2013 國際 ERP 學術及實務研討會
A solutions-focused innovative business model: Case
Study of Zara
Author: Dr Te Fu Chen
Assistant Professor, Department of Business Administration
Lunghwa University of Science and Technology
Email: phd2003@gmail.com
Abstract
With the current global scenario, R&D service providers need to better understand their client needs and
come up with what can be called “solution innovation”. Corporate solutions and innovations specialise in the
delivery of solutions to business problems and opportunities. A company embarking on this type of strategic
repositioning needs to establish exactly what kind of solutions it wants to provide and to what extent it will
leverage and integrate its own current products and services. This is a critical question, as these companies
need to continue to operate effectively in their current business as they attempt transition from their current
models of practice towards a new solutions-focused business model. The study is aimed to construct a
solutions-focused business model and then examine solution innovation via one case study of representative
firm: Zara. This model allows Zara to better identify customers’ business problems and for an effective
solution to be defined, developed and delivered in the form of a set of integrated products and services.
Clearly, key partnerships with technology and service-providers may be necessary to construct an effective
solutions-based portfolio. The competence profile of the “solutions” focused company sees a progressive
move away from a strong “technical” competence to one that is more balanced with the “integration” and
“market/business knowledge” competencies. The effective solutions-providers should add “customer
partnering competence” and balance four competencies into a profile. In this environment, it becomes
obvious that technological leadership will be quickly displaced by the depth of customer relationships and
the cumulative learning curves of a company as key market differentiators of the future.
Keywords: Solution innovation, Business model, supply chain, Zara
1. Introduction
The Oxford Dictionary defines a solution as “resolution, solving, answer, method for solving a
problem, puzzle, question, doubt, difficulty, etc.” In reviewing this definition, a company embarking
on this type of strategic repositioning needs to establish exactly what kind of solutions it wants to
provide and to what extent it will leverage and integrate its own current products and services.
Understanding the distinction of difference between needs and solutions can affect how you listen
to your customers, how you conceptualize new products and services, even how you analyze
existing markets to create new strategic platforms. Without an attention to both needs and solutions,
a company can find itself optimizing products for a set of needs that no longer exist. Separating
needs from solutions can make it possible to better gauge a market's receptivity to innovations, as
well. This is a critical question, as these companies need to continue to operate effectively in their
current business as they attempt transition from their current models of practice towards a new
solutions-focused business model. Today, many companies in the computer and electronic
equipment (C&EE) and innovation sector believe that they sell solutions – “if a customer needs a
box to solve a problem, we will provide that box and the problem is solved”. However, the nature
and competences of a “solutions” company are not this simplistic. Some key competencies need to
be established, evaluated and adjusted in order to meet the needs of the customer.
The industry has witnessed cutthroat competition with very few differentiating factors amongst
competitors. Over the years some organizations have changed their image to that of total solution
providers in the market place wherein they talk not only about their ability to do. However, with the
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current global scenario, R&D service providers need to better understand their client needs and
come up with what can be called “solution innovation”. Corporate Solutions and Innovations
specialise in the delivery of solutions to business problems and opportunities. A company
embarking on this type of strategic repositioning needs to establish exactly what kind of solutions it
wants to provide and to what extent it will leverage and integrate its own current products and
services. This is a critical question, as these companies need to continue to operate effectively in
their current business as they attempt transition from their current models of practice towards a new
solutions-focused business model.
The study will discuss the case study of Zara and then constructed a solutions-focused business
model. It requires a company to add competencies in business consultancy, application development
and systems integration. This allows them to better identify customers’ business problems and for
an effective solution to be defined, developed and delivered in the form of a set of integrated
products and services. Clearly, it is necessary that effective and enduring relationships be
established with customers to build a strong knowledge of their business. Additionally, key
partnerships with technology and service-providers may be necessary to construct an effective
solutions-based portfolio. The competence profile of the “solutions” focused company sees a
progressive move away from a strong “technical” competence to one that is more balanced with the
“integration” and “market/business knowledge” competencies. The effective solutions-providers
should balance four competencies into a profile.
2. Literature review
2.1 Needs, solutions and innovation
Dev Patnaik (2005) assumed a simple equation that leads to new thinking and novel products:
Needs + Solutions = Innovation, but it's a formula that too few companies have grasped. The
fundamental concepts that underpin that discipline: namely, supply and demand. Most disciplines
rely on a handful of basic precepts that serve as the building blocks of larger theories and more
complex arguments. What, then, are the fundamental concepts of innovation? Do equivalent
building blocks exist that can help provide clarity to practitioners of this somewhat opaque art?
Obviously, we have yet to apply the same rigor to the study and practice of innovation that we have
to other disciplines. Innovation as it's currently understood seems more akin to medieval alchemy
than it does to modern science. Still, some basic principles are emerging. The difference between
needs and solutions is one fundamental concept, the basic concept is simple enough.
2.2 Different forms of innovation
As simple as the concept may be, needs and solutions are a framework that too many
companies confuse. More often than not, they mix the two together. Consumer packaged-goods
companies, for instance, have spent millions of dollars over the last decade conducting "need state
research" -- the use of complex math to analyze and aggregate statements customers make about
why they purchase the products they do. Invariably, those statements amount to a list of feature
attributes of products that already exist. In effect, they're a list of solutions. This research fails to
inform companies of possible customer needs and the opportunities they might have in supplying
them. As companies spend more time focusing on innovation, the demand is increasing to think
beyond existing solutions. In the words of one designer at Ford Motor (F), "I keep begging the
marketing guys: Don't tell me you want a bridge. Show me the canyon you want to cross."
Understanding the difference between a bridge and a canyon is as close as it comes to an
innovation fundamental. Like supply and demand, needs and solutions are the basics on which
further concepts are built. And like any fundamental, mastering it early won't guarantee success. But
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it sure can help avoid a lot of pain along the way (Dev Patnaik, 2005). Dev Patnaik has a great
metaphor for needs-driven innovation in his Business Week piece Needs Solutions = Innovation:
We don't always need technological solutions. Nor do we necessarily need to solve the immediate
problem. One should first ask why we need to cross the canyon. If it is simply to gather firewood,
then another solution might be needed. If it is on the road to El Dorado, then let's think about
bridges. Ken Jarboe (2005) would also warn against two narrow a view of needs-driven innovation.
He has long agreed with Prahalad & Hamel that innovation came from "infusing products
irresistible functionality or, better yet, creating products that customers need but have not yet even
imagined." But sometimes it takes the creation of something totally new before people can envision
how it can be applied to meet yet unimagined needs. Innovation, as Patnaik points out, is a robust
interplay of new ideas (technological and non-technological) and needs. Companies who understand
this succeed. And countries who gear their policies to that reality prosper. Those who emphasis one
part of the equation over another don't. This is why we need to insure we have a balanced
innovation policy in the US if we are to succeed in the I-Cubed Economy (Ken Jarboe, 2005).
2.3 From product innovation to solution innovation
For providing value and winning customers, companies must quickly and accurately identify
changing customer needs and wants, develop more complex products to satisfy those needs, provide
higher levels of customer support and service. NPD (New Product Development) frameworks are
increasingly being seen as an important source of competitive advantage (Wheelwright and Clark,
1992; Brown and Eisenhardt, 1995; Bowen et al., 1994). The study summarises various
perspectives for a superior NPD framework from some scholars, in Table 1.
Table 1: NPD framework
Scholars
Perspectives
Wheelwright and Clark (1992); NPD frameworks are increasingly being seen as an important source of competitive
Brown and Eisenhardt (1995); advantage.
Bowen et al. (1994).
McGrath et al. (1992)
The only sustainable source of product advantage is a superior NPD framework
Shepherd and Ahmed (2000).
Firms are now being driven to implement changes that will help speed products
through development and improve process efficiency and NPD effectiveness.
NPD is increasingly being cited as the most important process within many high
performing organisations.
Market orientation and customer need are success factors within NPD frameworks,
The framework must be designed to meet the objectives for which it is being
implemented.
NPD’s implementation and use have to be supported by all employees, and it must
provide demonstrable benefits in both the long and the short term
2.4 Moving to a solutions innovation business model
However, customers of the high-tech industries (that is, computer and electronic equipment
industries (C&EE) are increasingly looking for solutions to complex business problems in order to
remain competitive. To achieve this, they are looking more and more towards partnering with key
suppliers who can provide world-class products and services to address those needs (Shepherd and
Ahmed, 2000). In order to tackle these trends and build towards a long-term, sustainable, profitable
growth, many of the top organisations in the high-tech industry are attempting to build upon
existing competencies in building and delivering products and product components by becoming
“solution” providers. In this solutions model, contextually defined here for the high-tech (C&EE)
sector, it becomes apparent that an organisation adopting a “solutions” focus needs to be able to
articulate its solution offerings clearly and ensure that the components which they comprise can be
either provided internally, or sourced externally and delivered wherever the customer’s site may be
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(Shepherd and Ahmed, 2000). From a technological perspective, the solution components need to
be architecturally compliant, that is, easily integrated using industry standard technology. This
supports the overall purpose of adopting a “solutions” model, which is to progressively move away
from being a hardware-provider and move towards providing greater proportions of the higher
margin software and services components (Picasso, 1997; NCR, 1997; Kaiser Associates, 1997).
2.5 From push to pull strategy
The solutions-providers now need to take a further step by working with customers to uncover,
or better define, problems for which solutions are required. In this manner, customer demand is
stimulated by the application of business expertise and a strong, symbiotic relationship with the
customer (wherein the vendor assumes the role of “trusted adviser” rather than “supplier”). The
nature of a company’s solution focus can then be articulated. The purpose, then, is to construct an
environment and relationship with the customer that locks them into a mutually beneficial,
long-term commitment, in which high margin add-ons and significant follow-on engagements can
be generated. This not only offers significant economic rewards, but also introduces significant
barriers against competitive attack (refer to Table 2).
Table 2: From push to pull strategy
Source: Shepherd and Ahmed (2000)
Strategy
Push
Pull
Content
Traditional technology providers adopted a “push” strategy to meet sales quotas while relying on the
customers’ desire to improve productivity through technology acquisition and advancement.
The area that best articulates what it means to be a “solutions”-focused company lies at the
customer–supplier interface. This view changed as customers’ needs became increasingly more
sophisticated and their understanding of the technology available improved, resulting in greater market
“pull”.
Once the customer need has been fully articulated, the specific solution can then be
constructed to meet that need. In an effective “solutions” company, sales teams will deliberately
target potential customers of a specific profile once a solution has been constructed and
implemented in a customer site, which boasts the same profile. This is undertaken to leverage the
“new competence” that has been developed (Shepherd, Ahmed, 2000).
3. A SOLUTIONS-FOCUSED BUSINESS MODEL
Adopting a solutions-focused business model requires a company to add competencies in
business consultancy, application development and systems integration. This allows them to better
identify customers’ business problems and for an effective solution to be defined, developed and
delivered in the form of a set of integrated products (hardware and software) and services. Clearly,
in a highly complex environment, it will be unlikely that any single organisation will possess, or
wish to possess, all the necessary skills and technological collateral to meet the broad,
enterprise-wide needs of its customers. It is therefore necessary that effective and enduring
relationships be established with customers to build a strong knowledge of their business (where the
company assumes the role of “trusted adviser” rather than “supplier”). Additionally, key
partnerships with technology and service-providers may be necessary to construct an effective
solutions-based portfolio.
Today, many companies in the C&EE sector believe that they sell solutions – “if a customer
needs a box to solve a problem, we will provide that box and the problem is solved”. However, the
nature and competences of a “solutions” company are not this simplistic. Three key competencies
need to be established, evaluated and adjusted in order to meet the needs of the customer (Table 3).
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Table 3: Three key competencies of a “solutions” company
Source: Shepherd and Ahmed (2000)
Competence
Technical competence
Contents
Which encompasses the knowledge, experience and portfolios around hardware,
software and networking products; this forms the foundation of an effective
solutions-provider operating in the C&EE industry.
Integration competence
Demanding expertise not only in technical integration of components, but also in an
ability to identify valuable business, process and organisational integration
opportunities.
Market/business
knowledge The ability to bring relevant and complete information to bear around an industry,
competence
technology and customer.
During the transition, it is clear that some companies will simply not possess certain
competencies demanded of them by the customers. This weakness can be addressed by recourse to a
greater emphasis being placed on partnerships, mergers, and acquisitions and sub-contracting.
Consequently, the competence profile of the solutions focused company sees a progressive move
away from a strong “technical” competence to one that is more balanced with the “integration” and
“market/business knowledge” competencies (Shepherd and Ahmed, 2000). The effective
solutions-providers should add “customer partnering competence” and balance four competencies
into a profile, as depicted in Figure 1.
Figure 1: Organisational competence of a solutions-provider
Source: Shepherd and Ahmed (2000)
In this environment, it becomes obvious that technological leadership will be quickly displaced
by the depth of customer relationships and the cumulative learning curves of a company as key
market differentiators of the future. Shepherd and Ahmed (2000) proposed that implementation of a
solutions-focused business model requires a number of organisational adjustments to be made.
These are: 1.Key organisational processes need to be effectively aligned to ensure clarity and
consistency of execution. 2.Reward/compensation schemes need to be adjusted to encourage the
development and successful selling of solutions, rather than maintaining the product-centric sales
motions of the past. 3.Effective communications within the organisation, keeping everyone
up-to-date with the changes, and need for change, are a vital activity. 4.Ensuring that effective
measures are established to indicate to management whether the strategic repositioning is both
working and effective.
However, the biggest area to be impacted upon by adopting a “solutions” model is that of the
organisational structure. Successful solutions-providers are increasingly adopting a “horizontal
competence” organisational structure wherein the majority of the headcount provides horizontal
subject-matter expertise (Shepherd and Ahmed, 2000). Horizontal competencies are illustrated in
Table 4.
Table 4: Horizontal competencies of solutions-providers
Source: Shepherd and Ahmed (2000)
Characteristics
Illustration
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Leading-edge and able to respond Horizontal competencies are recognised as the “core” of the company and it is that
to changing customer/market needs part of the organisation which keeps them “leading-edge” and able to respond to
market needs. Consequently, such companies are better able to respond to changing
customer/market needs and are not restricted to a sharply defined set of solutions
driven by product knowledge and experience.
High performers in terms of Horizontal competency organisations have been identified as high performers in
profitability
and
growth. terms of profitability and growth. Additionally, standardisation of solution
Standardisation of solution.
components has allowed service offerings to be implemented faster and more
efficiently.
Faster cycles of Technology The “horizontal competence” organisation also supports dramatic revenue growth
advancement
and
innovation. by supporting faster cycles of technology advancement and innovation, while also
Leveraging the highly focused leveraging the highly focused view on the key competencies required.
view.
Clearly, becoming a successful solutions-focused company demands radical change.
Progressive organisational change is required as new competencies become established and old
competencies are abandoned. This change has to be accompanied by the need to re-distribute or
acquire resources. During this evolution, effective linkages between key areas in the company need
to be forged to prevent inefficient functional boundaries becoming established, while a step function
improvement in the provision of information will be necessary to address the increased
organisational complexity. The evolution towards a solutions-focused business model is therefore a
high-risk strategy, but in today’s rapidly changing economic and technological climate, there seems
little alternative (Shepherd and Ahmed, 2000).
According to above literature review and discussion, this paper constructs a solutions-focused
business model as Figure 2.
Horizontal competencies of
solutions-providers:
1.
Leading-edge and able to respond to
changing customer/market needs.
2.
High performers in terms of profitability
and growth. Standardization of solution.
3.
Faster cycles of Technology advancement
and innovation. Leveraging the highly
focused view on the key competencies
required.
Figure 2: A solutions-focused business model
4. Case analysis and conclusions
In summarizing the above theories and models, an innovation industry embarking on solution
innovation needs to establish exactly what kind of value it wants to create and what extent of
innovation sources and processes it will leverage and integrate for its own current products and
services. This is a critical question, as these companies need to continue to operate effectively in
their current business as they attempt transition from their current models of practice towards a new
solution-focused business model. The study refers to the above theories and models and then
integrates them into the solution-focused model for innovation industry such as Zara. The study has
discussed solution innovation for one case study of representative firms: Zara, and then constructed
a solutions-focused business model. This allows them to better identify customers’ business
problems and for an effective solution to be defined, developed and delivered in the form of a set of
integrated products and services. Clearly, key partnerships with technology and service-providers
may be necessary to construct an effective solutions-based portfolio. The competence profile of the
“solutions” focused company sees a progressive move away from a strong “technical” competence
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to one that is more balanced with the “integration” and “market/business knowledge” competencies.
The effective solutions-providers should add “customer partnering competence” and balance four
competencies into a profile. In this environment, it becomes obvious that technological leadership
will be quickly displaced by the depth of customer relationships and the cumulative learning curves
of a company as key market differentiators of the future.
This paper adopts the analysis of secondary data, in-depth interview with manager of Zara
branch in Taiwan, and via a case study of Zara to examine the solutions-focused business model as
follows:
4.1 Technical competence
Zara’s information and communication protocols are significantly different from its
competitors. Zara spends less than 0.5% of total revenue on IT and IT employees account for only
0.5% of Zara’s total workforce. This differs from their competitors who spend on average 2% of
total revenue on IT expenditures and have 2.5% of their total workforce devoted to IT. Zara utilizes
human intelligence (from store managers and market research) and information technology (such as
their PDA devices) in order to have a hybrid model for information flow from stores to headquarters.
For example, managers at Zara stores use handheld devices to send standardized information
regarding customer feedback and ordering needs directly to in-house designers. This not only keeps
Zara's designers informed of fast-changing customer trends and demand, but also provides the
company with insight on less-desirable merchandise. Unlike Zara’s hybrid model (which
incorporates human intelligence and IT applications), competitors rely almost completely on
information technology. Zara’s unique approach of human intelligence assisted IT solutions results
in well-managed inventories, linkages between demand and supply, and reduced costs from obsolete
merchandise; however, there is still room for improvement in their IT processes to realize more
effective management of inventory levels. Hence, the hybrid information and communication
system that Zara uses provides cost advantages to Zara’s operations and helps to abide by their
fundamental principle to have the ability to rapidly respond to changes in consumer demand.
4.2 Integration competence
At Zara’s heart the company is building on a vertically integrated demand and supply chain,
while most other textile chains rely on outsourcing and cheap labour in China. Zara studies its
customers demand in the stores and tries to instantly deliver. This allows them to have a particularly
appealing value proposition: A collection that is in line with the very latest fashion (Alex
Osterwalder, 2005). Unlike other large apparel corporations, the company owns all of its retailing,
designing and manufacturing operations. This structural difference allows Zara to break some
norms in the apparel industry (Bruce Temkin, 2008). Integration of Supply chain: A garment design
of ZARA, only need the time under two weeks from designing to appearing in the shop, the link
that is highly integrated among them is difficult to imitate. Integration of knowledge management
(KM) and information technology (IT): KM and IT is dense and inseparable. The synergy of
integrating IT and KM is the primary factor for ZARA’s capability of operation and profit better
than competitors whose position alike.
4.3 Market/business knowledge competence
Zara does not advertise. Compared with 3.5% of the same trade or business, Zara advertising
budget has 0.3% of the business income only, is really few. The marketing line manager says the
advertisement of the dress retail business of the fashion should lean against the public praise with
the shop, needn't expect network or advertisement will bring buying climate heavy more, because
clothes is after dress just can know if it is good looking, so the shop and public praise is very
important. The interaction between sales and customer in shop is a kind of market research. Zara is
carrying on the market research all the time via collect and feedback customer’s suggestion by shop
manager to reach the headquarters. The intelligence capital of enterprises includes know how,
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enterprise's reputation, corporate culture, technology, and degree of knowledge of consumer of
enterprise, etc. The intelligence capital of enterprises includes the corporate culture, the corporate
culture of Zara is that the height is participated in. It is a member in a fashion industry that the
whole company will define by oneself, it was to prevail fast that every staff admitted ZARA will be
trafficked. It produces the new intention to encourage the staff to challenge oneself continuously in
such a corporate culture, let the staff at the basic level participate in the decisions of decision and
new style. The result got not merely has improvement on efficiency, can promote the staff and
support the change will even more, reduce and supply the chain to channel into the question. Zara
relies heavily on its front-line employees. it sees them as a key to its advantage. By analyzing sales
data, the retailer increases staff during the periods when there is heavy traffic in the store.
Employees are also expected to provide feedback on any fashion trends they see or hear about —
including what’s hot, what’s cold, or what’s missing from the current collection.
4.4 Customer partnering competence
“Limited customer variety” means only what is on display and in limited choices but every
customer is participating in the process to help determine the next batch. Store experience is copy
fashion, involve the customers and his group / cohort to create a network / brand. In comparison to
competitors, Zara’s business strategy, in regards to strategic partnerships and cost of production,
provide for a strategic competitive advantage. Zara, unlike its competitors such as Gap, Benetton,
and H&M, does not use Asian outsourcing. Eighty percent of Zara’s materials are manufactured in
Europe, with 50% made in Zara controlled facilities in the Galicia region of Spain near headquarters.
The local strategic partnerships that Zara maintains with manufacturers in Europe allow for a
product throughput time of 3-4 weeks from conception to distribution. To make this happen, the
company designs and cuts its fabric in-house and it acquires fabrics in only four colors to keep costs
low. Zara postpones dyeing and printing designs until close to manufacture, thereby reducing waste
and minimizing the need to clear unsold inventories. The proximity of these suppliers gives Zara
great flexibility in adapting their product lines based on up to date market trends and consumer
behavior. It also decreases costs of holding inventory. Inventory costs are higher for competitors
because orders are placed for a whole season well in advance and then held in distribution facilities
until periodic shipment to stores. This proximity effect and the flexibility that it gives Zara is
fundamental to their basic concept to respond quickly to shifts in consumer demand and has
provided them with a competitive edge in comparison to their peers.
4.5 Horizontal competencies: Leading-edge and able to respond to
changing customer/market needs
Fundamental to Zara’s success is their commitment to rapid response in customer trends in
fashion, producing clothing often and with short life spans (10 wears). Their commitment to this
goal and the capabilities that they have developed to achieve it, have provided significant
competitive advantage to Zara especially in the areas of product development, strategic partnerships
and cost of production, advertising and marketing, and information technology infrastructure. The
efficiencies and processes developed in these four functions differ significantly from their
competitors and stand out in providing additional value and profitability to Zara. Jennifer S. Altman
(2008) indicated besides selling relatively cheap clothes, which fit the times, the company maintains
an iron grip on every link in its supply chain. That enables it to move designs from sketch pad to
store rack in as little as two weeks. This "fast fashion" way of doing things has become a model for
other apparel chains. At Inditex, Zara store managers monitor what's selling daily—and with up to
70% of their salaries coming from commission, there's a lot of incentive to get it right. They track
everything from current sales trends to merchandise customers want but can't find in stores, then
shoot orders to Inditex's 300 designers, who fashion what's needed instantly (Kerry Capell, 2008).
Zara represents a great case study in how to change the paradigm by focusing on customers. Break
supplier-driven paradigms, like very discrete seasons in apparel, aren’t optimizing customer
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experience. So there are opportunities to expand business by challenging the status-quo. Disrupt
with service amplification. Look to customers for innovation. As discussed in the post customer
experience innovation: As simple as 1-2-3, companies need to focus their innovation efforts around
the needs of customers.
4.6 Horizontal competencies: High performers in terms of profitability
and growth, Standardization of solution
Why is profitability at ZARA so high, when margins are so low? Demand actual, demand
excess stock and unmet demand. Zara as a “Lean Enterprise”, Zara is the Dell of the dress industry.
Traditional SCM is from supplier to consumer. Dell SCM is from supplier to Dell to consumer.
Comparing with Dell supply chain is 2 day lead time only. Zara, the most profitable brand of
Inditex SA, they have expanded operations into 45 countries with 531 stores located in the most
important shopping districts of more than 400 cities in Europe, the Americas, Asia and Africa.
Throughout this expansion Zara has remained focused on its core fashion philosophy that creativity
and quality design together with a rapid response to market demands will yield profitable results. In
order to realized these results Zara developed a business model that incorporated the following three
goals for operations: develop a system the requires short lead times, decrease quantities produced to
decrease inventory risk, and increase the number of available styles and/or choice. These goals
helped to formulate a unique value proposition: to combine moderate prices with the ability to offer
new clothing styles faster than its competitors. These three goals helped to shape Zara’s current
business model. How Zara’s apparel chain gets new designs into stores in two weeks while keeping
costs low? Controlling the supply chain is the key. The $13.8 billion company is closing in on Gap
(GPS) for the title of world's biggest clothing retailer, has nearly quadrupled sales, profits, and
locations since 2000. This year, Inditex plans to expand by up to 640 stores. Zara’s growth shows
that there’s a lot of opportunity to find new and better ways to meet their needs. The bottom line:
The path to the top is always fueled by customers. ZARA one, rareness according to superior
resources standard view of the competition: Pointing this resource only has single or rare
competitors to own, the rarer ones are worth competing.
4.7 Horizontal competencies: Faster cycles of Technology
advancement and innovation. Leveraging the highly focused view on
the key competencies required
Industrial process life cycle of Zara: 1. Result of many years of experience learning and
probing with an innovative formula. 2. Defining the Zara process and improving process
performance. 3. Process improvement becomes more difficult & limits to improvement appear. 4.
Innovation then continues at the interface (shopping experience, Internet, etc.) 5. Process eventually
overtaken but when? ZARA is an innovative company for all types of innovation: technology
innovators, business model innovators, process innovators. ZARA customer offer lean and focused,
focused on “Fresh / Fast”, fast copying of leading styles, fast delivery in own stores and limited
editions. 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 (Colin Henderson, 2008).
Zara is based on NW Spain, they have developed a global strategy of successful stores, but the
innovation is centered in Galicia. 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. Zara reduced production cycle 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
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house in Galicia- actual production is local near the individual stores- all communication is network
based.
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Zara's
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