Open Innovation Helps in the Fight Against Covid-19

The Corona virus is having an equal impact on companies, giant conglomerates, and startups. Within a short period of time, all are seeing dramatic decreases in income, employee absences, delayed decision-making on the part of potential clients, suppliers under pressure because of supply-chain issues, and significant damage to an international market becoming more dependent on conference calls than on face-to-face meetings. Anyone relying on Chinese suppliers has been experiencing this crisis for three months already.

Companies are dealing with the crisis in various ways. Many are having their employees work from home to reduce the spread of the virus; others are cutting down on manpower; employees are going on unpaid leave; salaries are being cut by up to 20 percent, and more.

Naturally, the large, manpower-heavy corporations are finding it tough to reduce their fixed expenses, including salary costs and rent, while technology-intensive startups, with their greater flexibility, can adapt both their business models and expenditure structure to the vagaries of the market.

Startups are changing their employee compensation models to help their cash flow and ensure long-term stability by a combination of salary cost deferrals, salary reductions, and cuts to other employee options. Startups are also shifting activity to their employees’ homes, thus reducing expenses on office space, property taxes, communications, utility bills, etc.

One example of startup creativity is an initiative I recently discovered. Startups that have realized that international conferences will not be held in the next several months — conferences that were a major base for marketing activity and business development — are, via entrepreneur communities in their fields, directly addressing potential clients and inviting them to virtual conferences. In these virtual conferences, entrepreneurs introduce their innovations to the international corporations, thereby rendering physical conferences moot.

The need of giant conglomerates to rapidly become significantly more efficient, formulate new business models, leverage existing assets into new revenue, be flexible in their employment models, develop their capacity for distance work, and more, at the same time as they are reducing manpower, is precisely the time to map out the steps corporations can take together with partners in technology as an alternative to relying on costly and rigid internal resources.

The greater the role technology plays in a corporation — vis-à-vis clients and in terms of daily operations — the more flexible it is and the greater its chances of successfully surviving any crisis.

This is the time for corporations to build business partnerships with specialized, maximally-flexible third parties at the technological forefront. This is the time to assimilate startup innovations and advanced technologies based on the rules I formulated in my former blog post. This is the time to egos on the side and rev up quick processes.

The corporate need that startups can provide for in the most effective and efficient way is an opportunity for both sides, with some caveats: startups will have to think outside the box, improvise, target potential clients, and offer business models corporations won’t be able to refuse, while corporations will have to expand their cooperative ventures with startups, or even, in some cases, buy them and their talented people outright. Corporations that manage to do so with emerge from this crisis leaner, more technological, and more efficient than their competitors. The board members have an important role to play in this, as I described here.

In the world of business, the Covid-19 crisis is an opportunity for beneficial partnerships between corporations and startups.