Times of crisis, like the current pandemic, bring a myriad of radical, unpredictable and long-lasting changes that affect businesses in different ways.
They also create a prioritisation dilemma for corporate leaders: Focus on safeguarding their core business–conserve funds and decrease risk– or focus on diversifying new revenue streams by fast-tracking innovation initiatives.
Although there is no real 100% fail-safe solution, balancing the two options to suit the company’s needs will build resilience in tough times. In this post, we’re going focus on why you should give innovation initiatives a permanent seat at the table.
In short, companies that prioritise innovation (in “calm” times) are able to utilise underlying technologies to build new ventures (and revenue streams). At the same time, also strengthen their core business when their environment unexpectedly shifts.
Where we are today.
2020’s Covid-19 pandemic has shaken our society to its core, forcing companies to explore new ways of working and shifting customer behaviour in novel ways. Some of the most notable changes include unprecedented increases in e-commerce, D2C business models, digital entertainment, remote working tools, virtual learning and the usage of wellness apps.
The climate crisis has had a similar impact, with companies shifting their focus towards more earth-friendly offerings. Recent years have seen some impressive advances in solar technology, electric cars and plant-based meat substitutes.
The “new normal” might feel relatively novel for many, but the truth is it’s been a long time coming. As described in an article by McKinsey and Company:
“Crises, have a significant financial and human toll, stranding assets and human capital and causing significant social and economic dislocation. However, many of these dynamics are ingredients for disruption from which new business models emerge.”
That’s exactly where we find ourselves today, in a post-pandemic business landscape where the most successful companies are branching out to test new business models, scale new technologies and staying ahead of the competition by finding new ways of meeting customer demand.
A look back at previous times of crises.
They say those who don’t know their history are doomed to repeat it, and there is certainly much to learn from our previous times of crises.
Between 2002 and 2003, the Severe Acute Respiratory Syndrome (SARS) pandemic devasted Asia. As a result, e-commerce became the new mainstream, boosting platforms like Alibaba in China. Not long after that in 2005, came Amazon Prime and Esty, both of which enable people anywhere in the world to sell products online and run businesses mainly from home.
Similar innovations came between 2007-2010 when the financial crisis and the rise in unemployment gave way to the sharing economy as well as the beginning of the gig economy. During this time, we see the launch of companies like Netflix (2007), Airbnb (2008), Groupon (2008) and Uber (2009). D2C brands like Bonobos (2007), and Warby Parker (2010) also started hitting the scene with a fresh new take on e-commerce.
The moral of the story? Some of our most disruptive initiatives are built by combining existing and emerging technologies during challenging times of crises.
How crises spark innovation.
During “normal” times, it’s easy to focus on the core business and put new, out-of-the-box initiatives (e.g. new technologies, new offerings, etc.) on the back-burner. Time frames are longer; there’s less of a rush to get through corporate bureaucracy, and customers aren’t waiting for immediate results.
Times of crises, on the other hand, come with a sense of impending urgency brought on by:
- Shifts in customer demand.
- Adding or taking away vital business channels.
- Regulatory changes.
- Disrupted supply chains.
In other words, the assumptions that once supported long-term success are out the window, and immediate change is required to regain stability.
This environment fosters innovation by breaking down corporate barriers and demanding the company’s attention as a whole. The result is often lasting and substantial transformations that can support the core. Here are just some of the inspiring examples of innovation that took place in response to the 2020 pandemic:
- Pokémon Go created Pokémon Go Fest, which enabled users worldwide to interact and socialise while sheltering at home.
- Pepsico launched a D2C venture called Pantryshop.com, enabling them to test out a new business model and provide customers with their favourite snacks at home.
- BrewDog launched Open Arms, an online bar experience that is open anytime to accommodate patrons from all around the world.
Is innovation only effective during times of crisis?
The short answer is no. While the urgency created by a crisis helps drive innovation forward, it is certainly not the only time you should be innovating.
The best way to tackle innovation successfully is to make it a priority at all times, e.g. before, during and after a crisis. What’s key is to always provide some connection to the core so the whole company benefits.
This way you’ll build up the know-how and resources you need to test new solutions quickly and implement them at scale so that you can meet new challenges head-on, anytime.
Moving your innovation agenda forward.
So, how can you create the sense of urgency needed to move your innovation agenda forward – when there is no crisis?
Here are a few practical tips to help guide you through the process:
1. Engage in small experiments.
A great first step is to think of innovation as a series of small experiments instead of one large ongoing project. Essentially your goal should be to learn through in-the-field experiments, and quickly find out what works, what doesn’t and how to get the result you’re looking for.
2. Add speed to the mix.
During a crisis, innovation goals tend to be short term and high priority. This creates a sense of urgency to overcome the barriers and move on to the next step. Use sprints to challenge your team to take action in a matter days, not months. Provide them with a clear direction and the resources needed to reach pre-established targets.
3. Stay involved.
In times of crisis, everyone’s full involvement and attention increases the chance that an innovation initiative will succeed. Create these conditions by being present and providing a critical link to the company’s core. As a senior leader, your involvement will keep the team aligned to the overarching corporate goals.
Final thoughts.
A solid innovation strategy is the key to future-proofing your business and staying ahead of uncertainty – and the best time to get started is now.
Find out how some of the world’s leading enterprises are accelerating growth, tapping into new markets and creating new revenue streams: 50 Corporate Ventures.
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Are you looking to boost your innovation strategy? We can help you identify promising new growth areas, diversify your customer base and create new revenue streams.
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