Article by Carol Spieckerman, 06/12/13

Walmart annual shareholders’ week events are always surprise-filled, get-out-the-pom-poms, feel-good fests, and last week’s was no exception. Last Friday’s crescendo event, led by master of ceremonies Hugh Jackman, featured a star-studded line-up that included John Legend tickling the ivories, Kelly Clarkson belting out her latest single, Tom Cruise teeing up Walmart’s good deeds, and Jennifer Hudson providing the send-off. Once again, Walmart brought on the wow.

As always, key themes and visual cues were sandwiched between acts and hammered home often, including opportunities for career advancement within Walmart, its veteran hiring and women’s empowerment initiatives, diversity, globalization, and adamant avowals of corporate integrity. The media hasn’t wasted any time documenting the controversies currently surrounding a couple of these items and I’m not going to pile on here.

The fact is, retail as a whole is in a state of upheaval as retailers attempt to figure out how best to leverage their growing portfolios of physical, digital, social, local, and mobile assets. Contrary to much of what is being put out in the media, deciding whether or not to jump into these spaces isn’t what’s keeping retailers awake at night, as most, including Walmart, have already taken many plunges. In fact, Walmart has pursued new frontiers earlier and with more verve than its rivals. The sheer number of initiatives that Walmart has undertaken over the past couple of years and its willingness to challenge legacy systems make it a fascinating study in retail future-proofing. As the world’s largest retailer hits the mid-year mark, much can be learned from the way it has gone about building its platform on several fronts. However, simply tracking the multiplying news flashes coming out of Walmart can make it difficult to see the full picture.

Below, I frame Walmart’s tactics in three themes that encapsulate how it serves as a bellwether for retail’s transformation, throwing in a few predictions on what its comprehensive approach might mean for retail in the future.

1. Distance makes innovation grow faster

Today, determining whether Walmart was the first retailer to launch a satellite tech lab through its establishment of @walmartlabs in 2011 is splitting hairs. The company has undeniably influenced others to follow its beyond-headquarters model (Target, Home Depot, Staples, Tesco, and Marks & Spencer are among those that have since followed suit) and the pace of Walmart’s subsequent technology acquisitions and solution launches remains unprecedented in retail. Shopycat, Polaris, Get on the Shelf, and Goodies are just a few of the significant technology innovations and campaigns that have been developed and launched in the two years since @walmartlabs was established. Just yesterday, predictive analytics startup, Inkiru was added to Walmart’s California-based brain trust in the wake of its acquisitions of two Bay Area start-ups, One Ops and Tasty Labs last month. Just as with the Kosmix acquisition that formed @walmartlabs’ foundation, all three start-up’s founders have been encouraged to stick around for a while and share their knowledge.

Walmart’s reputation for insularity and favoring home-grown solutions (and people) isn’t just undeserved; it should have been already been shattered. The vast majority, if not all, of Walmart’s top global e-commerce executives, including in the @walmartlabs division, have either been gained through its acquisitions or recruited from outside, non-retail companies. In fact, Walmart CEO Mike Duke wasn’t too proud to personally woo Silicon Valley wunderkind Jeremy King for the organization via teleconference.

Walmart’s mold-breaking decisions to infuse its e-commerce organization with outside talent and to shun micromanagement and proximity demands in favor of empowerment and autonomy have garnered game-changing results. Walmart’s first quarter ecommerce sales spiked 30% and Duke has stated that its global ecommerce sales volume is expected to hit $10 billion this year. Regardless of which individual launches gain traction, the entire industry will benefit as Walmart accelerates mass adoption by escorting millions of its customers to new technologies.

2. Multitesting is the new mandate

Walmart’s ecommerce innovation pipeline would be impressive enough on its own, but the company has also concurrently embarked on several other major initiatives, including the opening of additional on Campus stores, the accelerated rollout of its Neighborhood Market and Walmart Express formats, the launch of ecommerce delivery lockers in select Walmart locations, multiple mobile shopping app launches such as Scan and Go, ongoing entertainment exclusives and cloud-based media advancements, and consumer financial solutions such as its Bluebird partnership with American Express.

Of course, Walmart could never have become the world’s largest retailer by tunneling in on one thing at a time, but its past eras have tended to be defined by big, singular visions (think sustainability). You still can’t attend a Walmart executive meeting without hearing a nod to its culture, but these days it appears to be emulating the cultures of the start-ups that it fancies as acquisition targets.

Walmart’s experimentation, agility, and growing comfort with keeping many pins in the air makes it mighty hard for competitors to get a fix. That’s quite a departure for the company, and quite an advantage.

3. Layering platforms secures scale

As diverse as Walmart’s recent choices for acquisition and partnership have been, most have one thing in common: they are platforms and not just companies with capabilities. More specifically, they are platforms that offer scalable innovation when layered onto Walmart’s platform. Its majority stake in Chinese e-tail giant Yihaodian offers Walmart much more than a digital shingle in an emerging consumer market. Yihaodian’s platform gives Walmart instant digital access to millions of newly-minted middle-class shoppers, same-day delivery capabilities in key Chinese cities, and next-day service in many more. Walmart’s investment also insures that Yihaodian will continue to compete aggressively in its home market as the Chinese ecommerce competition heats up.

On the social scene, Walmart’s relationship with Facebook is an example of how it has selectively pursued alternative, why-buy-the-cow strategies that leverage social synergies. Facebook’s cryptic reference to deepening its relationship with Walmart was the only meat fed to speculators on the heels of chief executive Mark Zuckerberg and COO Sheryl Sandberg’s visit to Bentonville last year. Walmart went on to buy two billion ads on Facebook, three times more than in 2011, and Walmart noted unprecedented levels of engagement from the blitz. In a December presentation, Walmart CMO Stephen Quinn made it clear that the coziness between the two companies will continue, and Walmart’s just-announced hiring of Brian Monahan as vice-president of marketing for Walmart.com U.S. points to it forging new platform partnerships in the digital space. Monahan was managing partner at Magna Global, the media market research unit of Interpublic Global, where he was credited with securing key partnerships with AOL, Facebook, Google, Microsoft, and Yahoo.

Recommended Reading: 

Social, Local, Simple: Insights From Walmart CMO, Stephen Quinn Part II

Walmart’s humble, never-look-back culture ensures that you won’t hear its executives boasting about having first-mover mojo. Walmart is setting a standard by exploring many new frontiers simultaneously and just early enough.

Where it’s going next:

• If others choose to fully emulate Walmart’s model, the impact that retailers’ technology labs will have on their mainline organizations can't be underestimated. At Walmart, merchant teams and others at HQ are being challenged to integrate innovations coming out of @walmartlabs and Global Ecommerce, rather than placing them in the role of gatekeeper. If multiple retailers are incubating and testing tons of fresh ideas and expecting their traditional teams to rise to the innovation occasion, the retail talent pool will be enriched, any remnants of old thinking will be quickly eradicated, and innovation will advance much more quickly across the board.

• The influx of non-retail technology talent from acquisitions and active recruiting on the part of retailers will change the retail leadership trajectory. Years ago, Walmart broke a long-held retail leadership development paradigm as it began moving people around its organization in various roles including merchandising, operations, logistics, and marketing. More recently, stints in its international division have been the boxes to check for future leaders. Retailers will soon reach a decision point. Will technology incubators continue to operate under a separate model that encourages high churn rates and detachment, or will retailers implement retention initiatives at their satellite sites and begin to rotate their best geeks into roles at HQ? I’m rooting for the latter. Retail will be better for it and retailers can’t afford to send technology talent to competitors’ labs. In terms of retail leadership paths, digital will be the new international.

• Walmart has been quite aggressive in pursuing acquisitions and partnerships with other platforms, and is pouring resources into ecommerce and digital innovation. Most of its competitors appear to be dabbling by comparison, particularly in the digital space. Despite Walmart’s lackluster sales performance (it eked out a 1% first quarter increase over last year), as its customers across the globe make the digital migration along with Walmart in greater numbers, its sales numbers should begin to reflect the shift and payoffs will materialize. Moreover, the more resources that Walmart dedicates to digital, the faster the shift will happen for everyone else. Retailers that sit on the sidelines or those that play wait-and-see with ecommerce and mobile are likely to find their numbers plummeting. In the meantime, retailers that want to get ahead of the game would be wise to follow Walmart’s example by making platform partnership experience a top criteria for new marketing hires. Digital experience is already table stakes.