Optimization versus innovation in digital commerce

In a year of disruption, businesses are reminded of how critical it is to be able to pivot and adapt. The number of executives who listed innovation as a top-three priority for their company jumped from 65% in 2020 to 75% in 2021, the largest year-over-year shift seen in 15 years of BCG’s Most Innovative Companies survey. 

However, it’s hard to say how many of those executives are talking about bringing completely fresh ideas to market (innovation) and how many are talking about adopting the hottest emerging strategies, technologies, and business models and tailoring them to their own customers (optimization). 

In a space that moves as fast as commerce, the distinction between innovation and optimization is never black and white. This is especially true in a year where necessity drove massive amounts of innovation. As physical stores shut down companies had to spin up solutions they had no blueprint for, turning shops into fulfillment centers or transitioning in-store staff to online consultants in a matter of days. 

Innovation, however, is a brief window. The early adopters lay the groundwork, the next wave of users find best practices to streamline processes and measure efforts, technology vendors figure out how to commoditize it, and it becomes an industry standard. Adding curbside pickup in 2021 is still valuable, but it’s no longer an innovation — it’s expected. 

Luckily, a large part of the value of industry breakthroughs comes after the innovation window. As technology to measure and test innovation matures, companies put their own creative spin on it, and the approach can be steadily optimized over time to capture the full long-tail value. 

Optimization is crucial for scaling the commerce experience, steady improvements that bring convenience to customers or efficiency to teams can quickly build up to a major competitive advantage. 

When CHRONEXT, a platform for luxury watches, found it too cumbersome to manage and update their website they knew they needed to replace their outdated technology — without pausing for a major replatform. So they adopted a Composable Frontend Platform, which gave them the freedom to refresh their customer-facing experience, roll out global sites 1 by 1, and gradually step off their legacy software without disrupting business. 

In a year where many traditional business models were disrupted, companies responded by pivoting to brand new markets. While some of these switches were short-term efforts to help out with the pandemic response, such as Burton Snowboards adapting their factories to make PPE masks and the many distilleries producing hand sanitizer, some pivots have opened new markets permanently. When offices shut down, SnapCab suddenly had no market for their open-office privacy pods. They quickly realize their pods could be useful for 2 of the most pressing needs in the pandemic, with potential for long-term relevance in the space. First, they worked with healthcare experts to revamp their pods to be suitable for medical testing. Second, they created a home-office pod for those who needed a quiet space in their own house. 

Other innovations occur as companies explore new technologies to amplify the reasons their customers already love them. Louis Vuitton, Cartier, and Prada are leveraging blockchain to provide another layer of authenticity that’s essential for luxury buyers. While LUSH has developed an AR app that provides product information for unpackaged bath bombs, an experience that’s both novels and fits well with the cosmetic brand’s focus on ethical shopping and sustainability.  

There’s also the option to buy innovation, such as Lululemon’s acquisition of the fitness startup, Mirror, which is catalyzing their transition from an athleisure company to a lifestyle brand.

While innovation and optimization can happen in any area of commerce, they both tend to be most associated with the digital side of the business. As a result, many eCommerce teams find themselves in a hybrid position. 

The digital commerce department has the most detailed view of the customer, with insights into purchasing behavior and engagement trends that offer a wealth of opportunities for optimization. At the same time, it’s often the department with the most access to cutting-edge tools and technologies, which sets the stage for innovation. 

The demand for new digital commerce experiences is clear there, with 54% of shoppers enjoying browsing and discovering online more than in-store. The expectation is clear there, with 1 in 5 CEOs citing “digital” as part of their top priorities in a 2021 Gartner CEO survey. The investment is clear there, with 75% of consumer goods companies expecting digital transformation funding to increase, according to a 2020 survey from BCG. 

However, there’s a key resource missing for many eCommerce teams to make this all happen. In a survey of 146 marketing professionals, the number one challenge cited across all sizes of companies was limited time. 

Customer expectations are high, and relatively small eCommerce teams are taking on demands for new channels, personalization, rich product information, multiple payment methods, a widening range of shipping and return options, 24/7 support, and the seamless experience that connects it all. Even more challenging, many teams are doing this on outdated technology that was built for the online commerce of 5 years ago.