Case Studies

2013 Joe Tidd, John Bessant, Keith Pavitt

1
Exploring Innovation in Action:
Sewing up the Competition - Innovation in the
Textile and Clothing Industry
Manufacturing doesnt get much older than the textile and clothing industry. Since the
earliest days when we lived in caves theres been a steady demand for something to wrap
around us to keep warm and to protect the more sensitive bits of our anatomy from the worst
of the elements. What began with animal hides and furs gradually moved into a more
sophisticated activity with fabrics woven from flax or wool and with people increasingly
specializing in the business.
In its early days this was very much a cottage industry quite literally people would spin
wool gathered from sheep and weave simple cloths on home-made looms. But the skill base
and the technology began to develop and many of the family names we still have today
Weaver, Dyer, Tailor, for example remind us of the importance of this sector. And where
there were sufficient cottages and groups of people with such skill we began to see
concentrations of manufacturing for example the Flemish weavers or the lace-makers in
the English Midlands. As their reputation and the quality of their goods grew so the basis
of trading internationally in textiles and clothing was established.
The small-scale nature of the industry changed dramatically during the Industrial
Revolution. Massive growth in population meant that markets were becoming much bigger
while at the same time significant developments in technology (and the science
underpinning the technology) meant that making textiles and clothing became an
increasingly industrialized process. Much of the early Industrial Revolution was around the
cotton and wool industries in England and many of the great innovations and machinery
such as the spinning jenny were essentially innovations to support a growing international
industry. And the growth of the industry fuelled scientific research and led to developments
like the invention of synthetic dyes (which allowed a much broader range of colour) and the
development of bleaching agents.
Theres a pattern in this in which certain manufacturing innovation trajectories play a key
role. For example, the growing mechanization of operations, their linking together into
systems of production and the increasing attempts to take human intervention out through
automation. Of course this was easier to do in some cases than others for example one of
the earliest forms of programmable control, long before the invention of the computer, was
the Jacquard punched-card system which could control the weaving of different threads
across a loom. But actually making material into various items of clothing is more difficult
simply because material doesnt have a fixed and controllable shape so this remained
increasingly a labour-intensive process.
By the twentieth century, the industries had become huge and well established, with growing
international trade in raw materials such as cotton and in finished goods. The role of design
became increasingly important as basic demand was satisfied and certain regions for
example, France and Italy began to assume strong reputations for design. Branding
became increasingly important in a world where mass communications began to make the
telling of stories and the linking of images and other elements into advertising, which fuelled
demand for clothing as much more than a basic necessity purchase.
Case Studies
2013 Joe Tidd, John Bessant, Keith Pavitt
2
Mass production methods and the scientific management approaches underpinning them
diffused rapidly and, in the case of clothing assembly which remained a labour-intensive
process, led to the quest for lower-wage-cost locations. So began the migration of clothing
manufacture around the world, visiting and settling in ever cheaper locations across the Far
East, through much of Africa and Latin America to its present home in China.
Today this is a global industry embracing design activities, cutting and processing
operations, assembly, distribution and sales all fuelled by a huge demand for
differentiation and personalization. This is an industry in which price is only one element
non-price factors such as variety, speed, brand and quality matter. And its an industry
dominated by the need for high-frequency product innovation fashion collections no
longer run along the old seasonal track with winter and summer collections. In some cases
the range is changed every month and innovation in information and communications
technology means that this cycle is getting shorter still.
All of this has shaped an industry which is highly networked across global value chains and
coordinated by a few major players. Much of the front end of the industry is about major
brands and retail chains while the backroom operations are often small-scale
subcontractors often in low-wage-cost areas of the world.
Like so many industries it has become somewhat footloose and wandered from its origins
leaving behind only a small reminder of its original dominance. Compared with countries
like India and China todays European clothing industry is a small player on the global stage.
There are some exceptions to this and they underline the power of innovation and
entrepreneurship.
Just because the dominant trends lead in one direction doesnt mean that there isnt scope
for someone to spot and deploy ways of bucking this trend. One such player was a young
clerk working in a small clothing retailing business in northern Spain. Frustrated with his
career prospects Amancio Ortega Gaona decided to strike out on his own and in 1963
invested his savings the princely sum of US$25 into a small manufacturing operation
making pyjamas and lingerie. In classic fashion he peddled (and pedalled his earliest
transport was a bicycle!) his wares around the region and built the business over the next 10
years and then decided to move into retailing as well, opening his first shop in the north-
western town of La Coruna in 1975.
Things have moved on somewhat since then. Industria de Diseno Textil Inditex the
holding company which he established is now worth around US$8 billion and has just
opened its two-thousandth store in Hong Kong. Active in nearly 70 countries this textile and
clothing business has 8 key brand groups, each targeted at particular segments or product
types for example, Pull and Bear for children, Massimo Dutti for older men and women
or Oysho in lingerie. Best known of these is Zara a global brand with strong design and
fashion identity running through both the clothes and the stores in which they are sold.
Its clothes combine stylish designs with a strong link to current high fashion themes with
moderate prices. As Lotte Freddie, fashion editor of the Danish daily newspaper Berlingske
Tidende, commented, If you want a classic, Italianate look in tune with current styles and at
a reasonable price go to Zara. Zaras successful growth is not simply a matter of low cost or
of standardization but rather of innovation.
The company have become leaders by exploiting some of the key non-price trends in the
industry for example, variety and product innovation. For example, over 10 000 different
Case Studies
2013 Joe Tidd, John Bessant, Keith Pavitt
3
clothing models are created and sold every year this is most certainly not a case of one size
fits all or of long-lasting product types! Ortega has taken the entire system for creating
clothes and built a business and originally did so in an area which did not previously have
any textile tradition.
At an early stage in the development of the manufacturing business he moved back into
textile-finishing operations to make sure that the colours and quality of the material he used
to make the clothes were up to scratch. Not only did this give better quality control but it also
opened up the road to offering exciting and different fabric designs and textures. There are
now 18 textile-designing and -finishing operations in the group as well as the clothing
manufacturing.
A major part of the companys success comes from a strong commitment to design they
employ over 200 designers and make extensive play of this commitment. Its a theme which
doesnt stop with the clothes themselves but also extends to the presentation of the stores,
their window displays, their catalogues, Internet advertising and so on. Part of the
headquarters building in Arteixo La Coruna, Spain contains 25 full-size shop windows with
display platforms and lighting which allow the team to see what real store windows would
look like not only under normal conditions but also on rainy days, at night and so on.
Another key aspect of Zaras success is the flexibility which comes from having a very
different model for manufacturing. Around 2500 employees work directly in manufacturing
operations but behind them is a much larger workforce spread across villages and small
communities in Spain and northern Portugal.
Once the new design has been approved the fabric is cut and then distributed to this network
of small workshops and these represent an outsource capability delivering a high degree of
flexibility. Pre-cut pieces and easy-to-follow instructions are given to workers in what is still
largely an informal economy and their output then flows back into the massive Zara
distribution centre like tributaries to a fast-flowing river. (This is not a small operation the
centre has around 200 kilometres of moving rails on which the products flow. Highly
automated and with extensive in-line quality checking, the process transfers the incoming
pieces into production lots which are then allocated to a fleet of trucks for fast shipment,
mostly by air from the nearby airport at Santiago de Compostella.)
Needless to say this places significant demands on a highly flexible and innovative
coordination system which Zara have developed in-house. In this way they make use of a
model which dates back hundreds of years (the idea of industrial districts and clusters) but
use twenty-first-century technologies to make it work to give them huge flexibility in both
the volume and variety of the things they make. Where competitors such as H&M and Gap
have to start planning and producing their new lines three to five months before goods
finally make it to the stores, Zara manages the whole process in less than three weeks!
Their flexibility is also based on rapid response and extensive use of information and
communication technologies. At the end of the day as the customers leave their 950 stores
around the world the sales staff use wireless handsets to communicate inventory levels to the
store manager who then transmits this intelligence back to Spain as a feed into the design
order and distribution system. This gives an up-to-the- minute idea of what is selling and
what isnt, so the stores can be highly responsive to customer preferences which colours
work, which themes are popular, which designs arent hitting the spot. But its not just
following the market Zara also push the game by making sure that no model is kept on sale
for more than four weeks no matter how well it is selling. This has a strong impact on their
Case Studies
2013 Joe Tidd, John Bessant, Keith Pavitt
4
brand they are seen as very original and design-led but it puts even more pressure on
their ability to be agile in design and manufacture.
Case Study Questions
1. Is the Zara model sustainable? What would you do to preserve their edge over the
next 510 years, given that many other players are now looking to follow their
example? If you dont think it can survive, give your reasons for why you think the
model is unsustainable and will fail.
2. You have been hired as a consultant to a small clothing manufacturer who wants to
emulate the success of Zara and Benetton. She wants advice on an innovation
strategy which takes the key lessons from these successful firms. What would you
offer?
3. Zara Home has just opened using the same basic business model and deploying the
same innovative approach as the rest of the business but in the home goods field. Do
you think it might succeed and why?