A thoughtful post on the nature of innovation, relative to globalisation, making the point that while the world appears global, the reality is quite local for effective innovation. The innovation levers technology and communication for the global aspects.
One example is Zara. Based on NW Spain, they have developed a global strategy of successful stores, but the innovation is centred in Galicia.
Irving Wladawsky-Berger
On average, it takes nine months to develop a new fashion product and get it into stores. Zara is able to shrink that number to a remarkable four to five weeks. Consequently, it can assess in real time how well its products are doing in its stores around the world and take action accordingly. If after a week a product is not selling well, it is withdrawn from the stores and the orders are cancelled. On the other hand, if a product proves hot, production is ramped up, and variations on its design are quickly pursued.
Some points of note on Zara’s strategy;
– they reduced production cycyle from 9 months to 4 weeks
– local receptivity on new designs is gathered real time from all stores back to Galicia
– design is all in house in Galicia
– actual production is local near the individual stores
– all communication is network based
Bankwatch 
Hi,
from what I read about Zara (in James Surowiecki’s ‘The Wisdom of the Crowds’) it is still a centralised enterprise. Decisions are taken in La Cornuna.
It might be that this works for Banks. There is one difference though: youhave a living relationship with your customer (some call it account) whereas Zara sells a product and that’s it. Of course Zara does everything to keep the customer coming, but the customer does not have an account.
The history of Handelsbanken as evangelised in Jeremy Hope’s and Robin Fraser’s ‘Beyond Budgeting’ gives me another impression. Hope and Fraser state that the success of Handelsbankencame from putting ever more responsibility to the local offices and the individual bank employees.
But of course Handelsbanken needs an infrastructure too. I think that what both share is a networked infrastructure and a very fast reaction to changes, with the ability to allocate resources very dynamically.
Thanks Johan … what inrigues me about Zara is the decentralised information collection, that is rapidly collected centrally, and turned into new design that reflects customers wants. This is real time feedback ….. what if Banks’ did that, and offerred new services on a cycle measured in weeks, versus what is today, years.
Hi Colin,
here is a pointer to an article regarding Beyond Budgeting @ Svenska Handelsbanken
I think it points directly at what you ask: how do they collect information, and translate it. The difference though is that there is lots of responsibility ‘at the frontline’. As already mentioned, the book ‘Beyond Budgeting’ accounts for this too.
Their story, very short:
– forget about budgets
– look at Key Performance Indicators
– use your information
Banks do collect their information rapidly, they do have the infrastructure in place to report EoD or intraday, you would have to focus on what to report, whom to report and how to work with these reports.
Still, I think there is an enormous difference with Zara: a bank engages in an active partnership with their customers. There will be trust, there is a binding contract called credit or account, there is an active exchange of money and information. Zara sells a product. With the rapid change of products it attracts customers, maybe a bank would distract customers with a rapid change of the product range.
Cheers,
Johan
Excuse me, to reply your central question: I guess that you would have to reframe the question, away from ‘offering new services in cycles of weeks’ to what? I don’t know. Engage with the customer? What does a bank actually sell? Security? Money Partnering? I don’t know. Harley Davidson sells a lifestyle, and gives you a bike as an extra..