Unintended consequences of innovations

MSc. Strategic Innovation Management Faculty of Economics and Business University of Groningen

Duisenberg building, Nettelbosje 2 9747 AE Groningen, The Netherlands

Unintended consequences of innovations

A research in the supermarket industry

Name: Lisette van Zanen

Student number: S3695875 Date: 24th _{June 2019}

MSc: Strategic innovation management Supervisor: Dr. W.G. (Wim) Biemans Co-assessor: Dr. T.L.J. (Thijs) Broekhuizen

Abstract

Research into unintended consequences has been done for many fields except for innovation. During the course of this thesis, the unintended consequences of innovation in the context of supermarkets are being investigated. In total ten interviews were conducted.

This research made four theoretical contributions. First of all, market pioneers (i.e. supermarkets for which innovation is highly important) in this industry manage innovations in a different manner than followers (i.e. supermarket for which innovation is less important). Market pioneers work according to the agile method. This means that they break down large projects in phases of two weeks in order to receive more feedback. In addition they analyse customer data during the innovation development. Followers, on the other hand, innovate in two ways. (1) Followers analyse market pioneers’ innovations and implement certain innovations when they are ‘proven concepts’ (i.e. when evidence is found at other supermarkets that these innovations increase sales or customer satisfactions). (2) Followers search for new market concepts that fit with their strategy. These are usually incremental, non-technological innovations. The second contribution is that certain types of customers are enthusiastic about new supermarkets innovations, while other types of customers show resistance. In other words, innovation adoption depends on the attitude towards an innovation. Thirdly, this research found four unintended consequences of supermarket innovations. These are (1) customer frustration related to scaling, (2) ethical unintended consequences, (3) customer resistance and (4) inappropriate use. Finally, based on the results of this research, two propositions were made.

Table of content

1. Introduction ...1

2. Theory ...4

2.1 Innovation ... 4

2.2 Innovation strategy ... 4

2.3 Innovation diffusion and adoption ... 5

2.4 Consequences of innovation ... 6

3. Industry background & supermarket innovations ...8

4. Methods ... 10

4.1 Industry selection, selection of firms & selection of interviewees ... 10

4.2 Data collection ... 11 4.3 Data analysis ... 12 5. Results ... 13 5.1 Innovation development ... 13 5.1.1 Market pioneers ... 13 5.1.2 Followers ... 15

5.2 Unintended innovation outcomes ... 16

5.2.1 Customer frustration related to scaling ... 16

5.2.2 Ethical unintended consequences of innovation ... 17

5.2.3 Customer resistance ... 19

5.2.4 Inappropriate use ... 19

5.3 Managing unintended innovation outcomes ... 20

5.4 Framework ... 21

6. Discussion and implications ... 22

6.1 Theoretical implications ... 22

6.2 Managerial implications ... 25

6.3 Limitations ... 25

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1. Introduction

In 1937, the company ‘Polaroid’ was founded. They offered instant film and were a really successful player in their market. In the post-war era their sales grew at an annual rate of 23%. Despite their success, Polaroid focused only on their existing business activities. The need to innovate and explore new types of products for the long term received less attention. One could say that Polaroid fell prey in the so-called ‘success trap’. As a result, Polaroid was unable to anticipate and respond to the introduction of digital cameras in the film business.

Polaroid is a well-known example of a company that highlights the importance of innovation. “Innovation is the generation, acceptance and implementation of new ideas, processes, products or services” (Thompson, 1965). According to Brown & Eisenhardt (1997), innovation needs to be managed as it is necessary for companies to survive. Baregheh & Rowley (2009) state that organizations need to innovate in response to changing customer demands and to act on opportunities offered by technology and changing marketplaces.

Innovation starts with technological development or responding to the emerging needs of customers. If successful, innovation should add value to the customer. However, innovations sometimes bring unintended consequences as well. “Unintended consequences are consequences which result from behavior initiated for other purposes” (Giddens, 1993. p.765). An example of an unintended consequence is the increased stress that employees feel when they have to be available 24/7 as a result of the implementation of new digital technologies that companies implement to improve internal communication. Another example is the lack of real life conversations as a result of the introduction of the smartphone. Although the two examples mentioned have negative outcomes, unintended consequences of innovation can also be positive. The latter is demonstrated with the example of aspirin which was invented as a pain reliever in 1890. It turned out aspirin did not only relieve pain, but also helped to prevent heart attacks and reduce the impact from thrombotic strokes (Dalen, 2006).

2 The combination of technologies recognizes automatically when products are taken from or placed back on the shelves. The products are also tracked by the technology when they are placed in a cart. When the customer has selected all the products needed, they can simply leave the store. At the same time, a receipt is sent to the customer and the money is charged from the customers’ Amazon account. However, based on a survey among 1039 adults in December 2016, 40% disagreed with the statement that Amazon Go will solve more problems for shoppers than it introduces (only 22% agreed). Some customers are also concerned that this highly innovative concept will not consistently charge the correct amount of money. (see figure 1).

Supermarket innovations occur in the Netherlands as well. In 2017, Albert Heijn tested “AH tap to go” which has a lot of similarities with the Amazon Go store concept. In the AH tap to go store, customers are asked to download an app and activate the Tap to go card. With this card customers can make purchases at an AH tap to go store. In the AH tap to go store, they take the products they want and subsequently touch their card with the price tag belonging to those products. Customers can then leave the store and the money will be automatically charged from their bank account. Albert Heijn is not an exception herein as different supermarket chains are also testing novel store concepts. In certain cities in the Netherlands Jumbo transformed stores into Jumbo Food market stores. The main differences are that Jumbo food market stores are bigger than traditional supermarkets and offer extra services (e.g. groceries, food café and local products). In this way Jumbo responds to novel food trends like veganism.

This research will investigate the unintended consequences of supermarket innovations in the Netherlands. The phenomenon of unintended consequences has been studied extensively.

3 Research into unintended consequences has been done for many fields among which health information technology (Coiera et al., 2016), marketing (Fry, 2004; Polley, 1986), big data (Clarke, 2013), communication technologies (Cameron et al, 2005), computerized provider order entry (Campbell et al., 2006), online privacy (Debatin et al., 2009) and drug resistance (Grosser et al., 2013). All those studies focused on the undesirable (or negative) unintended consequences. However, research in unintended consequences of innovation has not been done before. Sveiby et al. (2009) analysed literature on unintended undesirable consequences of innovation. 26 articles on undesirable consequences of innovation were found, but no articles on unintended consequences. According to Sveiby et al. (2009), the main reason this topic has not been given attention is because of the so-called ‘pro-innovation bias’. In short, it means that researchers assume that consequences of innovation can only be positive. On top of the pro-innovation bias, there is a lack in literature about managing unintended consequences of innovation. Management is responsible for the outcomes of their actions and should therefore be aware of potential unintended consequences of their innovations (Tan, 2004). Supermarkets provide a relevant context for filling the literature gap of studying unintended consequences of innovation because of three reasons. First and foremost, supermarkets innovate on a regular basis, thereby providing the researcher enough data to analyse. Secondly, supermarkets have a relatively high impact on the community due to the fact that customers visit supermarkets about three times a week on average (Deloitte Branchgroep Retail, 2017). Lastly, supermarket innovate in multiple dimensions; offline, online, products and services.

Considering that unintended consequences in the field of innovation have had no attention in literature, it is desirable to broaden the knowledge about the topic and raise awareness. This research will answer the following research question:

What are the unintended consequences of supermarket innovations in the Netherlands and how do companies manage these?

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2. Theory

This chapter reviews the literature on innovation and consequences of innovations. The concept and differentiations of innovation are explained, followed by different innovation strategies a company can adopt. Furthermore, literature on innovation diffusion and adoption will be reviewed. To complete the theoretical review on innovations, also classifications of innovation consequences will be discussed.

2.1 Innovation

“Innovation is the generation, acceptance and implementation of new ideas, processes, products or services” (Thompson, 1965). In order to be able to produce innovations, a company needs knowledge, capabilities, skills and resources. Prange and Schlegelmilch (2018) state that managing innovation is one of the most important, yet difficult organizational tasks.

Innovation research can be differentiated into three types of innovation; product, process and business model innovation (Crossan and Apaydin, 2010). Product innovation focuses on the introduction of a new good or service. An example is the introduction of a smartphone with new camera features. Process innovation is the implementation of a new or improved production method. For instance, the automated assembly line of a car manufacturing company. Finally, business model innovation is a renewal in the way the company offers products or services to the customer. An example of a business model innovation is a company that starts to sell products online as well.

Another way to distinct innovation can be based on the novelty of the innovation. Researchers distinguish between incremental and radical innovation (Bower and Christensen, 1995; Christensen, 1997; Danneels, 2004; Norman & Verganti, 2014). Incremental innovations are small changes that encourage the status quo, whereas radical innovations are significant changes wherein patterns of consistency are fundamentally reordered (Tushman and Tomanelli, 1985). Radical innovations have a greater impact compared to incremental innovation, but are also characterized as projects with a high degree of risk (Keizer and Halman, 2007).

2.2 Innovation strategy

5 In addition, an innovation strategy guides companies during their search for novel solutions and how to convert them into business concepts. According to Pisano (2015), without an innovation strategy different functions of companies can easily end up following different priorities of new business concepts.

There are two ways in which companies can innovate (Brem et al., 2009; Schoen, 1967); market pull and technology push. Market pull refers to the needs of the market for a new product of solution to a problem. The need is identified by the customers and new products are developed to solve the need. On the other hand, technology push happens when the R&D department develops new products or technologies. In the latter process, there is still a link with the market as a company needs to investigate whether there is a latent need in the market. The goal is to make use of new technological insights and know-how. Therefore, technology push can be characterized as more creative, with major improvements. Market pull is in this respect considered as a replacement or small improvement (Walsh et al., 2002).

2.3 Innovation diffusion and adoption

“Innovation diffusion is the process by which an innovation is communicated through channels over time among the members of a social system”(Roger, 1962, p.5). Whether an innovation spreads among the members of a social system depends on the following five innovation attributes (Rogers, 1962):

 Relative advantages; the degree to which a product is perceived as better than the existing standard.

 Compatibility; the degree to which the product has similarities with the existing norms.  Complexity; how simple it is to for customers to understand the new product.

 Trialability; how convenient the customers can experiment with the new product.  Observability; the degree to which the new product is visible.

With these five attributes of innovation, managers have the ability to predict the likelihood that an innovation will be adopted. In addition, the attitude towards an innovation also affects the adoption rate. Rogers (1962) identified the following five adopter categories;

 Innovators. This category describes people that are very eager to try new ideas and concepts. The innovator is also willing to take the risk if an innovation turns out to be unsuccessful.

 Early adopters. Early adopters are very important to managers and serve as a role model. Based on the opinion of early adopters, managers are to a great extent able to predict the likelihood of their innovation being adopted by the rest of the social system.

6  Late majority. This group of people approach innovations skeptical and cautious.

 Laggards. The last group of people in a social system that adopt an innovation. They resist innovations and are suspicious towards new ideas and concepts.

2.4 Consequences of innovation

An innovation has no effect until is it adopted by one or more of the adopter groups. “Consequences are the changes that occur to an individual or social system as a result of the adoption or rejection of an innovation” (Rogers, 2003, p.436). Three classifications of consequences of innovations have been developed. These are:

1. Direct versus indirect consequences. If changes to a member of a social system occur in immediate response to an innovation or as a second-order result. This type of consequence is based on timing of the innovation outcome (Roger, 2003).

2. Desirable versus undesirable consequences. Is the effects of an innovation are functional or dysfunctional (Giddens, 1984).

3. Anticipated versus unanticipated consequences. Whether the changes are recognized and intended by individuals or members of the social system or not (Merton, 1936).

7 This research will focus on unintended consequences of innovation which can be (un)anticipated and (un)desirable. The green boxes in figure 2 summarize the focus of this research.

Figure 2: Overview on the (un)anticipated, (un)intended and (un)desirable) consequences of innovation. The green boxes

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3. Industry background & supermarket innovations

A supermarket is a large self-service food shop (McClelland, 1962). In 2017, a survey amongst 2250 customers revealed two interesting conclusions about customer behavior in the Netherlands. The first is that a customer visits a supermarket three times a week on average. The second is that 91 percent of the customers do their grocery shopping in a physical store, while only 9 percent shops both online and offline (Deloitte Branchgroep Retail, 2017). A physical store is preferred because of two reasons: one is that there is often a supermarket nearby the customers’ house and the other is the personal contact customers have with employees or other customers.

The food retail market in the Netherlands is extremely competitive. In 2018, there were over 6000 supermarkets distributed over 26 supermarket chains. However, not all of these 26 supermarket chains are present in every province of the Netherlands. For example, Jan Linders is only active in South-east of the Netherlands, whereas Dirk van den Broek is only active in the North-west. In addition, the number of stores varies per supermarket chain. Furthermore, many of these supermarkets have different store concepts. Some of them focus on full service such as Albert Heijn and Jumbo. They innovate continuously to fulfill emerging customer needs and thereby increase customer satisfaction. Other supermarkets focus on costs and only introduce innovations that fit with their market strategy and are proven concepts.

Supermarket innovations are costly (Expert group on retail sector innovation, 2014). This is not only the case in the R&D phase during which supermarkets have to pay teams of data analysts and researchers, but also in the implementation phase, where the consequence can be that a supermarket has to be renovated. An example of this is the self-scan system by which all supermarkets had to be renewed with less cash registers but extra price tags, information desk and self-checkouts. In practice, being highly innovative is something only large supermarkets chains can afford.

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Table 1: innovations by ten supermarket chains in the Netherlands

App Meal package Self-scan Self-checkout Pick-up point Home delivery

To-go stores Tap&Go

Albert Heijn       ‘AH to go’ 

Jumbo       ‘Jumbo city’ 

Deka-markt        

Deen        

Dirk        

Plus        

Vomar        

Spar       ‘Spar city’ 

Hoogvliet        

Coop       ‘Coop

vandaag’



Different innovative concepts have been implemented in supermarkets. Some innovations are really successful, other not. In 2009, Albert Heijn was the first supermarket to introduce a mobile app called ‘Appie. As can be seen in table 1, all companies have since then introduced their own app version of it. According to Dovaliene et al (2015), mobile apps increase customer engagement which leads to higher levels of loyalty. By doing interviews, supermarkets found out customers often complained about having to wait long in checkout lines. The self-scan system was introduced to increase convenience and therefore solved this problem (Burke, 1997). Nowadays, the self-scan systems are being used by all companies except for Deen and Vomar. The mobile app and the self-scan systems are illustrations of successful new supermarket concepts.

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4. Methods

As the introduction mentioned, no research has been done on the unintended consequences of innovation. Hence, a qualitative research approach seems to be appropriate for an academic problem solving research (van Aken, Berends, & vander Bij, 2007). Theory development is needed when a business phenomenon has not yet been addressed in academic literature” (Van Aken, Berends & Van der Bij, 2012, p.5.).Therefore, conducting interviews is a well-established method to explore new theory (Eisenhardt, 1989). For this research, semi-structured interviews were used since this allows interviewees to talk openly about their experience (Seidman, 2013) and gives the opportunity to adapt to each specific situation. In this way, it was possible to gain insights into different perceptions of interviewees, while still controlling the major theme (Yin, 2013).

4.1 Industry selection, selection of firms & selection of interviewees

This research, hence the interviews, focuses on the supermarket industry. Customers visit supermarkets multiple times a week. To fulfill the ever changing customer needs supermarkets constantly innovate. For that reason they offer nice environments for studying the outcomes of innovations. Additionally, there are 26 supermarket chains in the Netherlands. However, not all are equally innovative. This research classified the 26 supermarkets chains in the Netherlands based on innovativeness.

Based on background information and interview data, it became clear that there are two groups; market pioneers and followers. Market pioneers are companies that gain temporary advantage by making first moves in technology, product or marketing innovation (Kaličanin, 2008). Followers are companies that imitate new products or concepts (Kaličanin, 2008). The aim was to interview supermarket chains of both groups in order to investigate the similarities and differences in managing innovations. The supermarkets being investigated varied in terms of size and store concept. Besides, this research followed a theoretical sampling method which means that interviewees were selected with an eye on theoretical relevance. Therefore, there the ratio (market pioneer: follower) is not equal. For this research more market pioneers were interviewed in order to fit the goal of this research which is to understand more about the consequences of innovation.

11 Secondly, the interviewed innovation managers connected me with a professor of a Dutch university investigating highly innovative supermarket concepts. The head researcher of the university was contacted to investigate more about this collaboration and the possible innovation outcomes. The last collection step consisted of searching words as ‘innovation manager”, “concept manager” or “formula manager” on LinkedIn. This last step resulted in seven more interviewees who either lead a team of employees responsible for (digital) innovative concepts or were part of an innovation team.

4.2 Data collection

The data of this research consists of qualitative data (semi-structured interviews) and secondary data. Collecting data in this manner (i.e. triangulation) “provides stronger substantiation of constructs and hypotheses” (Eisenhardt, 1998, p. 538). Innovation managers from different supermarket chains were interviewed in order to investigate the unintended consequences of innovations from different perspectives. The average length of the interview was 60 minutes. The interview guide can be found in appendix A.

The interviews were audio-recorded and field notes were taken. Field notes help to generate follow-up questions and write down thoughts (Phillipi & Lauderdale, 2018). Additionally, field notes help to find out how cases differ from each other (Eisenhardt, 1989). The interviews were mostly held at the location of the company. In some cases the interviewee requested to have the interview by phone.

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Table 2: All persons that have been interviewed have been labelled from A to J. Company size is measured in number of stores

Company Function of interviewee Supermarket size Innovation is less

important

Innovation highly important

A Innovation manager Large (500+) 

B Innovation manager Large (500+) 

C Food innovation Large (500+) 

D Researcher & Innovation project manager Small (10-50) 

E Digital innovation manager Average (50-500) 

F CEO Large (500+) 

G Executive director Marketing & online Large (500+) 

H Innovation manager Average (50-500) 

I Digital innovation manager Large (500+) 

J Innovation manager Large (500+) 

4.3 Data analysis

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5. Results

This chapter contains results obtained from the interviews. Important questions in this chapter are (1) what are the unintended consequences of supermarket innovations and (2) how do companies manage these unintended consequences? This chapter consists of four sections. The first section will discuss the innovation development, thereby differentiating between market pioneers (supermarkets for which innovation is highly important) and followers (supermarkets for which innovation is less important). The second section will discuss four main unintended innovation outcomes, experienced by both market pioneers and followers. The third section will discuss three ways at which supermarkets are able to manage unintended innovation outcomes. The chapter concludes by presenting a framework developed based on the results this research. The goal of this framework is to visualize and link the findings of this research. Figure 3 provides an overview of the structure of this chapter.

Figure 3: Structure of chapter five; the results.

5.1 Innovation development

New product development (NPD) is necessary for the creation of products or services that satisfy customer needs and differentiate the company from competitors (Kazimierska, 2017). Data revealed that the new product development phase differs between market pioneers and followers.

5.1.1 Market pioneers

14 Results showed furthermore that market pioneers have multiple innovation teams, each focusing on a different market concept. In doing so, they analyse customer data for both the online and offline channel, perform interviews with focus groups as well as individual customers. They have their own test centers, perform A/B testing for the online channel and work with external research agencies. One supermarket chain in this category recently started to collaborate with a university in the Netherlands to investigate the future of technologies and robots in the context of supermarkets. As one interviewee mentioned:

“Nobody knows what role technology will play in the future, but the supermarket that investigates this area first will probably also be the one that gains advantage when something interesting gets out.” (researcher & innovation project manager, small supermarket chain)

According to data obtained from the interviews, the motive of supermarkets for new product development frequently starts with identifying new customer needs. This can be done through analyzing customer data or having discussions with focus groups. Customer needs were amongst others to have a faster, more convenient shopping experience. Additionally, data revealed that certain macro-trends can give rise to the development of new products. Macro trends are, for instance, aging customer population, transparency and awareness of food consumption. These macro trends impact the type of innovations as well as the way companies develop new products. The way companies develop new products has changed over the years. In the past companies used the so-called waterfall method of working. This means that they identify customer needs followed by two years of new product development. The new product was then brought to the market. However, it turned out that sometimes customer needs had changed in the meantime. Nowadays supermarkets make use of the agile working methods. Agile working is an overarching method that includes different methods and principles. Data revealed that market pioneers in the supermarket industry used the well-known ‘Scrum method’. This method divides large product development into clear, small time boxes. These time boxes are also called sprints. Usually they cover a two weeks period. In these two weeks the team works on part of the project. The number of sprints differs per projects. The more complex the project, the more sprints the project has.

15 Besides daily meetings, the innovation team also has a larger biweekly team meeting in which they reflect on the project and changing customer needs. In order to do so, they closely analyse customer data and focus group outcomes, which they take then into consideration during the development of a new product. Therefore, daily team meetings as well as the larger biweekly team meetings help a supermarket reduce the chances of unintended innovation outcomes. The difference between the waterfall method and the agile working method is visualized in appendix B.

5.1.2 Followers

The second group, the so-called followers, takes a more passive position with regards to innovating. This group indicated to have fewer stores and less budget compared to market pioneers. Additionally, their innovation teams are smaller. To give an illustration, one interviewee mentioned that their innovation team consisted of three people. This group innovates in two ways. First of all, followers analyse market pioneers’ innovations and implement certain innovations when they are ‘proven concepts’. When evidence is found at other supermarkets that these innovations increase sales or customer satisfactions, followers are eager to copy the concept. For instance, if a market pioneer introduces a new concept, followers will analyse this new concept and wait. In the meantime the pioneer, as described above is working on improvements of this new concept. After a certain period of time the innovation outcomes will be known and the follower is able to decide whether or not to implement the concept. The reason for this behavior given was that they cannot afford innovations that turn out not to be appreciated by the customer. Innovating by copying market pioneers will reduce the chance of unintended consequences for followers as market pioneers already undergo the unintended consequences and improved the concept. As one interviewee summarized:

“We are doing well in fast copying of innovations of both A-brand suppliers as well as competitors. This saves us costs while still satisfying customer needs.” (Innovation manager, average size supermarket chain)

16 Therefore, this way of innovating makes innovation outcomes less predictable since customer needs are not much involved. As one interviewee from this group explained; incremental innovations can also generate unintended consequences.

So, market pioneers and followers differ in the way they develop innovations. They both indicated innovation outcomes are to a great extent predictable, while acknowledging unintended innovation outcomes are sometimes inevitable.

5.2 Unintended innovation outcomes

In the literature review chapter, the concept of innovation and the innovation outcomes were discussed. All interviewees mentioned that unintended innovation outcomes are to them a decrease in sales revenue. This research, however, does not study decreased sales as an innovation outcome. The interview results showed that there are four main unintended consequences of supermarket innovation: 1) customer frustration related to scaling, 2) ethical unintended consequences of innovation, 3) customer resistance and 4) inappropriate use. According to interviewees all four consequences are unintended and undesirable, however inappropriate use can also be desirable as it makes innovation teams pay more attention to the design and open for further improvements.

5.2.1 Customer frustration related to scaling

One unintended consequence mentioned by almost all interviewees was customer frustration related to scaling. Supermarkets work on different innovative concepts, both online and offline. Whereas some concepts need to be implemented all at once, for example a mobile app, others need to be implemented gradually in order for the supermarket to monitor and control the outcomes. For example, they might start with implementing the concept at two stores and then see what effect this has on sales, customer feedback and customer satisfaction. If the outcomes are all positive, the company can choose to spread the concept to six stores and again monitor what happens. This is where the unintended consequence occurs. For customers it is important to have the concept everywhere available and not just at a few stores. This might induce irritations and frustrations. Even though the innovative concepts can all be carefully thought out and developed, it is difficult to implement the new concept in all stores at the same time. This is elaborated by the following statement:

17 One interviewee mentioned that the more stores you have in total (i.e. a larger supermarket chain), the more extensively a supermarket is able to test certain concepts before scaling up. They can then improve the concepts by implementing feedback from the test phase which results in a better fit with customer needs. The ability to test concepts in more stores connects to the fourth unintended consequence found in this research; inappropriate use. Through testing the concepts in more stores, the company is able to increase reliability that the concept will work and reduce the chance of inappropriate use as an unintended consequence.

Finally, one interviewee mentioned that scaling is also important on product level. On product level, supermarkets face a dilemma. On one hand, customers value affordable prices. Through scaling it becomes possible to lower the initial price with the result that customers are more willing to buy the products. On the other hand, the company needs to take into account other players in the supply chain, for example suppliers. This is elaborated by the following quote:

“Suppose we develop a very attractive marketing campaign for diapers and many customers are willing to buy this product. Then we need to take into account the capability of suppliers to restock. After all, we do not want to sell ‘no’.” (Innovation manager, large supermarket chain)

According to the interviewees, customer frustration related to scaling is an anticipated, unintended and undesirable consequence. For some concepts scaling is not important (for example a smoothie machine), while for others (for example a self-scan system or home delivery) it is important. Whether or not a concept is important is depends on the impact the concept has on the customer experience.

5.2.2 Ethical unintended consequences of innovation

18 All interviewees confirmed that the supermarket they work for has amongst others a mobile app and self-scan system. After downloading the app, the mobile app asks to share location. The customer then has to choose the store at which the customer often shops after which the app asks the customer to confirm that ‘this is my supermarket’. The customer can then use to app to find products and create shopping lists. Based on algorithms, supermarkets can recommend certain products to the customer. The same goes for self-scan systems. By linking the self-scan to the customer, the supermarket can track the needs of each customer. Interviewees mentioned that their databases save a lot of information about their customers but that by law, they are not always allowed to use the data to make recommendations. Invasion of privacy is an unintended consequence of personalization, which is an aspect of ethics. To give an illustration, an interviewee said:

“… For example, if we know someone is alcoholic. The dilemma arises because our data shows that we should sell alcohol to this person. On the other hand, we know we should not because we know the problem of this person. By law we are forbidden to make recommendation to this person.” (Executive director marketing & online, large supermarket chain)

Market pioneers also shared that they are investigating new types of technologies, such as robotics. Again supermarkets face a dilemma; on one hand supermarkets hope robotics will increase efficiency and customer satisfaction. On the other hands, robotics introduces concerns to both employees and customers. Whereas employees of the supermarket fear robots will take over human jobs, customers fear that robots will save all kinds of data about them and therefore invade on their privacy. The concerns of both employees and customers are unintended consequences of robotics. As market pioneers are usually larger in company size, they believe the consequences will affect them hard if they act in an unethical way. They are aware of the large exposure they have and therefore consider ethics as an important factor when developing and commercializing an innovation. At the same time, they indicate that robotics will be part of the future. This is supported by the following statement:

“Lots of people do not even know what happens with their data. In the future, data collection will only become more important. There might be persons that develop an aversion against the technologies that will be adopted by supermarkets, on the other hand; that is how the world will look”. (Innovation manager, average size supermarket chain)

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5.2.3 Customer resistance

Supermarkets also indicate that it is hard to battle against customer resistance as this is usually rooted. Multiple interviewees mentioned that customers do not appreciate big changes. One interviewee explained:

“We were one of the first supermarkets in the Netherlands with a self-scan system. At first, customers did not really use it. We tried to find out why not by conducting interviews with focus groups. They told us that there was nothing wrong with the way it used to be and therefore resist to use the self-scan.”(Innovation manager, large supermarket chain)

There are different reasons why customers resist new market concepts. Some customers do not want supermarket innovations at all. They just want to do their groceries. Other customers do not appreciate specific concepts such as the mobile app or self-scan that tracks all their data. This connects to the second unintended consequence found in this research; invasion of privacy.

As a result, these customers might resist innovations that invade their privacy while they, for example, might not resist meal packages as a new supermarket concept. On product level, customers might also show resistance as product innovations are usually introduced with higher prices. For example, vegan options are more expensive than non-vegetarian options. Customer resistance is an anticipated, unintended and undesirable consequence.

5.2.4 Inappropriate use

Finally, a new concept can also be used in an incorrect way as the function is not clear. For example, one interviewee mentioned:

“We developed a function in our mobile app by which customers could make a grocery list. However, customers started to use this function as their daily to do list. Things like ‘call a plumber’ were also on the list in our app”. (Executive director marketing & online, large supermarket chain)

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5.3 Managing unintended innovation outcomes

All supermarkets indicated that they closely watch they implementation of the innovation. However, the interviewees spoken to noticed that every employee in the company has a different opinion about when an innovation is successful. As one interviewee explained:

Everyone’s opinion differs in the way we should measure innovation results and outcomes. My opinion differs from the CEO and this again differs from the public opinion. (Innovation manager, large supermarket chain)

Supermarkets indicated that once they implemented an innovation, they always carefully monitor data. Amongst others, this can be sales, customer feedback, customer needs, time spent in the store or the average number of products in the shopping cart. In practice most firms seem to prioritize the financial aspect over the customer needs. All interviewees mentioned that if the innovation outcome(s) are completely intended, they will search for further improvements. Intended outcome in this case was referred to as increased customer satisfaction or positive customer feedback. Supermarkets monitor customer data such as time spend in store or average shopping basket and use this to improve their concepts. Additionally, they have conversations with groups of customers as well as individuals. During these interviews they try to find out in what manner they can improve the concept. Besides interviews, all supermarkets indicated to have an online customer panel in which customers can share their ideas for new market concepts.

Supermarkets indicated there are three ways of managing unintended innovation outcomes.

1. Provide information. This is especially the case when the unintended outcomes are related to customer resistance or inappropriate use. By providing enough information the company tries to persuade the customer to use the new market concept. This is in line with the adoption model from Rogers (1962). Rogers (1962) explained that one attribute that determines innovation adoption is complexity. In other words, if the innovation is easy for customers to understand. By providing information the company decreases the chance of customer resistance and inappropriate use.

21 3. Remove the innovation. The ultimate response is to take the innovation form the market because it is not fulfilling a customer need or it cannot be managed to remove the unintended consequence. This is the case when scaling up is not possible, for example because it turns out to be too expensive. Other causes for removing the innovation are too much ethics concerns or customers clearly resisting the new concept even after providing information or adapting the innovation.

5.4 Framework

This research found that innovation development differs between supermarkets for which innovation is highly important and supermarkets for which innovation is less important. While the first group identifies customer needs and analyse macro-trends, the latter group mainly innovates through copying of market pioneers and innovation push. Both groups indicate that innovation outcomes are to a great extent predictable however, unintended innovation consequences are sometimes inevitable. Four main unintended consequences were identified; 1) customer frustrations related to scaling, 2) ethical unintended consequences, 3) customer resistance and 4) inappropriate use. Further to that, if the innovation outcome is intended, then supermarkets will analyse customer data and feedback in order to improve the concept. Hence, three routes were identified which the supermarket can use to respond to an unintended innovation outcome; 1) provide information, 2) adapt the innovation and 3) remove the innovation.

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6. Discussion and implications

This research was set out with the aim of assessing what the unintended consequences of supermarket innovations in the Netherlands are and how companies manage these. This chapter will present theoretical and managerial implications. Limitations of this research will be discussed, followed by suggestions for future research.

6.1 Theoretical implications

Companies innovate in order to gain competitive advantage or to stay relevant (Tuzovic et al., 2018). Although innovations are carefully developed and implemented, supermarkets are nevertheless confronted with unintended consequences of innovation.

This research made four theoretical contributions:

1. Supermarket level

On supermarket level, two main factors influencing unintended consequences of innovations were found. First is the innovation development method. This research found that, compared to the past, innovation outcomes in the context of supermarkets are to a great extent predictable. This holds for both market pioneers and followers. Market pioneers are better able to predict innovation outcomes through agile working. By breaking down large innovation projects into periods of two weeks, market pioneers receive constant feedback which they can then implement in the innovation development. It became possible to guide the innovation towards a better fit with customer needs. Followers mainly implement proven concepts. Proven concepts have per definition predictable outcomes. Before a concept becomes a proven concept, it is tested extensively and thereafter improved. Although followers can also innovate by searching market concepts that fit with their strategy, these innovations were found to be incremental and therefore do not have a large impact on the customer experience.

23 2. Customer level

On a customer level, this research confirmed prior research from Rogers (1962). According to Rogers (1962) innovation adoption depends on the attitude towards an innovation. In the supermarket context found that certain types of customers are enthusiastic about new supermarkets innovations (i.e. ‘innovators’ or ‘early adopters’), while other types of customers show resistance (i.e. ‘laggards’).

Different causes might shape customer attitudes. To illustrate, one factor that determines attitude towards supermarket innovations is customer concerns about ethical aspects. While personalization on a

supermarket level is considered as an important tool to create higher conversion rates, on a customer level personalization is associated with privacy concerns. As a result customers might approach innovations skeptical or even resist them, which is an unintended consequence of personalization.

3. Types of unintended consequences

 Availability frustrations. Availability frustration is the most frequently mentioned unintended consequence of innovation. This is the result of carefully scaling up of new concept by the company. According to research “Scaling up involves adapting an innovation successful in some local setting to effective usage in a wide range of context” (Dede, 2006, p.1). This research found that scaling is especially challenging for complex innovation. Hence, for large projects supermarkets need to gradually implement the new concept in order to carefully monitor the innovation outcome. This finding is in line with earlier research in the field of scaling. According to Moore (1999), the more complex the innovation and the wider the range of contexts, the more likely a new concept is to fail. Research describes that companies must avoid to ‘replica trap’, meaning that the implement the same concept at all places. According to Wiske and Perkins (2005), companies need to adapt the concept to the local needs even if the variations are small. This is again in line with the current research; one of the ways supermarkets manage unintended consequences is to adapt the market concept.

24  Customer resistance. The third unintended consequence of supermarket innovation found is customer resistance. According to Heidenreich and Talke (2013) there are two forms of innovation resistance; passive and active innovation resistance. Passive innovation resistance results from a generic predisposition of customers to resist innovations prior to new product evaluation, while active innovation resistance results as an attitudinal outcome that follows an unfavorable new product evaluation (Heidenreich and Talke, 2013, p.3). This research found that both passive and active innovation resistance are also present when introducing innovations in a supermarket context.

 Inappropriate use. Inappropriate use of an innovation is an unintended consequence found in this research. For instance, one supermarket implemented a new function in the app so that customers could make grocery lists. However, customers started to use this function as their daily to-do list. No information was found on this topic in the literature.

4. Propositions

Based on the research done and the discussion of the results, two propositions can be made. Propositions were introduced because there seems to be support for these statements, yet data was found not to be strong enough to made validated conclusions.

Proposition I: ‘Unintended consequences are more likely to occur with service innovations than with product innovations’.

During the interviews lots of examples of innovation projects were given. Amongst others Tap to Go, QR code payments and delivery methods were mentioned. These are all service innovations. Service innovations have more chance unintended consequences as they are found to be more complex to scale (Pietro et al., 2015), introduce more ethical issues (Nathan, 2015) and might increase customer resistance (Mani, 2018). Future research might exploit this proposition.

Proposition II: ‘Unintended consequences are more likely to occur with offline innovations than with online innovations’.

25 For example, Amazon is able to test and adapt small changes in its website every 11.6 seconds (Humble, 2014). Future research might exploit this proposition.

6.2 Managerial implications

This research made a contribution to current literature by offering a framework (figure 3) illustrating unintended consequences and how to manage unintended consequences. Data from this research showed that supermarkets developed three ways of managing unintended consequences. First is to provide information. Prior research found that providing information can increase customer satisfaction (Dutka, 1993; Ilieska, 2013). By providing information, the supermarket is able to reduce customer frustrations, ethical concerns, customer resistance and prevent inappropriate use. If providing information is insufficient, then the supermarket can adapt the innovation. This measurement is performed if an innovation could be further improved to give additional customer satisfaction. Prior research confirms that innovations sometimes need to be adapted, in order to fulfill customer requirements (Felix, 2015). Finally, the supermarket can remove the innovation. This measurement is performed if there is no possibility for the innovation to succeed.

6.3 Limitations

26

6.4 Recommendations for further research

This section provides five suggestions for further research about unintended consequences of innovation.  Extend the dataset. The current research conducted ten interviews at three supermarkets chains. It

is suggested to repeat the same research but taking into account more supermarket chains and interviewees from different functions. It will increase the reliability on unintended consequences of supermarket innovations.

 Longitudinal study. It is suggested to start a longitudinal research. Longitudinal research employ continuous or repeated measurements to follow particular individuals or cases over longer periods of time- often years or decades (Caruana, 2015). Employing a longitudinal research will allow to objectively follow the complete innovation process instead of asking the interviewee afterwards if certain outcomes were (un)anticipated, (un)intended and/or (un)desirable.

 Incorporating new forms of supermarkets. This research investigated traditional supermarkets but did not take into account new forms of supermarkets such as Picnic. Picnic is a company that has a completely different business model compare to the supermarkets investigated in this research. Whereas supermarkets as Albert Heijn, Jumbo and Dekamarkt all have physical stores as well as a website, Picnic is a supermarket that only exists online.

 Different industries. The current research is based on a very specific industry, namely supermarkets in the Netherlands. It is suggested to repeat this research in other industries. For example, future research might be expanded to the retail sector. Retail includes not only food but also fashion. The fashion industry is innovative. Product lifecycles are measured in weeks. Therefore it is interesting to see what the unintended consequences of innovations are in this industry.

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Appendix A: Interview guide

1 Achtergrond

1.1 Kunt u kort iets vertellen over het bedrijf? 1.2 Kunt u iets kort vertellen over uzelf? 1.3 Wat is uw positie binnen het bedrijf?

● Aantal jaren werkzaam bij bedrijf ● Aantal jaren werkzaam bij die functie ● Aantal jaren werkzaam in bedrijfstak

1.4 Wat zijn de taken van uw afdeling, waar zijn jullie verantwoordelijk voor?

2 Innovatie

2.1 Wat zijn recente innovaties vanuit [bedrijf]? 2.2 Wat is het belang van innovatie in het bedrijf? 2.3 Kunt u iets vertellen over de investeringen in R&D?

2.4 Hoe komen deze innovaties doorgaans tot stand? (denk aan intern development, externe acquisitie of combinatie?) 2.5 Zijn jullie innovaties radicaal (= nieuw voor jullie of de klant) of incrementeel (= verbeteringen van

product/service/process)? Of beide?

→ Bij beide; wat is de ratio radicaal/incrementeel?

2.6 Wie zijn er doorgaans het meest betrokken bij de innovaties (stakeholders)? 2.7 In hoeverre wordt de klant betrokken bij het innovatieprocess?

2.8 Wat is de mate van success in het algemeen?

3 Managing consequences of innovation

3.1 In hoeverre zijn de gevolgen van innovaties te voorspellen?

3.2 Welke methode gebruikt u om gevolgen van innovaties te voorspellen? → Is dit voor elke innovatie hetzelfde?

→ Zijn alle gevolgen te voorspellen?

34 3.3 Wat is uw ervaring met het voorspellen van gevolgen van innovatie? (wat werkt wel, wat werkt niet, wat is altijd een

probleem?)

3.4 Hoe reageert u in het geval een innovatie niet goed uitpakt? (stappenplan?) 3.5 Zijn de gevolgen de classificeren?

4 Specific project

4.1 Kunt u een voorbeeld geven van een recent doorgevoerd innovatie project? 4.2 Hoe heeft u een inschatting gemaakt van de gevolgen voor dit project? 4.3 Kwamen hier onvoorziene gevolgen bij kijken?

4.4 Hoe ging de communicatie? 4.5 Wat kon er beter?

5 Is het mogelijk vervolg vragen te sturen?