Big Interview: Iceland on start-ups and innovation

Iceland may be late to the start-up trend, having just completed its mentorship and judging responsibilities for the Venturespring Future of Retail Challenge, but the retailer is very keen for this engagement with early-growth companies to continue.

Speaking to Essential Retail, joint-MD of Iceland Foods, Nick Canning, says the retailer was spending a lot of money with consultancies and technology partnerships trying to keep on top of the latest digital innovations.

"But as a relatively small company in a huge market, we took a different view," he says. "We're an entrepreneurial company and what keeps us going when others have perhaps fallen by the wayside, is our driven commitment to what is right for our customers and a way of going about doing things."

Canning says getting involved in the Venturespring Future of Retail Challenge allowed Iceland to support "real entrepreneurial IP-generation" at the lowest level. "And that's a great example of how us ourselves began."

The winner of the competition – also backed by Argos, Unilever and IBM – was a start-up called Universal Basket, which enables consumers to shop across the internet with a single account. But Iceland's chief digital officer, David Devany, says over the course of the competition he was exposed to start-ups from all areas of retail technology, including in-store queue elimination, Bluetooth technologies, paperless receipts, online recommendations.

"Across the board, for me, it was really exciting and we met some really fast-paced companies and there was lots of innovation," he describes." There were lots of different options to look at, and a lot of the start-ups were solving problems we can install today, such as paperless receipts – for us anything like that where we can get customer details and eliminate queueing would be beneficial.

But with so many digital options, where do retailers even begin to integrate these new technologies? "We have to prioritise and take a look at the current roadmap," explains Devany, who joined Iceland to head up a digital team of 28 from Claire's Accessories last month. "We look at all developments, analyse what best fits our customer and we need good ROI as well – it's got to be a good mix of everything, as well as assessing what we can do quickly and what will take more time."

Canning says the competition was a learning experience for Iceland as much as it was for the start-ups. Despite launching its home delivery service 20 years ago, this is the retailer's first experience with early-stage start-up companies and he says there was such a myriad of choice. "What we found was there are whole loads of people out there working on a bunch of problems, close to the stuff we're looking at," he describes. "And we learnt we're not always best placed to solve all problems in-house, and sometimes you have to look outside and see what others are doing."

Canning reiterates that customer experience is everything at Iceland and start-ups look at the digital challenge from the perspective of the customer need, unlike a number of the big incumbent IT suppliers. "We have to think and act differently to try and mould their solution back into the business."

Devany adds: "When we talk about start-ups, they're without boundaries and they do things with pace and you find they're more likely to take risks which gives you the innovations."

He describes these small companies as a "breath of fresh air", but warns retailers have to be realistic and look at their own internal projects and timescales.

"We've got a lot of work we need to do internally," Devany explains, referring to upgrading legacy systems. "And we have a base line and understand our development, but if a start-up fits in with that, that's great – but we have a lot of internal systems to sort out first."

Could Devany imagine a time from now without the Oracles, Microsofts, and SAPs of the world? A world purely dominated by super-innovative small companies and agile digitally-savvy retailers?

"There's always going to be a place for the big IT players – especially in the short-term there definitely won't be a place where we're not using the big players," he answers, noting how there's always a risk that a start-up could go bust.

"It's about scale," chips in Canning. "It's something start-ups do well, but we recognise the limitations. We're running a business which conducts nearly five million transactions a week – the tech needs to be rock solid and work. What we're looking at is how to enhance the customer experience rather than replace the legacy systems."

Looking further afield, Canning says he keeps an eye on the food service industry for inspiration on how to better the Iceland business. "It's fascinating to watch business liked Deliveroo grow and it's an interesting benchmark for us, looking across our food and our services across everything we possibly do."

He says the grocery industry needs to keep pace with developments in non-food. "We're a business where anything upward of 40 items goes into an online basket and we have to deliver it in a temperature-controlled environment making sure the customer gets it at its absolute best, it's a very different business than delivering one or two items which are not temperature controlled," says Canning. "So we watch very carefully what's happening technologically in the industry and apply it back to us."