The vertical growth strategy of the decathlon group : building a portfolio of powerful and innovative own brands
3In contrast to an external growth scheme based on the creation of a portfolio of strong brands by purchase / acquisition as most companies usually do on many markets (Ries & Ries, 2000; Aaker & Joachimsthaler, 2001; Lewi, 2005; Kapferer, 1997, 2006…), the Decathlon Group has invented a model of business growth based primarily on the development of a portfolio made up of new own brands
[3][3]Even if, recently, the company also took the way of the…. At the same time, the group has developed, its own R&D department, an original management system of knowledge and innovations. In this way, the Decathlon Group is different from its main competitors such as Intersport and Go Sport which have not chosen to design and manufacture their own innovative and strong sub-brands. The latter has many own brands, but they are not built on characteristics related to technical performance or innovation (Lebrun, 2006). Today, the Decathlon Group has embarked on an upstream
[4][4]The term “integration” does not seem, in the species, the right… vertical expansion without seeking to enhance the attractiveness of its sales outlets. By creating specialized brands that directly compete with international sports brands, the group seeks to control the market from the top (making faster, better control of prices…), while maintaining its position as a leading French specialized retailer. As is usually the case with all big international companies, this strategy asserts its wish to “control” the whole upstream-downstream value chain to ensure better profitability (Aaker, 1996). However, when one retailer “controls” the whole channel, we notice an impoverishment of its offer along with a decrease in the number of referrals due to better coverage of its profitable brands. In its stores that focus on “in-house” goods produced by “passion-brands”, the Decathlon Group retains much better margins. And, in order to make their conquest of the market successful, each new passion brand is given an autonomy variable from one brand to another in terms of R&D, budgets, and human resources.
4With a 2007 sales turnover of 4,476 Mde, including 56.60% realized outside of France, with more than 400 stores and more than 40,000 employees on the payroll, the Decathlon Group is a company which is involved in a true strategy of “expansion intrapreneuriale” whose mainstay is the constitution of a portfolio of new brands, not only able to launch new lines of products on the market but also able to durably transform a whole market segment. In 2008, these new sport brands were: Quechua, Kipsta, Domyos, Geologic, Aptonia, Inesis, Wedze, Tribord, Kalenji, b’Twin, Géonaute, Fouganza, Artengo and Oxelo. Each one of them is positioned on a precise sporting branch of industry: b’Twin, for example, is specialized in mountain bikes and road bikes; Wedze in boardsport on snow, and Kalenji in walking, running and cross-country running. Together, these “passion-brands” make the Decathlon group one of the first ten world’s manufacturers of the sector behind Quiksilver, Nike, Adidas, Timberland, Columbia, Salomon, The North Face and Patagonia.
5By giving an autonomous operation and R&D (variable depending on the case) to each “passion-brand”, the group’s ambition is to acquire specialized brands capable of lasting shine on the international scene. Each one focuses its resources on a number of priorities and rationalizes the human and material resources needed to launch innovative goods. As a result, in 2008, no fewer than 12 new goods were rewarded with several design prizes (IF Design Award; Reddot Design Award & Design Observer). If the whole competitive advantage of Decathlon was based, until now, on the attractive prices of its sub-brands (but to the detriment of the performance of the products), the group’s new objective is a rapid rise in technical performance through its innovative “passion-brands” with the aim to match exactly the expectations of sports enthusiasts. Even premium products are being studied, whereas they were previously reserved for specialized and old brands like Eagle, Lafuma (outdoor) or Helly Hansen (sailing & boating). “The Decathlon example is interesting to follow for it shows that companies can pass from one policy to another. For twenty years, the company has been following a single brand policy which, given the success of the scheme, has created an unexpected effect: the brand is almost ‘soviet’. Everyone wears Decathlon goods and the brand has become a sign of standardization. With the strong reactivity that characterizes it, the company decided to change policy overnight and, from now on, to grow under specialized own brands anywhere in the world” (Kapferer, 2006, p. 185). Finally, the Decathlon Group follows the strategy of a big company willing to increase its market share by seeking to enter high margin segments (Michel & Salha, 2005), although it was rather forced to do so. Indeed, the solution of sports specialized superstores – invented by Decathlon and successful either in France or in Europe - is a failure in countries where consumer patterns are different. Not to mention that, on some markets, particularly in the United States, there are situations of quasi-monopoly on behalf of local retailers (barrier at the entry) which cancel any thought of expansion of a newcomer, even a big one. Therefore, to become a producer instead of being only a retailer, has not only been an economic necessity but also a quasi-obligation in order to develop.
6On a market where the technicality of the products and the technological progress are powerful consumption levers, the competitive success of specialized brands will inevitably require the development of an innovation and creativity management system particularly productive and efficient. To take up this challenge, the Decathlon Group has implemented pioneering strategies that are likely to outdo the strategies of leading brands with much higher marketing, communication and sponsorship budgets. For example, if the “passion-brand” Tribord or Quechua develops today a policy of new products similar to that of international sport brands, it also chooses a widening spectrum of customers with sectional positionings, ranging from the
first price ranges (the X-basic swimming goggles of Tribord are sold 3 e) to virtually
premium ranges. This rise reflects a new step in the development of the group brands. At the same time, it is a challenge to offer consumer goods that are, on one hand, at the best quality-price ratio, and on the other hand, the result of advanced studies in the field of ergonomics, design, bio-mechanics, physiology or choice of materials. In order to obtain, for each of its “passion-brands”, products as technically advanced as those of the best sports brands, the Decathlon Group must seek for the excellence in its R&D activities, particularly in the innovation process.
A federative innovation process and a R&D activity divided into sectors
7Within the framework of many and various approaches, much authors have been interested in innovation processes : from the viewpoints of economic changes and progress (Schumpeter, 1939; Freeman, 1990; Kline & Rosenberg, 1986; Dosi, 1982; Amendola & Gaffard, 1988, etc.), of social and organizational changes (Rothwell, 1994; Chandler 1990; Callon, 1994, etc.), or from the sociological and managerial viewpoint (Crozier & Friedberg, 1977; Mintzberg, 1982; Akrich, Callon & Latour, 1988; Alter 2000, etc.). But whatever currents and theoretical origins, the innovation process shows nevertheless a dual permanent feature. First, it is an integral part of the goods launched on the market, and thus, implicitly, of their success (or unsuccess) with users. Then, chronologically, the process is always the same: gestation, development and diffusion.
8If, in the sports industry, the issue of the diffusion of innovation has been approached under the technological angle, in particular through the diffusion of new materials (Desbordes, 1998), on the other hand, the issue of the production of ideas, of creativity and procedures, more generally the upstream part of the innovation process, has never been studied with specific depth (Hillairet, 2006). Thus, our study will focus on the R&D of the Decathlon Group, especially on how innovative ideas are created and managed. According to us, the analysis of the innovation management in this company is part of the prospects of Akrich, Callon & Latour (1988) to make progress in the art of managing innovations: understanding the mechanisms by which innovations succeed or fail to develop principles that serve as guide to action. To a great extent, the success of the Decathlon Group innovations and “passion-brands” depends, first of all, on an excellent understanding and coordination between the various components of the company involved, but also on an atypical innovative projects management system.
9With regard to the emergence and implementation of innovative ideas, whether at the individual or the organization level, the genesis of new solutions has always to go through a succession of identifiable informal and cognitive steps (Deschamps & Ranganath Nayak, 1997) that widely participate in the mechanisms of creativity (Moles & Caude, 1970; Prost, 1995). This progression in the upstream part of the innovation process is indeed the core of the discovery step (Ait El-Hadj, 1989) and of the R&D in medium to large organizations, but also the core of the business project in smaller structures (Burgelman & Sayles, 1986). If this progression depends on the know-how, the perception, the value systems of the company and on the quality of its innovative behaviour, it also depends greatly on the ability to innovate of the people involved in new goods development projects (Robinson & Stern, 2000). Indeed, the steps of creativity that structure the start of any innovative project are largely determined by the creative skills and behaviours of consumers (Kao, 1989; Amabile, 1988). On the other hand, if it is no longer necessary to prove the role and the importance of the creativity management in the success of innovations (Heunks, 1998; Fitzgerald, 2000; Brabandère, 1998), does this creativity management constitute a competence factor in the success of a company? In the case of the Decathlon Group, some indicators appear to be moving in that direction.
10In companies, innovation is driven by a proactive management of ideas that would include three distinct steps: first of all, a step of
fertilization, then a step of
sowing of the new ideas, an lastly, a step of
incubation (Deschamps & Ranganath Nayak, 1997). The innovation process implemented within the Decathlon Group follows this modelling. It also divides into three great steps: the
upstream step (a), the
project step (
b) and the
marketing and communication step (c).
Methodological elements of research
On the methodological level, this study about the innovation management within the Decathlon Group is initially based on studies about the sports industry innovations (Desbordes, 1998, 2001, 2002; Chantelat, 1992; Hillairet 1999, 2005, 2006), about the sports markets and industry (Wolsey & Abrams, 2001; Ohl & Tribou, 2004; Mullin & al, 2000; Scully 1995; Stotlar, 2000) and about the sports brands (Bouchet & Hillairet, 2008). Then, it is based on the expertise on the new products marketed by the Decathlon Group “passion-brands” since 2004. A thorough analysis of articles taken from professional reviews (particularly directed towards the industrial design and the sports articles market) usefully supplemented the knowledge of the company’s innovation management. Lastly, this study is based on a research carried out by Richard & Abdourazakou (2008) who interviewed the Director of the innovation of the Decathlon Group “passion-brands”, Irwin Wouts. On this last aspect, the interview as collection method of primary data was chosen because of its absence of formalism. According to the authors, this method, not very directive, seemed more adapted to an executive officer unfamiliar with more sophisticated techniques. By letting the interviewee structure his answer, it is relatively easy to understand its logic before rationalization a posteriori. Moreover, the choice of the interview procedure makes it possible to establish a trust relationship with the interviewee so that he can speak more easily about the innovations developed by its company.
11(a) The
upstream step called internal
step of vision, aims to identify opportunities for new targets (customers and market segments), new sales approaches (i.e. the launch of a national campaign of advertising spots for the Wed’ze skis and snowboards, the Quechua Forclaz Light polar, the Kalenji Deefuz T-shirt or the b’Twin bicycles) and new marketing approaches (i.e. the launch of websites such as
www. prêt-partez. decathlon. com where consumers have the opportunity to try more than 200 sports outfits for girls and boys on virtual models). In the company, this upstream step finds its concretization in 2-days creativity workshops gathering designers, R&D engineers and people in charge of marketing. Each workshop gives birth to 200 to 300 ideas of products or improvements (a few of which only will be taken into account). According to Irwin Wouts, director of innovation of the Decathlon Group “passion-brands”, this step allows to “set relevant targets and high potential for innovation”. In this process, the definition of the need according to a specific and latent use is essential to start the development of a new good. The listening of the customers, the feedbacks coming from the shops and the observation of sportsmen in the field, are the missions assigned to the product manager who will have to draw up the specifications. Then, in collaboration with advanced research and designers, the process engineers and the components engineers of Decathlon take over to establish the technical specifications (functional definition, materials, assembly processes, etc.).
12(b) The
project step is characterized, first, by a strong creative spirit in order to find innovative ideas that are achievable within a reasonable price. This second step incorporates all Decathlon R&D activity such as scientific research programs and design and ergonomics studies. If these studies are conclusive, the head of the prototyping industry will make a first prototype that is subjected to “torture tests” in a laboratory then to the “testers club”, a panel of customers, high-level athletes and people from the company staff (the “decathletes”). Chosen for their skills, their level of expertise and their critical mind, they have to monitor the quality and safety of the future product. The final prototype will be made after intensive use tests and the final technical specifications will be established. Then, the various offices of production, in France and abroad, will take over. The mass production of the products will be carried out by a Decathlon subcontractor who will be responsible for the supply of components, the quality of the series produced, the delivery in due time to the different logistic platforms of the group, and so on.
13(c) The
marketing and communication step is the third step of the Decathlon innovation process. It encompasses both the implantation of the goods in stores (merchandising) and the definition of a media plan to be implemented.
14Depending on the nature of the projects, the importance of these three stages may be variable. While some projects will be inspired by the creativity of specialists and goods experts of the Decathlon Group, others, on the other hand, will be triggered by opportunities given by the observation of the markets and changing practices. According to P. Freychat, the Decathlon R&D Director, if we look at the very successful innovations of these last ten years (
Flex concept, backpack
Symbium, bra
Topping Bra,
Self Heat gloves,
Supportive tights…), inspiration comes mainly from the observation of the use and simplification of the use like the
b’Twin bicycle or the
2 seconds tent. Besides, the categorization of innovations invented by Decathlon is based, along with the goal of technical improvement, on this desire to simplify the use (
figure 1). Eventually, the process varies according to the nature of the project and its actual intentionalities. But in any case, the project managers of the Decathlon Group try to “feed” the process both in quantitative (more plans for new goods are put in parallel to create a positive collective emulation) and qualitative modes (generation of many ideas with high growth potential
[5][5]Beyond the R&D units, in order to encourage the emergence of…). Many ideas come from the field of action. Staying in touch with places of practice, listening permanently to the sportsmen, setting a particularly dense network of technological and scientific observers and partners eventually determine a rather high threshold of creativity. Among the competitors, this creativity can be stimulated in different ways. At Nike for example, ideas and opportunities to develop new goods germinate in the “
Innovation Kitchen”. It is in this unique place, located on the Nike campus, that were born most of the ideas underlying the biggest commercial successes such as Michael Johnson’s golden spikes, Cathy Freeman’s wetsuit, or all Air Jordan models produced since 2001. The concentration of the whole of Nike’s creativity in an only place is the natural outcome of the increasing business of the U.S. sports giant (basketball, football, athletics, horseback, etc.), the direct effect of which is to reduce the resources allocated to design new goods. If tens of millions dollars have been spent for the “
Innovation Kitchen” since the beginning, approximately 90% of ideas that are experimented are never taking shape. At Nike, one prefers having a great deal of ideas in order to retain only the best ones. The resources invested in innovation and R&D by the American firm have no equivalent in the world.
15Since its creation in 1976, the Decathlon Group has bet on a selective innovation in order to offer high-performance sports items thanks to the competence of its Research Center. But, unlike some major sports brands, the innovation culture of the Decathlon Group does not only focus on the material and technological dimension (processes, materials…). On the contrary, since 1997, the group has developed a tool, the Decathlon Research Center, the objective of which is to study the human body in motion. The studies made there are used to improve health, safety, comfort and pleasure of people practising a sport. In total, nearly 300 engineers and researchers work in the field of engineering and innovation. For more efficiency, the R&D Research Center is structured on the mode of concentric radiation. The first circle consists of a hard core of about thirty full-time specialists in three areas: anthropometry, biomechanics and thermic physiology. These three fields cover roughly 80% of the Decathlon Group R&D. Around this core, there are three additional circles. Firstly, a team of a dozen PhDs working on specialized topics during the time of their thesis (3 years, in general). Secondly, a team of students coming from engineering schools and from the university (2nd cycle – master) works on projects during six months. Finally, the third circle of skills consists of forty partner institutions: university laboratories, engineering schools, technical centres (i.e. the Technical Center of Leather and Footwear: physiotherapists, podiatrists, doctors…). The innovation process efficiency will get most of its substance out of this perfect union between these various circles of skills.
16Around this concentric and centralized operation of R&D on all major projects and technological development programs, the Decathlon Group has established a “decentralized” research activity (whose importance is variable depending on the case) at the level of “passion-brands” that have obtained a certain autonomy in this matter. Thus, Quechua or Tribord have acquired knowledge and skills allowing them to run the development of new goods by themselves, the first one in the field of water sports, the second one in the field of mountain sports. They have their own R&D engineers, designers, stylists, technicians. In the end, a sprawling and collaborative R&D has been built within the group. One can even speak of a “subsidiary” of the engineering with delegation of projects and programs. Each “passion-brand” has developed an expertise in its field with a strong sectoral expertise (snow skiing, fitness, running, riding…) that it may share, if necessary, with other R&D centres of the group. Ultimately, each brand has an engineering department to develop new goods concepts, whereas the Decathlon Research Center is in charge of basic research related to the human body. From now on, all the Decathlon Group innovations are the product of this original structure and some very promising ideas.
17Beyond its expertise in analysis of the movement and the athletes’ body on one hand and in the design of sports goods on the other hand, the Decathlon R&D privileges a form of permanent and systematic creativity which leads to a great intellectual flexibility and a deep broadmindedness. With regard to Quechua, for example, there is somebody whose job is to develop innovation and run projects. This person has a certain ability to get used to changes, to breaks and to risk-taking. Through the creation of this job, the Decathlon Group gives itself the means to develop the winning combination of ideas production / opportunities for projects with high development potential. The organization of R&D, especially creativity, allows a permanent permeability to the outside world. “We regularly meet inventors and we are open to all proposals” says Irwin Wouts. Besides, it is not uncommon that proposals for new goods and ideas coming from outside have greater weight.
A dual management system of innovation and creativity
18If the technical nature of goods directs part of the sports brands innovation process, non-technological determinants, especially organizational and human capacity to carry out an innovation project, also play a leading part. They would even be the core of the success model of the Decathlon Group and its “passion-brands” (Richard & Abdourazakou, 2008). According to the
approach by resources and the concept of “
core competencies” (Hamel & Prahalad, 1995), it is possible to reconstruct
ex ante an innovation approach. In modelling the
act of the company, we bring out specific organizational skills (Métais, 1997). The concept of resources or strategic assets derives from the desire to accurately describe the full potential of a company. It allows us to identify the basic entities which make up the innovative potential of a firm (Dierickx & Cool, 1989; Peteraf, 1993; Wernerfelt, 1984). The resources significantly involved in the success of innovations must necessarily be used to create some customer value (Barney, 1991; Rindova & Fombrun, 1999). If they are tangible or inviolable assets belonging to the company (Wernerfelt, on 1984), they are more or less complex to build - or to acquire – and it sets their power of differentiation (Grant, 1991). In these terms, the innovation skills of a company will then be defined as being the capacity to carry out a task or an activity thanks to the good use of the
available resources. However, resources and capacities should not be confused. If a resource is an observable asset which can be evaluated and exchanged just like a brand, a plot of land, a licence or a patent, a capacity is not observable (thus necessarily intangible). It can neither be evaluated nor partly exchanged but only as a whole (Makadoc, 2001). Competences of a company can be approached under the topic of distinctive competences (Selznick, 1957), that is in taking into consideration fields where the company in question excels. Consequently, an implicit bond appears between the resources and the competences (Hofer & Schendel, 1978), insofar as the latter are, ultimately, a convenient association of the whole entrepreneurial resources. In other words, the organisational capacity of a company would be determined by its aptitude for the deployment, the combination and the good coordination of its own resources, competences and knowledge (St-Amand & Fox, 2004).
19According to us, within the Decathlon Group, perfect alliance between the available resources and the existing competences build all the relevance of its management of innovation system. But, far from constituting a Cartesian and rigid model, this system takes, according to the different projects of development of the new goods, different original forms with sometimes fluctuating or surprising borders; however this does not a problem by virtue of the qualities of the management system! The commercially successful “passion-brands” goods are not exceptional. The exaltation of all the resources, competences and capacities of the group towards the concretization of top priority objectives – launching innovating goods that are, at any costs, commercial successes – will give a boost to each project. It should be said that the general direction of the group puts its staff under pressure: the R&D units are expected to concretize ten innovations or so per annum, not less! Ultimately, four guiding principles dictate the management innovation system implemented by the Decathlon Group (
figure 2):
creativity,
design management,
knowledge management and
R&D. These four principles would seal the cohesion and the interdependence of all the productive and operational divisions of the group. It is a force of reduction and mutualisation which does not exist in the competitors’ groups. Incorporating, for example, design-management in the middle of the growth device of a company is a step that few companies have taken. Wrongly, by the way, because it not only allows modification of the visions of the company and improvements to its strategy (Cooper & Press, 1997) and its competitiveness (Trueman & Jobber, 1998), but above all, it allows the company better to assert its identity (Dumas & Mintzberg, 1989). Moreover, it favours a better coordination between the various functions of the company and it federates all the actors by making them work together on the creation projects (Stokholm, 2005) while improving overall innovation management (Borja & Mozotta, 2003). Lastly, very often, the design seems to be the first factor of commercial success of the new goods (Cooper & Kleinschmidt, 1987). Associated with healthy competition between “in-house” projects and strong values such as serendipidity
[6][6]Serendipity (or fortuity) indicates the fact of finding, by… and intuition, the four guiding organize the Decathlon Group favourably in its potential aptitude “to revolutionize” the various segments of the sports markets where it is present. Compared with the innovations marketed for some time, this system of management seems, obviously, adapted to its policy of expansion and development.
20Today, the really innovating companies are those which have abandoned technocratic rigidity and reconsidered their innovation management system by introducing freedom in it. It is them which, ultimately, created flexibility of thought and built a culture of innovation “on every floor” (Ramecourt & Pons, 2001). Transformed by the resources, this flexibility will become a main organisational capacity to innovate. It will be obtained, in particular, by creating disorder. Indeed, in a more and more codified, standardized and rigid world, this disorder is privileged by a growing number of companies in want of innovations (Alter, 2000). But disorder implies that the company also takes risks (sometimes great risks), the consequences of which are not well known. Besides, it is for this reason that disorder is normally banished from organizations. Is not disorder disorganization? It also implies that the company is continuously on the verge of losing control of everything. It is a border which belongs to the implicit knowledge of the leaders and which is always very delicate to assess in a reasoned way. For the innovating company, the difficulty is to know exactly the limit between the acceptable and the unacceptable, to approach it to the nearest point: to seek a balance between order and disorder. Whether in a stable or an unstable environment, the innovating company makes these two antagonistic forces coexist in its centre. The innovations would come mainly from the permanence of this status quo, and it seems that the Decathlon Group found it if we take into consideration the number of its new goods that have been commercially successful these last years. Let us quote for example the bicycle
b’Twin, the skis
Wedze or the swimming goggles
X-base. While developing a competence, the Decathlon Group also developed an organisational capacity that is registered between the Cartesian rationality of a traditional management of innovating projects and the disorder characteristic of the creativity which falls under a kind of creative brainstorming.
21Concretely, if the company wishes to do it, it can adopt a “conventional” step when it has the necessary competences to conclude the development of a new good. Then, the innovation management system will be fully directed and framed, leaving little space to chance and uncertainty. On the other hand, if some projects move away from the competences and capacities available in-house, the management system of innovation can aim to this
creative brainstorming, so as to favour the permeability to environment in order to better stimulate all the inventive forces of the individuals. The Decathlon Group finally ensures these project-teams a form of creativity and of directed freedom that, in the course of time, are developed and improved. In these project-teams, a kind of beneficial collective emulation creates itself as well as a strong tendency to make emerge new ideas with huge potential. Thus, on one side, there is a prevalence for a
rational type management system and on the other, for a
turbulent type management system. Finally, even if there is a possible risk of scatter, “turbulence” gives birth to exceptional ideas which a traditional management of innovating projects could never have made emerge. But we have to be careful. If, at Decathlon Group, the production of ideas can be carried out in a disorganized way, there is always a supervising authority - the product manager is part of it - which will re-frame the project if it departs too much from the objectives set by the general direction. Two examples of recent innovations clarify the specificities of these two management systems at Decathlon Group (
table 1).
