Emerging from the crisis stronger: 9 opportunities for innovation
The global crisis forced many businesses into survival-mode. Now is the time to lift our gaze and rethink — not just to survive, but to thrive. But how? Successful companies that have doubled down on innovation during crises can show us.
Part 1
At the turn of the 18th century, Napoleon’s France was enduring a deep recession and a war on several fronts. Their armies urgently needed shelf-stable food, so Napoleon offered a prize of 12,000 francs for anyone who could preserve food. A resourceful young chef, Nicolas Appert, had his eyes on the prize and ended up changing the way we eat forever: he packed food into sealed, airtight champagne bottles with cheese and lime. In the midst of a crisis, with little more than what he had in his kitchen, Appert invented something you probably have in the cupboard right now: canned food.
Like Napoleon, European and American companies that continue or increase their investments in innovation during crises and recessions perform much better in the long term than those that scale back. The OECD has also proven that investing in innovation is good for struggling economies as a whole.
But those companies are the exceptions. Spending on innovation and R&D is among the first to get cut when the going gets tough and attention is focused on essential operations and general firefighting. The instinct is to preserve, not to innovate. But for most companies, this is a risky misstep.
It’s a cliché because it’s true: Necessity is the mother of invention.
Uncertain times call for a fresh look on risk and reward, but perhaps not in the way you think. By and large, the upside of investments in innovation are now greater, so it should more often outweigh the risks of failure. In the words of Strategy&, “a reduction in innovation efforts would be akin to unilateral disarmament in wartime.” Inaction and slack prioritization are your worst enemies.
Cutting innovation in crises to wait for better times is the kind of shortsighted behavior we in Scandinavia refer to as “peeing your pants to keep warm”. It’s the classic investment banality of buying low and selling high. So, if you can find the budget, doubling down on innovation during the downturn is a good strategic investment.
To paraphrase Warren Buffet: You should be fearful when others are bold and be bold when others are fearful.
(Of course, I don’t mean this in an exploitative sense, and I don’t condone zero-sum thinking or a pure neoliberal ‘success to the successful’ type of system, but that’s another story.)
Part 2
Nine opportunities for innovation
Let’s look at some examples of how highly resilient companies have handled this crisis and previous crises, and what they can teach us about innovating in a lean, strategic, and human-centered way.
1. Embrace new ways of working
“Our staff has been onboard with switching to online meetings with our clients and staying up at night to get the virtual kitchen showrooms up and running. Some of the things we’re doing now we’ve been talking about for a long time, but we haven’t had the time to do it.” Co-founder of the Danish kitchen supplier Reform, Michael Andersen is convinced they will emerge from the crisis stronger because they took the opportunity to go all-in on new ways of working, both internally and with customers.
These days all organizations are finding themselves on lots of steep learning curves. As necessity makes us adopt new habits, we’re also given unique learning opportunities. Decision-making is naturally sped up too, when the routines of going up the chain are broken.
Embrace the change. Speed it up. Let’s make the other changes we’ve been wanting to as well, like steps to become more sustainable for instance. These things should or would probably have happened sooner or later anyways, and now is a good opportunity to rip some band aids off and make a lasting difference. We can’t and shouldn’t go back to business as usual when the worst is over.
After experiencing two extremes within a short period of time, what have we learned? Switching from in-person teams to remote collaboration happened within days. Let’s combine the best of both ways and be more aware of when we actually need to meet in a physical space. The digitalization of the workplace can bring big productivity gains, and at the same time give us the opportunity to foster a creative organizational culture by using both face-to-face and virtual interactions when appropriate.
2. Go all-in on digital
Amid the crisis, Resident Culture, a craft brewer in the US, saw a big drop in demand, like so many other firms. To help them stay afloat they jumped on a business idea they had been playing with for a while: selling their bitter beers through a direct-to-consumer beer app called Tavour. Although the company has historically made the majority of their money through on-premise draft sales, now gone, they recognized that unprecedented times called for flexibility and opportunism. The brewer had mostly used digital channels for marketing, but saw that digital could make possible new kinds of partnerships and business models too.
When Covid-19 hit, event production company SXS Events’ entire industry dissolved overnight. The company then decided to use its expertise in video technology and live streaming to pivot into education technology. Less than three weeks later, they were ready to hit the market with their first product, a fully digital broadcast studio in a box.
This crisis has widened the gap between the digital front-runners and the digital laggards. The latter are now losing ground more than ever, and if your business is one of these, or even if you are just about on par with your peers, take this opportunity to go all digital, like Resident Culture and SXS Events. Now is the time to leapfrog instead of taking small, cautious steps to digitalize.
3. Find the urgent and poorly-met needs
You’re probably reading this on your sofa or kitchen table. That’s where many of us spend the majority our waking hours nowadays, cramped over our laptops with stiff shoulders, getting distracted by our partners or kids making noise a few feet away.
Stykka, a European furniture startup, sought to meet the soaring need to work comfortably at home by making a $85 desk you can build in 10 minutes. Why so cheap? It’s made of cardboard, so you can recycle it later too. It’s aptly called the StayTheF***Home Desk. The team at Stykka designed the desk in just 24 hours as a crisis response to a sudden stop in demand of their other products. Lately they started making face shields too. Both products are open source so anyone with the right equipment can make for themselves.
You can’t afford to make something people don’t really need. The main risk of failure in innovation is not about technology, or even about money, but about whether or not people will use or buy the thing you’re making. Technology and your business model you can mostly control, but not peoples’ behaviors. Besides, there is enough crap in the world already, like products that aim to create bullshit needs. (Who said “smart” diaper?)
Therefore, make people the focal point of your work. When you can, talk with users directly in the contexts they experience the problem you’re researching. These days, user interviews on video will do fine too. Who are not your customers today, but could be, and what can you offer them? Identify user needs that are 1) currently unmet, 2) urgent, and 3) significant compared to their other needs. If these three things are true, then you’re onto something. If not, move on. Do this well before you solutionize to avoid a waste of time and money.
4. Embrace tight constraints to spark creativity
In the aftermath of the Haiti earthquake, Dara Dotz, an industrial designer, saw how it took global supply chains many months to get live-saving supplies to the island. She founded Field Ready, an NGO that brought 3D printers and manufacturing units directly to Haiti. There they could collaborate with the locals, figure out what they most needed in context, and then teach them how to make it for themselves. Soon they were making essential medical supplies and replacement parts that helped alleviate the damages from the earthquake.
This is a prime example of frugal innovation. It considers resource constraints as a creative opportunity to develop novel, locally-relevant solutions. This is often akin to what startups do too, and in recent decades we’ve seen startups beat big corporations in billion-dollar markets despite their tiny teams, timelines and budgets. Often, especially in large companies, abundance is actually a problem. It leads to slow decision-making, complacency, and the incentive to fine-tune everything just little more, then a little more, before you launch and get that first, sorely-needed, reality check. Being afraid to fail — as most traditional companies are — leads to the risk of failure spiraling upwards, as time goes by without real testing with users or in the market.
Minimize risk by involving the people you’re designing for. Define the constraints, needs, and goals together with users, and formulate a list of super-specific “how might we” questions. Such as: How might we help new citizens, trying to learn the language, talk more with locals — with a one-dollar product? Perhaps counterintuitively, this kind of specificity makes it much easier to come up with ideas.
Then, once you have done this, prototype solutions together with users. It takes more preparation, but this can be done remotely too. Pilot the new product or service within days or weeks to see if it fits the bill within a small selection of the market. Learn, repeat, and scale.
5. Replace bureaucracy with autonomy
Kolonial, Norway’s biggest online grocery shop, was overwhelmed by a six-fold increase in demand when the corona crisis hit. How could they increase capacity and deliver food to people in isolation — in a matter of days? Step one: they hired many people who were laid off from hotels, propelling them through a new onboarding program to get them up and running quickly. Step two: to cut the time to pack groceries, one agile team at Kolonial improvised a novel offer — a pre-packaged carton of essentials. This streamlined their process and increased efficiency dramatically.
Many companies can learn from this, even if they see less demand in the crisis. You need radical agility to innovate quickly, especially in times like these. But how? The main prerequisite of agility is autonomy. For agile innovation, you need small teams with all the main skills needed to take something from A to Z, and the power to make most decisions independently. Have them work in small batches and short cycles of prototype-test-learn, and then discretely launch a minimum valuable service as early as possible. The traditional long waterfall process is the opposite of this, with one team handing over to another like on an assembly line.
6. Pivot towards growing trends and behaviors
In the early 2000s, Domino’s was the underdog of the pizza world. It had a reputation for poor quality and unremarkable service and was rapidly losing money. By the 2008 recession, they had hit rock bottom. Then, they observed new customer behaviors and determined that digital channels had the potential to outperform telephone and in-store ordering. On this basis, they made a big decision to put their money behind e-commerce, and to couple it with a push to bring authenticity back into the brand. In the words of then-CEO Patrick Doyle: “The old days of trying to spin things simply doesn’t work anymore… great brands going forward are going to have a level of honesty and transparency that hasn’t been seen before”. Since then, Domino’s market value has increased almost tenfold.
In this current crisis, we’re also seeing new habits and behaviors emerge. The most obvious for us is perhaps more virtual interaction with colleagues, friends, and family. As a response to fear and uncertainty, we’ll probably also see increased demand for brands that provide familiarity, safety, and even nostalgia. Look closely for trends and needs that are growing out of their hiding places in the margins. Which are startups or pioneering companies in other industries already targeting? Which are you better positioned to meet than your competition? Where can you get a head start?
7. Step up your game on sustainability
“In the midst of crisis, don’t play it safe and just try to scrape by”, says Vincent Stanley, then VP of marketing at Patagonia. “Rather, use it as an opportunity to exhibit true leadership”. Instead of pushing consumers to just fill up their shopping carts, Patagonia urges them to not buy what they don’t really need through its Common Threads Initiative. “Don’t Buy This Jacket” was the headline of a groundbreaking marketing campaign from the company a few years back. Despite this — or probably partly because of it — Patagonia is exceptionally profitable and now generates $750 million in yearly revenues.
These are tough times, but let’s keep our ideals and the bigger picture in mind. Sustainability, both social and environmental, still needs to be at the core of our business, not a CSR strategy on the side. We need to set the triple bottom line as our default framework of business value: for people, profit, and planet. Without all three in place, there is no sustainability.
Sustainability can be a strategic advantage. Research shows it is possible to make money, meet the needs of people and society, and be planet positive at the same time. In fact, more than 50 studies make it clear that companies that are leaders in environment, social and good governance policies are financially outperforming their less sustainable peers. For example, removing waste in the value chain often decreases both cost and environmental footprint. Now is the time to take action for the good of people and planet.
8. Boldly narrow your focus and rethink risk/reward
It’s 2005 and Netflix is just a DVD mail-order company with a few million subscribers. A team at Netflix is ready to launch a new piece of hardware, a media player that customers can use to download movies overnight to watch the next day. Then Youtube comes along, growing in prominence, and proving that people wanted accessibility and speed more than high quality. Next, the financial crisis hits, and Netflix realises that their DVD mail-order business is obsolete too.
At this point, it was do or die for Netflix. After careful considerations they made a strategic bet — a bet that would change how we spend our evenings. They went full-on with streaming, putting the other products on the back-burner. Today, they are one of the world’s biggest media companies with over 160 million subscribers worldwide.
Tough times allow for tough decisions, and you should take that opportunity now. A lot of things are in the air, in motion. Use this to slash the things that clearly aren’t working out, and double down on the ones that are. Crises create the sense of urgency needed to make change happen in large organisations, and also allows you to more easily unite people around one focused, common purpose. Of course, with this power comes responsibility, so don’t exploit the situation, but listen to your all main stakeholders (not just shareholders) for input to refocusing your values, goals and strategies. If you have to build a new strategy from scratch, spend a little more time to make sure it’s solid. Don’t confuse important with urgent and make sure to aim before you fire.
Reconsider your normal ways of assessing risk and reward too. Uncertain times should push you out of complacency and reactiveness, and make the potential gains of investments in innovation more often outweigh the risks of failure. Don’t do anything rash and follow sound strategy, of course, but remember that inaction gives the highest risk of failure. To paraphrase “Get Things Done” guru David Allen: You can’t do everything, but you can do anything.
9. Explore new business models
During the dot-com bubble Amazon was hit hard like most internet companies at the time. What made Amazon both resilient and quick to respond was its focus on opportunistic diversification into new product categories, and most importantly, new business models. In addition to selling stuff beyond books, they started Amazon Marketplace that allowed third-party sellers to offer their products on an online marketplace alongside Amazon’s regular offerings. With this they built a platform business model, that had less risk and cost for Amazon because they don’t own the products themselves, they just move through the platform.
Not only that, Amazon saw that their technology backbone was so strong that they could offer it to others. That was the beginning of Amazon Web Services (AWS) that provides cloud computing. Had AWS been a standalone company today it would probably be one of the most valuable companies in the world. By the way, AWS’s growth was partly fuelled by another resilient company that, in the middle of the financial crisis, launched a platform business model too. That was Apple, and its Appstore, which offers apps that need lots of cheap computing power to run.
Taking inspiration from Amazon, how might your service or product be offered through a different business model? If it’s a product, can you make it into a service? Can you, say, offer it as a subscription to get risk down and steady cash flows up? Is there a middleman you can circumvent? Can you make your technology open source to allow faster growth, and rather charge for the services around it? Ideate by looking at different business model patterns. Classic disruption starts at the low-end of the market, usually with a simpler product, aiming for the less profitable customers no one else wants. Is there an opportunity somewhere for you to do the same? Perhaps within an industry that’s been standing still for a long time? Education and healthcare certainly seem ripe for disruption nowadays. Rather than trying to steal customers, start with non-customers with needs that are currently unmet.
One last thing: No matter what you do, or which things you choose to focus on, these weird, tough times require from us a new approach to change and innovation. One that is truly empathic, creative, and experimental.
Why? Genuine empathy for people and our planet allows us to create win-win solutions for the real, poorly-met needs of the world. Creativity lets us reimagine, and inventively put together what we have within tight constraints, innovating in leaps and bounds rather than steps. Working experimentally is about tackling uncertainty head-on by testing assumptions and prototypes as early as possible to increase the pace of learning. In short, we need our approach to be design-driven. In business as unusual, we just can’t afford the alternative.
