The Strategy Behind Target's Fast-Tracking of Food Innovation

Food needs to be purchased more frequently than many other products, which means it can help drive retail sales in-store or online.

Consumers' increasing interest in healthier, safer food means that providing higher quality - and offering the technology to prove it - could mean the first explicit investment in dedicated tech and data in this category to stimulate broader consumer sales growth.JL


Elizabeth Segran reports in Fast Company:

Food sales currently make up close to $20 billion of Target's $73 billion in revenue, and while fashion collaborations and designer teapots can lure people into the store occasionally, food is something people shop for on a weekly basis, making it an important driver of foot traffic that could potentially lift all of the store's categories. By focusing on transparency, Target hopes to offer customers the information they need to make smart decisions when it comes to food, and by extension, begin to trust that the company has their best interests in mind.

Here's a dirty little secret about the food business: An apple you pick up at your local supermarket is, on average, 14 months old. By the time you sink your teeth into it, it has lost most of its nutritional value. The thing is, most consumers are not aware of this. "People think they're buying a healthy snack," says Greg Shewmaker, an entrepreneur-in-residence at Target who is helping the retail giant reposition itself amid quickly evolving consumer mores around healthy food. "But year-old apples are the nutritional equivalent of a sugary ball of fiber; all the nutrients have already leached out."
To Shewmaker, this is an example of how little transparency exists in our food system. Consumers believe they are buying one thing when, in fact, they are buying something else. "We don't really know what we are putting inside our bodies at all," he says. And this isn't just true in the fresh produce aisle of the grocery store. Labels on packaged goods are often inaccurate, he argues, as any parent of a child with allergies will tell you.
This is just one of many food-related quandaries and opportunities that Shewmaker and his colleagues are exploring out of Target's Future + Food coLab, which is located in the Kendall Square tech district outside Boston and looks much like the other incubators that have set up shop in the area. MIT-trained data scientists are coding away, entrepreneurs are writing business plans, and designers are at standing desks drawing mock-ups of potential products. They are working together to imagine the future of food—and where Target might, eventually, fit into that future.

The coLab is an unconventional project that Target launched last summer in partnership with the MIT Media Lab and Ideo, bringing together more than 40 participants from different fields— farmers, scientists, statisticians, engineers, designers—to respond to problems in the food system with high-tech, futuristic solutions.
In some ways, it functions as a launching pad for new brands that might be incorporated into Target's portfolio or spun off into independent companies. It's also a lab where scientists tinker with data and experiment with new technologies that do not have any obvious commercial application. Mostly, its the kind of amorphous exploratory project that is common in the startup world, but is typically hard to orchestrate within a large corporation.
And they don't get much bigger than Target. With a staff of 347,000 people worldwide, revenues of over $73 billion a year, and an army of shareholders to keep happy, Target's success depends on organizational systems. It is this structure that keeps the Target experience consistent across its 1,793 stores. One of the most interesting questions that arises from the coLab is how Target will manage the chaos and risk of innovating like a tech startup, even though consistency is the fuel of big business.

A food spectrometer

Giving Ideas An "Unfair Advantage"

But back to those 14-month-old apples. What if there were a machine that could scan any food product and identify exactly what was inside it?
"This technology already exists," Shewmaker explains. It's called a food spectrometer. By shining infrared light onto an item of food, it can identify its molecular composition. And with enough data, the machine could tell you exactly how old an apple is, how many calories it contains, what nutrients are present inside it, and even subtle nuances in taste. "These machines would make labels irrelevant. Instead of having to believe what a company says is in a product, you could see what was actually inside it," Shewmaker says.
Food spectroscopy is still a nascent technology that a few startups have begun tinkering with. But one of the biggest challenges to its development is gathering enough information to be able to plot out the wide spectrum of variations in food. To accurately identify the qualities in one particular apple, you would need to partner with a company that would give you access to millions of apples.Target has millions of apples.
Last week, as part of the coLab, spectrometers developed by a company called Ocean Optics were sent to two of Target's 38 distribution centers around the country. The plan is to scan produce of all kinds in very large quantities to create a data bank so that in the near future, we could put any given apple on a spectrometer and figure out exactly how nutritious it was.
Shewmaker describes this as the "unfair advantage" of the coLab. Unlike other startups that are big on ideas, but often short on resources, the coLab is able to leverage all that Target has to offer: funding, a massive supply chain and millions of customers who can provide feedback. And this, in his view, is an unquestionably good thing. (It's worth asking, though, what will happen to the many fledgling companies in the startup ecosystem when a company of Target's size enters the picture.)
Shewmaker, who cofounded the Target coLab over the summer, was drawn to spectroscopy because he feels like it will put knowledge back in the hands of consumers, empowering them to make more informed decisions. His boss, Target's chief strategy and innovation officer Casey Carl, believes that investing in spectroscopy could also be incredibly beneficial to Target.

The Future + Food coLab

Translating From Startup To Corporate

Carl believes that one way Target can build trust among consumers when it comes to food is to improve transparency. And something like spectroscopy might be able to help them accomplish that, since the goal of the technology is to literally tell you what is inside a food product. Right now, however, it is unclear exactly how the company will apply it, besides helping to build a database of information about food products.
But at the coLab, they're tinkering with ideas. What if, for instance, a customer could use a spectroscopy machine in the store to see how old a piece of fruit was? Could Target then do dynamic pricing on its produce? Would the very presence of such a machine drive customers to Target over a competing grocer? None of this is clear yet, but the coLab has already created a prototype of a spectrometer that it will place in stores to track how consumers react.
Carl's role is to think about what might grow Target's business over the next few years, and even decades. And food has massive potential for growth particularly because, as I point out to him, food isn't exactly what the company is known for. Since 1995, Target has been introducing fresh food in its stores; fresh produce is now available in 85% of Target locations around the country. But even when fruits and veggies are available, the selection tends to be very limited, dwarfed by the enormous freezer and pre-packed food sections."You're spot on," Carl says. "Target's signature categories are home and apparel, baby and kids products. But we want to enhance Target's ability to be in the consideration set when a customer is thinking about where to buy food."
Food sales currently make up close to $20 billion of Target's $73 billion in revenue, and while fashion collaborations and designer teapots can lure people into the store occasionally, food is something people shop for on a weekly basis, making it an important driver of foot traffic that could potentially lift all of the store's categories.
Brian Cornell, Target's CEO, has been open about how Target's food offerings need to be improved to keep up with changing tastes. "This year, you'll see us working to earn more credit for organics and dramatically improving freshness across the assortment," he said in the most recent financial community meeting. Given the complexity of Target's supply chain, he said that this shift will take time, but healthier products are already beginning to appear on shelves. Last year, Target launched the Simply Balanced brand, which includes 150 fresh food items, most of which are certified organic. But even as Target tries to stock shelves with better spinach in the short term, it's also keen to make bigger bets on food.
Carl's role is to serve as a kind of translator between the coLab and Target's corporate office. He is well versed in Target's strategic objectives and is quick to spot ideas bubbling up at the coLab that might be aligned with those goals. At the same time, when the coLab begins to take on a new project, he needs to explain to the top dogs at Target why it is worthwhile to invest in them. "I'm out here asking, 'What did we just pay for?'" he says. "Anything we can do to extend our core business—to improve the guest offering, improving freshness, maintaining shelf life, growing market share—is worth considering."

IDEO's Matt Weiss examines a Food Computer

The Food Computer

Some of the coLab's projects won't have any commercial viability for a long time. Take the Food Computer, for example. Invented by Caleb Harper, who's just across the street at the MIT Media Lab, the machine can grow any plant you want by allowing you to control the environment inside, from oxygen levels to humidity to sunlight. Harper's goal is to make farming more widespread, so that the average person might have a computer in their home to grow their own vegetables. At a wider scale, a city like Dubai might be able to grow the avocados it currently imports from Mexico in massive Food Computers.
When Carl came to visit the Media Lab last summer, he felt it might be worth partnering with Harper even if there was no near-term direct application for Target. "It wasn't like Target wanted me to solve a problem for them," Harper recalls. "It was more about how if we work together on this problem, we'll get a heck of a lot farther, faster."
At the coLab, a small Food Computer is growing basil leaves. One of the things that Shewmaker wants to understand is how people will actually interact with it. To test it out, engineers at the coLab are building 100 units and sending them to schools around the country. Teachers will use the machines to teach kids about how plants grow, but they will also be able to provide feedback about how people actually interact with the machine. Target conceives of this investment as a corporate social responsibility initiative. As a bonus, the coLab gets plenty of UX data.In a different part of the lab, an interdisciplinary team is thinking about how these Food Computers might become commercially viable. One team imagines a big section at the back of Target stores in the future where people could rent out plots and grow vegetables for their family. "It would be a like of tailored CSA (community supported agriculture) box," says Shewmaker. "If a family wanted to participate in the farming process they could come down and pick the veggies themselves—or they could have Target do it for them."
At another part of a the coLab, a team consisting of a farmer, an Ideo designer, and students from Harvard and the Parsons School of Design are imagining other ways they could turn the Food Computer into a business. One idea is to have a tea room at Target stores where customers could see tea leaves being grown in large, attractively designed Food Computers to learn more about the growing process, and to purchase locally produced tea. If this team is able to come up with a strong, compelling business plan, Target is willing to test out the idea at a store. So perhaps commercial applications of the Food Computer are not as far away as we might imagine.

Instant Gratification

But the coLab team is also committed to spinning out brands that could go to market much faster than the spectrometer and the Food Computer. Carl recognizes that part of adopting a startup mentality means being able to bring a minimum viable product to market quickly. He describes his role at the as creating a "second set of rails" at Target, one that fast-tracks some ideas while the rest of the company chugs along at its usual pace. "When we're creating new things, we can't ride along on the same rails," he says. "It would just get bogged down in bureaucracy. So we want to give these guys (at the coLab) the freedom they need to go fast. "
Everything at the coLab happens quickly. The coLab itself went from an inchoate idea that Shewmaker and Carl were tossing around to a fully functioning operation in a matter of months. The design firm Ideo has been able help smooth this along. "What we bring is process, speed, and our culture," says Matt Weiss, an Ideo portfolio director and business designer who directs day-to-day operations at the coLab. "We're used to moving very quickly on things. We want to get pilots in stores in a matter of weeks. We want to bring products to market in a matter of months."
Seven weeks ago, as participants in the coLab were brainstorming around with the idea of transparency, they had a very simple idea: What if Target went totally literal with the concept? What if they created a line of products that came in clear packaging with a white label on the front listing every ingredient inside?
A coLab team immediately put together a prototype for a new brand called "Good + Gather" that brings this idea to life. Last Friday, they set up a booth on an aisle at a Target store by Fenway Park in downtown Boston to see how customers would respond to a range of food items—snacks, pasta, and granola—whose packages are designed to highlight their ingredients. When the products are placed next to one another on the shelf immediate contrasts emerge. The jar of peanut butter only has the words "organic roasted peanuts" in large letters on the label, but the package of cheese balls has so many ingredients squeezed onto the label in tiny lettering that it is almost impossible to read.

A coLab team member at a Target store. Photo: Tiffany Knight

As customers stop by, their feedback is informative. Some don't even notice the ingredients on the front because they are so used to seeing that information on the back. "Do you think there might be some banner blindness going on here?" Weiss asks the team.
One person wants to know why Target has placed one trail mix with 19 different artificial ingredients next to one only made up of 8 different kinds of nuts. Wouldn't shoppers always choose the simpler trail mix, and Target lose money on the more processed (read: cheaper to produce) trail mix, going against the store's own interests?
Questions like this reveal that the average customer doesn't trust big business to offer unbiased information about food. This is a problem that Shewmaker is trying to tackle head on with many of the coLab's projects. By focusing on transparency, Target hopes to offer customers the information they need to make smart decisions when it comes to food, and by extension, begin to trust that the company has their best interests in mind. "There are a lot of products today that highlight that they have few ingredients," Shewmaker says. "But very few are saying, 'We have 25 ingredients and we're still going to show you what's inside, good or bad.'"