Innovation was the key to turning Trader Joe’s into what Forbes magazine called one of the hottest retailers in the marketplace, according to Doug Rauch, former president of the grocery chain. He told the audience at the National Chicken Council’s Annual Conference in Washington that innovation is the implementation of creative ideas in ways that bring unique benefits.

“Innovation isn’t just an event,” Rauch said. “Innovation occurs as the result of a team working together. Suppliers were core stakeholders in the innovation team at Trader Joe’s.” He explained that many of the ideas for new products at Trader Joe’s came from manufacturers. These innovative new products can become what he called “destination products” and these have become an important part of Trader Joe’s brand, because they are distinctive and distinguished the retailer from its competitors.

Building an innovation culture

“Your culture is the one thing that distinguishes your business; it is your DNA,” Rauch said. “It is the only thing that your competitors can’t copy.” He explained that the company’s culture is a company’s destiny. “Culture is your committable values. It is intangible, but it is really powerful,” he said. “Culture isn’t something you can put on a napkin.”

To build a culture based on innovation, you have to be able to overcome people’s natural resistance to change. He said, “Only a baby with a wet diaper likes change.” To be able to innovate you have to be willing to change and fail. “If you want to stay alive, you have to embrace risk. You have to be willing to fail,” he said.

Rauch explained that all failures aren’t equal and that there are four attributes of good failures. First he said, make sure that your “failures are around your purpose.” You should innovate and take risks around the things that are most important for you to move forward. Second, he said that your failures should be “learningful.” Make sure you understand what your failure is telling you. Third, he said that the risks you take have to be balanced with the possible reward. “Don’t bet the house, unless you really have to,” he said. Finally, Rauch said, “Share your failures, don’t cover up mistakes. That way you can analyze it and learn from it.”