context identification and Intellectual Capital mapping for implementing

‘Innovation’ with House of Innovation model in fashion industry 0

1 Introduction .............................................................................................................................. 4

2 Analysing the Innovation Space in Fashion Industry .............................................................. 4

2.1 „Fashion‟ Innovation: - Focal shift from delivery excellence to innovation ................. 5

3 Plotting the focal points in the innovation space ..................................................................... 6

3.1 Exploiting the Customer Innovation Space with technology ........................................... 6

3.1.1 Customer what‟s ................................................................................................. 6

3.1.2 Technological How‟s .......................................................................................... 8

3.2 Exploiting Business Process Space with Strategy ....................................................... 12

3.2.1 Customer what‟s ............................................................................................... 12

3.2.2 Strategic How‟s ................................................................................................. 14

4 House of Innovation:.............................................................................................................. 20

4.1 Steps in building the House of Innovation: ................................................................. 21

4.2 Nike‟s House of Innovation ........................................................................................ 21

4.3 Acting upon information for insights - innovation implementation: .......................... 23

4.3.1 Kick off or gap analysis .................................................................................... 24

4.3.2 Creating innovation strategies ........................................................................... 25

4.3.3 Innovation portfolio mix ................................................................................... 25

4.3.4 Structural Changes ............................................................................................ 26

4.3.5 Operating with ideas – setting idea banks and right culture ............................. 26

4.3.6 Implementing Lead User Method: .................................................................... 27

4.3.7 Exploiting technology and intellectual property: .............................................. 27

5 Conclusion: ............................................................................................................................ 28

6 References: ............................................................................................................................. 29

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1 Introduction

As the famous quote goes - “You can’t connect the dots looking forward; you can only connect

them looking backwards” (Jobs, 2005), one of the successful innovators of all time seems to be

the highly relevant innovation formula today. The dots here symbolize “learning” which can

stimulate innovation in X context and Y Time frame. This to some extent makes the solution

predictable. Continuous learning and context identification for its application can be the

substitutes in the above formula. Assuming that most organizations have already adopted the

culture of continuous learning, the most difficult problem to be solved is to identify the

appropriate context for innovation implementation. This paper takes you through a systematic

approach of solving this problem taking fashion industry as the business domain.

2 Analysing the Innovation Space in Fashion Industry

Fashion industry, in general serves to capture the currently popular style or practices and

manufacture or invent products based on it, especially in clothing, foot wear or accessories (bags,

sun glasses, wrist watches, wrist/hair bands, tattoos and so on). The nature of this industry is

quite different from many product-manufacturing industries like the ones making an electronic

device or an automobile. This can be attributed to the factors below:

Short life-cycles – A fashion product is often ephemeral, designed to capture the mood

of the moment, event or place. As a consequence, the sales period tend to be very short

and seasonal, normally measured in months or even weeks.

High volatility – Demand for these products is rarely stable or linear. It can be

influenced by the vagaries of weather, films, or even pop stars and footballers.

Low predictability – The highly volatile nature of the product makes it extremely

difficult to forecast the market‟s demand with any accuracy over a time frame.

High impulse purchasing –Most purchase decisions of consumers for these products are

made at the point of display with its first impression unless the product is extraordinarily

costly. In other words, the shopper when confronted with the product is stimulated to buy

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it and hence there is a critical need for “Superior Product Visualization both online and

on-shop” which allows the consumers to research and try out as much as products as

possible in a short time frame at his comfort. Promotions should be well tailored to

capture the consumer‟s attention and good will.

‘Seize the moment’ shopping style - Shopping is no longer an intensive activity which

takes a day out in a shop, but it is and it will be more of an experience that is embedded

in your routine activities where you will have the ability to shop on the fly, on the

moment you see, may it be a movie or a fashion show or a soccer match.

Attention to detail – The changing consumer trend need to be analyzed and predicted at

the right moment to avoid intensive losses. More and more significance is vested upon

unveiling the minute details of the consumer environment in terms of geography,

heritage, changing needs and preferences, reasons behind, local culture focus, shift and so

on.

2.1 ‘Fashion’ Innovation: - Focal shift from delivery excellence to innovation

The above analysis on the nature of the industry brings out realization on the focus of fashion

industry that is not centred at delivery excellence or quality, but a different way of thinking itself

in the form of innovation which is any creative, actionable idea that can result in a superior

product or service and can enhance the revenues to the company and good will of the customers.

The ideas to start with, can be entirely from roots or an optimized hybrid form of existing

structure. Both have a significant role to play in fashion industry due to its hard to exploit,

versatile innovation space.

This space need to have more bias on customer‟s comfort and good will as they decide the trend

unlike many other manufacturing industries where the prime focus is not on the change, but it is

productivity. However there need to be a strategic business alignment behind every change

executed for the customers.

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3 Plotting the focal points in the innovation space

This part aims at narrowing down the view of the broad space of innovation into distinct focal

points in the customer world whose implementation needs are to be aligned with the specific

strategic and operational business processes in the organizational space. The overlapping part of

the two spaces derives the context for innovation.

3.1 Exploiting the Customer Innovation Space with technology

Below are the identified focal points biased towards customers that can be explored upon for

implementing innovation in fashion industry.

3.1.1 Customer what’s

Embedded Product Awareness in real world experiences

As fashion products tend to reflect the trend of people themselves, they ideally should not only

be targeted for a standalone showroom purchase. Instead the focus should be on reflecting the

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product in people‟s day to day routine activities and gain attention to the product as well as the

brand. Cross selling and Sponsoring an event or team or person could be common examples.

Ability to research wide and fast on products

A fashion product, particularly when that is really expensive needs a significant research by the

consumers before buying. The traditional mode of research is either online or on-shop.

Reading reviews, tweets about the product, comparing one or more products in the product

websites or social network sites could be some common examples.

Superior Product Visualization

A customer when confronted with the fashion product must be stimulated to purchase it. There is

an increasing need to satisfy the customers in a short time frame by making them try as much

products as possible.

Three dimensional views of products in the online stores and digital mirrors in interactive

dressing rooms of Prada, New York, Nike ID customization in Nike Stores, London could be

some interesting examples.

Instantaneous Product Purchase

Shopping a product need to be instantaneous with a high degree of synchronization with the

purchasing context and medium of the customer to recommend the highly relevant products at

the right time and make the purchase process easier.

Online and on-store shopping with Personal Digital Assistants (PDAs) and Radio Frequency

Identification (RFID) could be some examples.

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Personalization

The products are no longer designed generic addressing a common audience throughout the

world. Rather they are highly personalized targeting the specific customers to satisfy their needs

in terms of socio –demography, geography and psychology.

Material Science Engineering, embedded electronics for core product design, Data mining and

analytics, Customer Relationship Management software and socialization in web2.0 for customer

focussed design are the channels for trend realization for consequent purchases of a person or a

product itself.

Nike with Apple has released a sport kit, having an electronic sensor under the inner sole of a

new Nike running shoe which talks to a small wireless receiver in Apple's iPod nano music

player and the running data can be transferred to mac book or I phone and can be analyzed.

Nike+, Shox series can absorb impact from heel strike while running and cause "spring back" to

add more power to a runner's stride and provide superior shock absorption with high-tech elastic

foam. Nike claims that the hollowed-out columns combined with a Pebax dispersion plate gives

such a ride. These are some examples of personalization.

3.1.2 Technological How’s

· Media (Online and television media)

· Software (Instantaneous Communication, Customer Intelligence, Artificial Intelligence)

· Augmented Reality (Interactive media - online or on shop)

· Electronics and Information processing devices (PDAs, RFIDs )

Exploiting the value and technological constructs of these how‟s has given rise to a next

generation model of fashion product shopping.

Virtual Theatres, Fashion Shows, Games, TV shows

Most of these features do not have a predominant form as of now. But they need to take lead in

consideration with the ongoing trends of computing and information technology today.

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They can be attributed mostly to Augmented Reality, a technique to simulate the object based

real world environment with computer generated sensory input such as sound, graphics, video

and so on (Lu & Smith, 2008), Wireless Communication advancements and partly due to

artificial Intelligence methods for intelligent interaction, simulation and synchronization of the

different environments or parties (Yang et al, 2009).

Virtual Theatres and games can be online projection of a movie/ TV show or a gaming theatre to

attract customers by a fun filled experience enabling a virtual hang out with friends and play with

instant chats and video packets and also create product and brand awareness and initiate product

purchase with the sequences of the movie, TV show or game being streamed in the fashion

product‟s website or in a restricted box of any social networking sites like Facebook or Google

Plus by partnering and sharing profits with the real world and online media corporations.

Online Fashion shows to save large sum of time and efforts and stimulate the passion for the

brand in the existing customers and iconic models by easy accessible virtual participation or to

create awareness among the prospective customers who can act as virtual audience where in high

tech motion capturing cameras and Augmented Reality based streaming can help in making a

perfect real world simulation (Yang et al, 2009).

All these virtual experiences in a highly computed environment aim at pausing or saving the

fashion product during the course of experience and initiate product purchase immediately or at a

later point.

Real time Value Co-creation in Web2.0

The information view on internet is shifting from an open to closed space model where there is

increased usefulness and reliability of content. This is carried out by increasingly popular actions

like reading, subscribing, and rating, tagging, commenting, linking, recommending, moderating

and owning such closed group or communities where there can be real time purchase stories

which has a locality or relationship network boundary . Fashion products have most of the times

carried exciting stories spun in a social network. This information shared is critical for both

customers to base their purchase decisions and product designers to base their subsequent

products.

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Personal context and real world object based product recommendation

Customer profiles as captured by CRM software, Data mining tools predict reliable patterns of

recommendation or to an extent attempts to personalize the customer with a specific product

circle (Mu, Zheng, Cao & Cao, 2011).

Innovation part lies in connecting the common personalization patterns with intelligent personal

context matching algorithms which tries to derive a recommendation pattern by acting upon his

previous patterns, profile information, GPS data and specific events happening in his

environment which directly or indirectly be related to fashion products (Schwartz, 2011). The

augmented reality, Artificial Intelligence capabilities, programmable sensors and micro

electronics - all together can attempt to recognize real world objects in three dimensions and

accurate surface level details can be transmitted over network and matched with similar patterns

of real world object, in our case, fashion products for intelligent recommendation (Medina,

García-Cervigón, Carazo & Costas, 2010) .

Virtual trial rooms and Interactive digital mirrors

This is the most fruitful innovation in the fashion industry where most people would like to try as

much items as possible before deciding one. This invention is already in an advanced stage

which can be extended with more capabilities based on a cost effective process design. This

should allow the customers to visualize and try the products virtually across all geographies and

choose the best fit. This effort from the product seller will definitely satisfy customers three fold

with its emotional touch on a person who actually gets what he wanted after extensive try, no

matter where he is (Mu et al, 2011). Significant employee reduction in the retail shops by

automating the process of suggesting products with few facilitators in place. The customer can

try a variety of products and its absolute fitting in all angles with just a click and indeed saves a

lot of time and manual effort in product selection.

Shopping process synchronization with PDAs and RFIDs

In recent years, typical Personal Digital Assistants(PDAs) manufactured by Apple, Blackberry,

Amazon, Samsung and others have been evolving as smart Ubiquitous Computing devices with

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advanced information processing and transmitting capabilities. They can aid in instantaneous real

world transactions. Taking advantage of the little Personal Digital Assistants, Zara becomes one

of the outstanding clothes giant in fashion industry in a short time. In each Zara‟s store around

the world, the sellers have worked with a PDA that can help them collect and capture the original

data from customers. For instance, when a customer walks into the store, the seller is willing to

chat with the customers by a series of questions such as what colour he/she likes, V-neck or

round neck, and long pattern or short and so on. Then according to the description of the

customer, recommendation could be given. Most importantly, at the same time, the data and

feedback is input to the PDA that links to the POS (Point of Sale) system (Moon & Ngai, 2008).

That is to say, the data is transmitted immediately to the corporation that can be accessed and

utilized by those who need. Therefore, the designers could arrange a heated discussion about the

trend-spotting as soon as possible. And finally they were able to conclude that which style is

popular currently, why the sort of style unsold and what kind of pattern can satisfy customers?

These data gathering stimulate idea creation and help the designers make plans of the lasted

styles based on the feedback rather than hunches and guesswork (Gallaugher, 2008).

RFIDs are Radio Frequency Identification devices which use radio waves to transmit data from

an electronic tag on the products over a certain range of operating distance. They are used in

inventories of retail stores to track the inflow and outflow of products. Similar popular product

identification principles are bar codes and QR codes both which are restricted to its static

location. In Prada‟s retail stores, each item for sale is spot with a unique RFID tag. When the

customers try on the garments, the dressing room will automatically recognize the items and

transmit the item information with wireless connectivity and then show the availability of the

similar patterns, colours from the RFID display screens. Moreover, the RFID cards which can

store customers‟ personal information and history preferences are provided. When the clients

with these cards enter the shops, the salesperson are able to give them tailor-made service or

promotions immediately based on the data in the cards (Moon & Ngai, 2008).

Domestic PDAs facilitate online product research through browsing websites and social

networks. If a software installed in the PDA can capture the interests or skimmed results of his

online product research and when the customer walks down to the shop again he can be directed

to his preferences with an in house retail store map as well as notify the unavailable products and

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suggest alternatives based on his online search pattern or previous transactions using the product

RFIDs. RFIDs/ Bar/QC codes interpreted by PDAs can give way to instant semantic analysis

over the internet or retailer data house for specific instant functions like comparisons,

descriptions, promotions and next stock availability in the near future (Gallaugher, 2008). Thus

synchronizing the online and on-shop experience can give way to the customers in selecting the

desired products faster with minimal effort and enhances control of purchase of a specific

product with details – what, when, where and how.

3.2 Exploiting Business Process Space with Strategy

Below are the identified focal points aligned towards business processes that can be explored

upon for implementing innovation in fashion industry.

3.2.1 Customer what’s

Brand for revealing personality

Currently customers of younger generation are demanding not only style and quality but also the

products to reveal the personalities and characters of their own. That is why more and more

customers want to know about the brand culture and connotation (Rowley, 2009).

Demand for Customization

Result from mass production, homogenization is making part of the fashion market less colourful

(Michon, Yu, Smith, & Chebat, 2007).Younger generation has a higher demand on customized

and personalized apparel products.

Shopping experience

More and more customers are concerned about the experience of shopping (Rowley, 2009). Store

design and service become important factors of facilitating shopping behaviours. Some of the

customers considered that the creative and unusual design will keep them staying longer in the

store (Lin & Liang, 2011). On the other hand some other customers want to have different ways

of shopping, for the reason of lack of time for shopping in stores (Kim, Kim & Lennon, 2011).

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They not only want to have their apparel products bought through online retails and delivered to

their house, but also want to have similar service as shopping in the real stores.

When discussing shopping experience, “out-of-stock” is a controversial issue. Obviously, it

shows that the sales of products are good. However, it is quite annoying for customer who comes

to the stores and find out what they want to buy is unavailable and this wrecks the relationship

between customers and corporations (Michon et al, 2007).

Demand for Cost-Performance

In the fashion industry, if the product does not reveal its differentiation, it makes no difference

with other general merchandise. “This trend is driven by the growing importance of providing

customer choice in competitive settings (Da Silveira, 1998)”. Currently, the customers not only

require the good quality of product, but also demand the new function and performance. And the

customers are not just staying in the basic demand level, along with the improvement of the

living standards; customers also pay more and more attention to the material of the products,

whether it is healthy or environmental protection.

Marketing for socialization

“If marketing strategy is to be implemented effectively, it must be thought of in a total-

organization, systemic way” (McTavish, 1989). Customer behaviour and market environment is

constantly changing. Companies should readjust their marketing model to face more customer

base, more media and more distribution channels. With the development of the network, network

marketing is more and more popular. Companies can use media, advertisement, and promotional

events effectively to market their new products.

Work environment for employees

In the fashion industry, +innovation is very important, while innovation comes from new

inspiration, good atmosphere can arouse more inspiration. “The lack of sufficient leadership and

coordination can stymie successful innovation” (Pitta, 2008).The team with great vitality and

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creative power can encourage employees to research new product, design various styles to meet

their customers changing demands.

3.2.2 Strategic How’s

Differentiate from Competitors--Design and Material of Product

“Product innovation is the development and introduction of a new product to the market or the

modification of existing products in terms of function, quality consistency, or appearance” (Liao

et al, 2007). They can create more value for the company and gain more market share.

The most of new items because of seasonal changes are characterized by a great deal of new

elements in comparison to previous products (Alexander, 2007). It is said that a new fashion is

an innovation. The factors of the product innovation include design, appearance, function and

material to gain competitive advantage.

Such as in the Nike Company, they pay attention to the innovation of design and material. Some

design inspiration of the designer comes from the animals. Air Jordan XIX, one style of the Nike

shoes, the concept is said to have been inspired by one of the most poisonous snake in Africa.

The shoes can protect instep from abrasion because of the deformation of its surface. In the

material aspect, Nike emphasizes sustainable development process and tries to avoid using glue,

adhesives, plastic and other toxic chemicals during the whole design process. Nike Air and Nike

Shox are both air-cushion sports shoes and their design is advanced all over the world. Product

with high quality and high performance will attract more customers and provide more choices.

Achieve cost leadership – Global outsourcing

It has been proved that the cost savings through outsourcing could be enormous (Kumar & Arbi,

2006). The cost savings through outsourcing in the low-cost labour countries in Asia for the

apparel manufacturer supply chain can be huge. Outsourcing is not a solution to short-term

market demands problems, but might be an enormous cost-saver for any large quantity orders.

In the past decades, many apparel manufacturers, especially those based in Europe and North

America, have moved their operations to different countries. It is rather obvious that the main

financial reasons behind this include attractive tax policies and cheap labour costs.

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One of the key to success in fashion industry is: having the right product in the right place at the

right time at the right price (Pang, 2004). While applying outsourcing strategies in fashion

industry, several factors are essentially needed to be considered: Logistics, IT infrastructure,

Long-term relationships and Use of simulation for assessment (Kumar & Arbi, 2006). For

instance, the UPS – Supply Chain Solution (UPS-SCS), which is one of the third party logistic

services, is well known for its flexibility, small time and money consuming. The UPS–SCS is

built especially for the products from different manufacturers and intended for the same retailer,

which is one of the consequences of global outsourcing (Pang, 2004). UPS-SCS is able to

provide a faster transporting and disseminating of products, which insures a better inventory

management for both suppliers and retailers, in a lower expense.

Establishing firm and highly collaborative relationships with shipping corporations are as

essential as with the outsourcing partners.

Creating demand-driven Supply Chain - Alignment of retail and delivery

In fashion industry, the retailer is generally considered as the only contact point with consumer.

This is the reason why corporations concentrate efforts on the downstream side of the SC, in

purpose of better control over the sales network (Brun & Castelli, 2008). Numbers of fashion

corporations try to get in direct contact with customers through downstream integration (Ferdows

et al, 2004).

However, the current market competition requires alignment of every roles in SC processes

towards the brand values and to achieve consumers‟ preferences and loyalty, and gain benefits.

For instance, product availability is one of the relevant sources of value for the customer and a

confirmation of a brand‟s reliability (Pedraza & Bonabeu, 2006). To ensure availability requires

time compression and flexibility throughout the SC, which means the retail and delivery

alignment need to be “end-user focus”

Accordingly, it is essential to create coordinating and collaborating relationship between

suppliers and retailers, in order to ensure effective and efficient inventory management,

flexibility and responsiveness (Fernie, Fernie & Moore, 2003).

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In recent year years, increasingly shorter product lifecycles and greater product variety are the

most significant features of fashion products. And the consequences are high demand volatility,

low predictability, and frequent impulse purchase (Fernie, Moore & Lawrie, 1998). In order to

balance supply and demand, ensure product availability and control logistic costs, retailers and

manufacturers should join efforts as regards the related operations, for incidence, coordination of

order policies, use of expediting and committing for supplier‟s capacity.

Creating a Free Work Environment – allow maximum interaction of minds

“Administrative innovation refers to changes in organizational structure or administrative

processes, such as the recruitment of personnel, the allocation of resources, and the structuring of

tasks, authority, and rewards (Damanpour, 1992; Gopalakrishnan & Damanpour, 1997)”.

Drucker (1999) said that “Every organization of today has to build into its very structure the

management of change”, such as Nike who continues to encourage designers to look for creative

inspiration from all industries and arranges holiday for designers. Therefore, develop a corporate

culture and start living it with openness which can stimulate the innovative minds and thus

promote the development of new products.

Establish strategic alliance and collaboration in the fashion industry

A corporation establishing co-operational relationships with rivals is a new strategy in fashion

industry. For instance, Giorgio Armani and Emaar Properties creating “Armani Hotels”; LG and

Prada co-operated and produced mobile phones; and Swatch and Tiffany&Co., creating a range

of watches (Wigley & Provelengiou, 2010). Alliance and Collaboration facilitates the utilization

of resources from corporate partners, and the collaboration on design, engineering,

manufacturing, marketing, distribution and service” (Deeny, 2007). Additionally, this kind of

collaboration is not related to any financial capital transaction.

Motivations for strategic alliance and collaboration in fashion industry, generally, are similar to

other industry or business. Specifically, strategic motivations like corporations‟ desire to achieve

product or market diversification. For instance, one is with a current product within a new

market and another is with a new product within a current market and when both corporations

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desire to acquire considerable profits from certain market, and also derive advantages from

competing corporations. Two corporations desire for lower financial risk in establishing new

operations and saving on market. Technical motivations are also important when several

corporations or brands want to derive technologies or techniques from each other. Minimizations

of supplier base, building economies of scale, and reduction of supply chain costs are also the

considerable motivations in finding strategic alliance.

In purpose of establishing a firm and long term alliance or collaboration, comprehensive partner

selection is an essential issue. Brouthers and Wilkinson (1995) illustrate four benchmarks in

selecting partners: complementary skills, cooperative cultures, compatible goals, and

commensurate levels of risk. However, these are not fixed and will be change according to

market demands, needs, goals or objectives of the alliance and the predictable risks.

Attract more customers – Decide your way of marketing:

“Marketing innovation refers to market research, price-setting strategy, market segmentation,

advertising promotions and marketing information systems (Vorhies & Harker, 2000;

Weerawardena, 2003)”. The innovation helps to retain old customers and to attract more new

customers. Armstrong and Kotler, (2003) noted that marketing strategy is designed to guide a

company to use its limited resources to meet the requirements of target customers and achieve

marketing goals more efficiently. H&M is regarded as high-street brands, but it always

collaborates with famous designers who design luxury goods such as Karl Lagerfeld, Lanvin and

Viktor. The target consumers of H&M are young man who have the sensitivity with fashion

goods but have not enough purchasing power. Through this viral marketing online, H&M attracts

more young consumers‟ attention and its limited production is again strategic which creates

crazy brand fever among customers.

Innovative branding strategies:

Branding is about how to create value by producing product or service with excellent capability

and quality, supported by satisfactory customer experience which leads to customer loyalty and

repetitive buying (Rowley, 2009). In purpose of getting more attention from customer, fashion

corporations need to conduct variety of branding strategies. Innovative strategies make these

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fashion brands more outstanding and unique form their competitors, and more competent in the

fashion market.

Online branding:

Fashion Corporations‟ branding activities are facilitators of curiosity and desire for deeper brand

understanding and evaluating. With better understanding, trust relationships between customers

and brands are easier and firmer (Xie & Boggs, 2006). Customers are more likely to accept the

brands‟ claims about their products. Internet, as the known forth media, is providing a cheaper

and wider platform for branding (Rowley, 2009). Using website for branding is easier to

communicate with potential customers in different way, such as music, broadcasting, video and

games. Nike and Adidas, the famous sports fashion brands with a big number of worldwide

young customers, are using homepage as one of the most important branding platform. All the

new product concepts and information, promotion activities like road shows or temporary stores,

and latest commercial videos are provided in the their homepage. With a clicking mouse,

customers can get to know the latest information about the brand. UNIQLO, a Japanese fashion

brand, is using their homepage not only for sales and providing information, but also for

organizing the online promotional activities. Customers participate in the activities through

buying apparel products. These activities not just facilitate the sales but also display the brand

culture effectively.

Brand communication and market evaluation by temporary stores:

Temporary store was first found in Britain but quickly spread out around the world, especially in

the metropolis like Milan and New York. Limited time frame is the common feature of these

stores. Durations of temporary stores are currently between a week and a month. Customers tend

to be curious about these temporary stores because they appear to be stylish and unique. Another

key factor is the location. Temporary stores often locate in the urban shopping area because the

number of potential customers is relatively high and it is easier to attract attention (Micaela

Surchi, 2010). Temporary stores include different forms. It can be in a camp or a van or even an

online store (webpage or website). In Surchi‟s research (2010), it illustrated that temporary store

fulfils two functions: promotional and investigative. Fashion brands, such as Levi Strauss, by

opening a series of temporary stores in certain period, highlighted their brand values and culture

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and strengthened the corporate images. The sales figures of temporary store are not important to

most fashion brands because the objectives are to conduct brand communications directly and

closely with both current and potential customers. The promotion function of temporary store is

more valuable for every established brand, such as Zara and Nike. They have already possessed

enough information and evaluation about certain religion market and their customer. On the

other hand, for the emerging brands, which is not widely accepted by the market and the

customers, this can serve to be investigative to evaluate that if it is worth enormous investment

on the certain locality with certain conditions. The temporary stores can gather information about

the reaction from the customer and study the impact of the promotion activities and these

insights need to be effectively used to better position themselves and plan their investments.

Gain the Trust of Customers - Good Customer Service

“Service innovation refers to manufacturers' engagement in various innovation activities to

enhance customer satisfaction, including after-sale services, warranty policy, maintenance

routines, and order placement systems (Gopalakrishnan & Damanpour, 1997)”. It is a strategy

that supports a company to meet more complex customer needs and set up a good corporate

image. Some companies have found service innovations to be a very effective way to get the

future business opportunities (Wise & Baumgartner, 1999). Mathieu (2001) said that customer

service captures all services that can enhance the quality within the customer relationship and

support companies to increase their product offering. In the fashion industry, good service can

win the trust of customers and make customers as their brand's followers.

Vancle, a fashion brand in China depends on online sales, using experience service to create

more value. Customers can try on the clothes when they get it from courier and there is 90 days

unconditional return policy for an exchange or service. It is said that customers in the service

development process are positively associated with the extension of the service business

(Gebauer, Fleisch & Friedli, 2005).

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4 House of Innovation:

The house of quality originated in 1972 at Mitsubishi‟s Kobe shipyard site and this management

approach was called as „Quality Function Deployment‟ where the quality gaps are identified by

mapping the relationships of the WHATS (customer voice) and HOWS (technical descriptors)

and the capability is measured in terms of HOWS.

The house of innovation proposed in this paper is „the transpose of house of quality‟ where the

existing capability is measured in terms of WHAT‟S rather than HOW‟S. This is because of the

simple fact that quality measures a mechanism and it need to be measured in terms of HOW‟S

where as innovation primarily depends on the context and learning from the environment.

However both represent the translation of the customer‟s voice (WHAT‟S) and the company‟s

means (HOW‟S) into a matrix format to get deep insights on the interrelationships and

correlations and hence determine the strength of existing context and action steps for

organization to fit in or implement innovation. This model can thus attempt to measure the

specificity of innovation gap by analyzing the inter relationship between what‟s and how‟s

(context parameters) and also the structural changes required for bridging the innovation gap or

implementing innovation management based on correlation of what‟s and correlation of how‟s

respectively.

The interrelationship measures the existing capability of innovation. The difference between

the existing capability and the maximum innovation scale can measure the innovation gap in

terms of the hops required to bridge the gap. This provides useful knowledge to act upon the first

few stages of innovation implementation in gap analysis, creation of innovation strategies and to

decide on the innovation portfolio mix.

The correlation measures the degree of importance and relative alignment with the other

context parameters. This provides knowledge to act upon the structural changes and create focus

groups, operating idea banks, exploiting technology and assigning lead users.

The direction of innovation and performance measures can help in accurately visualizing or

measuring the properties of the innovation gap in specific performance measures.

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4.1 Steps in building the House of Innovation:

1. Collect the innovation context parameters which are a combination of what the customer

wants and how can it be fit into organization‟s strategies and advanced technologies.

2. List how‟s in rows and what‟s in columns.

3. Draw a matrix to connect every how to a what.

4. Identify and plot the direction of innovation with respect to the key performance

measures of what‟s in subsequent rows below it.

5. Identify the relationship between them through questionnaires, interviews or brainstorms

and code it in as the matrix elements with a scale of measurement, may be strong, weak,

medium connecting what‟s and how‟s. When the elements are not related relevantly, the

block can be skipped.

6. Sum and derive the existing innovation capability with the interrelationships under

what‟s.

7. Draw a triangular matrix on the top of what‟s and how‟s separately to represent the

relationship between what‟s and what‟s, how‟s and how‟s.

8. Code in the triangular matrix elements by analyzing and interpreting the correlation in

what‟s and how‟s independently

9. Calculate the innovation hops possible by using the cumulative existing innovation

capability

Innovation hops possible = Maximum innovation capability (10) – Existing capability

4.2 Nike’s House of Innovation

The House of innovation has been applied to the identified context framework of innovation in

fashion industry in the first part of the paper.

The interrelationship and correlation plotted in the above model is a synthesis of information

from various sources in various forms as company‟s internal product and process reports,

employee‟s speech and publications in conferences, press meets and social gatherings , Nike‟s

product website (www.nike.com) , Nike‟s official website (www.nikebiz.com ),official on-store

22

and process videos in YouTube from trusted channels of Nike, case studies and publications on

analysis of the strategies of Nike from its different departments.

Fig 2: House of Innovation for Nike‟s customer space with technologies

For calculating existing capability, we can use the mid value of the ranges.

These relationships are to be identified with questionnaires, interviews or brain storms in focus

groups in terms of context and existing capability in real time application whereas here in the

23

model shown, we have synthesized relationships with various sources of information available

online about the organization and its present day‟s capability

Fig 3: House of Innovation for mapping Nike‟s business process gap with strategies

4.3 Acting upon information for insights - innovation implementation:

With the model of interrelationship and correlations of what‟s of customers and how‟s of

organization or trends, a strong sense of the context to start with and the desired positions to land

with is derived, based on the realization of market trends and self performance with respect to

the innovation context.

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4.3.1 Kick off or Gap Analysis:

This gap or context helps in creating an innovation portfolio with mapping of existing projects in

relation to their strategic fit, degree of innovativeness, estimated costs, expected returns and

calculated risks in the business processes involved. Also with the analyzed market trend based on

the current reach of context in customers, decide the time for marketing to gain competitive

advantage.

Propagate the context and innovation portfolios with brain storms, contests, exhibitions and talks

inside the company to spread the thought as well as to determine the matching talents, skills and

competence in people to form right teams for managing innovation.

Nike’s Business process space innovation gap analysis:

According to the above model, Brand Personalization context is the biggest strength of Nike. The

organization just has a least detected gap which can be bridged upon further innovation with a

maximum of one hop and that can possibly be pushed by an incremental innovation strategy to

keep in pace with the emerging technologies in material science , interactive marketing and

branding.

Customization can be rated with medium strength as Nike still can focus more on collaborating

with partners for customizing designs rather than just outsourcing the design, the quality of

customer service, work style for employees and there need to be something more which

collectively demands some form of innovation with 4 hops to bridge this gap.

Nike’s customer space innovation gap analysis:

According to the model, Nike‟s biggest strength is the ability to research on its products by

exploiting the power of web 2.0 in its product website and other social media sites and

communities like Facebook, Google Plus where there will be new product details, latest purchase

reviews, expert answers for doubts raised by customers, video posts on designs, service or

product complaints. There can be just a maximum of one hop possible.

25

Interestingly a much bigger innovation gap could be detected in its instantaneous product

purchase capability where they have not utilized advanced software or augmented reality to

make your laptops and movie theatres as a virtual shop that enables purchase on the move

instantaneously. Nike needs to capitalize on these trends and make changes soon to sustain its

global leadership. There need to be around 8 hops (may be a huge leap!) to bridge this gap as

predicted by the model.

Product awareness, product visualization and personalization could be the trends where Nike is

performing well in traditional media like TV and advertisements through social media sites, but

it still needs to capitalize on the potential of software systems and internet media where artificial

intelligence can be exploited for personalization, augmented reality software for virtual trials and

also in synchronizing the online shopping using PDAs and on-store shopping through RFIDs,

QC and barcodes and semantic web concepts can be applied for instant searches and

comparisons which would bring down the customer‟s purchase effort and decision time

drastically down. There can be a maximum of 4 hops possible to bridge this gap.

4.3.2 Creating innovation strategies:

Apply the innovation portfolio to the customer and technology trends, internal business

processes which gives a definite direction or flow for the execution of activities with specific

strategic interpretations, either customer, technology or employee driven. A dominant or

balancing proposition of one of these innovation strategies can be considered based on the

strength of interrelationship and the predominant cause for the relationship.

In our case, for Nike, Instantaneous product purchase through online virtual shops implementing

augmented reality and artificial intelligence techniques can be a project which can be mapped to

a technology driven innovation strategy based on their low interrelationship and high correlation

between product visualization and instant purchase .

4.3.3 Innovation portfolio mix:

Categorize the projects with innovation portfolio to reflect the levels of risks involved. Identify a

classification for the mix based on the innovation gap – incremental, major revisions or a break

26

through. Add operational strategies and timelines. Allocate resources based on the mapping of

correlation to interrelationship or degree of importance of individual context to the existing

organizational capability.

In our case, the above project of Nike can be considered a portfolio mix, „major revision‟ as it

has to implement new technologies and invest on software and expert handlers to design and

develop the project for Nike. They also need to utilize their previous technology of online

shopping with these virtual shops with virtual trials and real object based recommendations

which requires more integration efforts to digitize all real world objects on store in all

dimensions and sell online. This has been decided based on their average interrelationships or

existing capability with software systems and internet media for product purchase as well as a

high correlation between software systems and internet media.

4.3.4 Structural Changes:

This process can be well substantiated by correlation of individual organizational means to

achieve the context and the importance of each factor to structure the change or innovation

scenario to tap the internal and external resources effectively. They aid in developing focus

groups or competence centres and managing alliance portfolio based on the identified strength of

context factors and the innovation gap.

In our case, Nike‟s project when implemented can radically impact the previous IT resources and

infrastructure setup inside the company which need changes in their structure. It also impacts the

sales in the traditional stores which require planning in allocating resources and supply chain.

The correlation between the entities in the model explains it.

4.3.5 Operating with ideas – setting idea banks and right culture:

After incorporating the structural changes, it is now the stage to build upon ideas. Set the right

culture in the team to build upon ideas conceptually and strategically, publish targets, rewards,

assessments, revisions and iteratively act upon improving the quality and shape of the idea

orienting towards the maximum hops possible to bridge the innovation gap identified with the

model.

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In our case, COPs, conferences, brain storms may be conducted on the subjects related to this

project to bring more awareness and context for thinking among the team responsible for project

implementation. The subjects are identified based on low interrelationships and high correlation

between the affected entities.

4.3.6 Implementing Lead User Method:

After analyzing the correlation of individual context parameters that is in scope of innovation

and the existing focus groups are clustered into highly representative subunits or function

clusters are chosen and lead users are assigned for its key project planning, expert consulting and

conceptualization.

In our case, this is purely based on departments or entities correlation. Highly representative

units can be assigned lead users based on their competence and expertise in the specific project

domains related to software systems, artificial intelligence, augmented reality, and wireless

communications and so on.

4.3.7 Exploiting technology and intellectual property:

After identifying the context and assessing the existing capability, there is a need to compare our

movement relative to our competitors and anticipate future moves by exploiting past patent

trends, technology road map in the future to plan incremental innovation and patents to block

competitors or kill innovation projects or obtain license based on the current trend and value of

the idea.

In our case, exploit the intellectual property of the present day‟s Nike IT team, R&D team or its

partners. Pick out the unused patents, publications and value them by mapping into the trends

that Nike expects to bring into customer world. If the patents don‟t worth its competitive

advantage as identified by the future trends, they can be licensed or donated to bring up their

image. The areas for IP exploitation can also be identified from the correlation of individual

what‟s and how‟s to select highly representative elements for research operations.

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5 Conclusion:

A detailed analysis on innovation management layer of the Intellectual Capital framework was

made in the first part of the paper by defining innovation, researching on the nature of the

fashion industry, identifying the context for innovation in the customer and business process

space. After having identified the connectors enabling innovation or the context, these are

translated into the house of innovation, a model which is a transpose of the house of quality

which can be used to measure the innovation gap in the fashion industry by listing down the

identified context parameters in both the axis of the matrix and evaluating the interrelationships

between them and correlation within them. This was discussed in brief by considering Nike as an

example and how the identified gaps and relationships can help in innovation implementation

through different layers. Thus this holistic approach starting from context identification to

innovation implementation takes us through a series of events to realize the importance of

spotting the relevant context at appropriate time and aligning them with organizational

intellectual capital based on existing and required capability and this effective restructuring from

time to time makes an organization in any industry truly competitive as well as innovative.

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